If you are a small business owner already or just starting out, you may be considering forming a limited liability company.  While there are many benefits there are also requirements that need to be met when it comes to LLC formation.  There are many advantages of forming an LLC, but you need to make sure you follow the right steps in order to receive those benefits.

If you have not yet started your business you have a clean slate in choosing your business name.  It is a good idea to perform a name availability search within the state you plan to incorporate in. For example, if you planned to incorporate in Nevada, you would need to perform a Nevada Secretary of State business search and determine if your name is available.

Once you’ve conducted a preliminary search, if the name you want to use for your business is already in use or too similar you will need to come up with a back-up name.  This could present a problem if you have already been operating your business under a certain name that is already incorporated in your state. 

Another requirement is stating your business purpose.  There are two types of business purpose clauses; general and specific.  Depending on which state you want to incorporate in some states accept a general-purpose clause.  Other states require more detailed description of what your limited liability company will provide. 

In order to form a limited liability company you will need a resident agent in your state of incorporation.  There are several requirements of a resident agent.  For example a resident agent must have a physical address and be available during normal business hours.  Laughlin Associates provides resident agent service for a very low annual cost. This is especially convenient if you are incorporated out of state. 

Setting up an LLC properly demands that you have a management structure.  Your LLC can be managed by owners or a manager.  It is important to outline in your Articles of Organization if your company will be operated by a member or a manager. 

Requirements to form an LLC vary from state to state.  It can get confusing and you may have questions along the way.  Laughlin Associates provides one-on-one service to our clients to ensure their companies are set up properly.  We are there every step of the way to provide personalized service.  We are available to answer questions and provide you will real answers.  We pride ourselves on providing quality customer service and maintaining a personal relationship with you to help you get the most out of running your small business. 

Have questions about forming an LLC? Call me at 1-800-648-0966 or drop me a line at mstein@laughlinusa.com.

After you make the decision to incorporate your business, one of the next big decisions you will have to make is deciding which state to incorporate in.

Some things to keep in mind here are:

• The state in which your business is located is referred to as your home state.
• The state the corporation or LLC is formed in is called the “Domestic” state.
• All other states that you plan on doing business in other than the “Domestic” state are known as “Foreign.”  It is important to understand that when you incorporate in another state, you still have to register to conduct business in your home state.  You will be required to file a “foreign qualification” to conduct business in each. This will require you to pay additional state fees on top of the fees you are paying to the state you “domestically” formed in. 

When going through this process, which can be confusing, it is important to work with an incorporation service provider that can guide you through the process.  The advantage of working with a team like ours is that Laughlin Associates can provide you with one-on-one customer service.  It is important that you are walked through every step of the incorporation process and we’ll help you do just that.  We will answer your questions and help ensure your corporation or LLC is set up correctly. When it comes to incorporating your company with us, there will literally be no stone left unturned.

Preferred States

There may be advantages when it comes to incorporating in “foreign” states over forming the entity in your home state.  Some states are “pro-business” and draft their corporate and tax laws to attract more companies to their state.  These are called “Preferred States” as they are preferred for their business advantages.  Three states that appeal to small business to incorporate in are:  Nevada, Wyoming, and Delaware.  These three states offer unique advantages that may work in your business’ favor. 

Some advantages to incorporating your business in a preferred state are:

• No state corporate income tax
• No minimum capitalization requirements
• Privacy structuring is obtainable with proper implementation
• Nevada and Wyoming have no franchise tax (initial and annual statement fees and business license fees apply)
• Nevada offers “charging order protection” on Corporations, LLCs, and LPs

There are always advantages and disadvantages when it comes to Corporation/LLC formation and the structuring of your business entity.  The key is to find the correct and trustworthy answers and to know how to properly implement them into your business structure.  To further explore how to incorporate in your home state or whether a preferred state offers enough advantages for you to pursue, contact Laughlin Associates to answer any questions you have. 

You can call me anytime between 8 a.m. and 5 p.m. PST—just call 1-800-648-0966 or drop me a line at rhaines@laughlinusa.com.

If you get involved with an audit the burden of proof lies on you. While you might not be able to avoid an audit, you can make it less painful by following a few simple rules.

You should always keep accurate records showing travel, entertainment, meals, seminars, medical, auto and other business deductions you might take. They should be containing specific information like the date, amount, reason for the expense, and the names of people who might have accompanied you.

If you don’t think it’ll happen to you then think again. You are in the highest risk category for an audit if you are self-employed, or involved with a pass through entity such as a partnership, S-corporation or an LLC; especially if you are a corporation with a reported income of over $250,000.

Taking the time to keep accurate records from the start can save you a tremendous amount of time and hopefully money when and if you are involved in an audit.

 According to an article entitled, “Audit Proof Your Business-Maximize Your Deductions With Confidence,” posted at www.mygeorgiaaccountant.com, small business owners should keep a few things in mind when you’re preparing yourself for the IRS’ eagle eye.

“Self-employed business owners have one of the biggest targets on their backs from the IRS.  They are constantly under scrutiny for the deductions that are taken since there are many that attempt to take advantage of the system.  It is for this reason that it pays to take a few extra steps to minimize your chances of getting bitten if your return is selected for audit.”

The article continues on to say, “The main goal here is to keep adequate documentation so you can maximize your deductions with confidence.  Nobody is saying to break any laws, we just want to make sure that you get every deduction possible and the best way to do this is to make sure that you are ready for questioning before the tax return is filled out.  In the unlikely chance that you are selected for an audit, being prepared will make the process a quick and painless one.  The Internal Revenue Service is more concerned with the folks that cannot back up their deductions than the ones who can.”

Auto Expenses

• Mileage – keep a log if possible
• If no log, use your appointment calendar for proof of your meetings and therefore, your miles driven
• Can also use total fuel purchased during the year to calculate mileage
• Charge all fuel purchases to your business account

Advertising

• Keep invoices from advertisers as proof of your expenses
• Keep a copy of the ad placed or some samples of any promotional items purchased

Equipment/Assets

• Keep receipts, proof of purchase as your accountant will need these at year end when preparing your tax return
• Scan a copy of loan and lease agreements to your computer and email to yourself after deal is signed so you have a permanent electronic  copy

Meals

• Keep a good record of breakfast, lunch and dinner meetings
• Write who you met with and what business purposes you discussed on the back of your receipt

Subcontractors

• Don’t pay a dime until you have a W-9!
• No w-9/no 1099/-deduction can be disallowed or payments can be re-characterized as payroll and become subject to  back payroll taxes

Receipts not required  if less than $75

• Per IRS rules, you are not required to provide receipts as proof of any purchases that are less than $75

 Charge to business checking account

• When in doubt, charge any expenses that may be deductible to your business checking account-it is easier to reclassify any purchases as personal as opposed to going through your personal accounts and identifying any business expenses

Reconcile your books or pay someone to do them for you

• Unless you possess some formal accounting training, there may be some deductions and opportunities that are missed if you handle all of your own bookkeeping duties

If selected for audit, will need to usually supply:

• Bank Statements
• General Ledger
• Balance Sheet
• Income Statement
• Tax Returns
• Other Supporting Documents (Leases, Loans, Amortization Schedules, etc.)

Pay your taxes!!

• It sounds like a no-brainer, but one of the easiest ways to get on the IRS’s radar is to ignore your tax liabilities, once they discover that you are non-compliant, they have an open window to start digging further into your file

Neat stack vs. Box of Crap

• If you are selected for audit, showing up with a neat stack of papers that are already sorted and organized will make your audit process a less stressful one

The other day as I was having a conversation with my aunt who is a hair stylist, she was telling me how she pays to rent the space she uses to cut hair.  She also has to pay for her own supplies and pays a percentage of her services to the owner of the salon. She was a little surprised when I said, “Congratulations on running your own business.” She never made the connection between her work and being a business owner. She was so focused on the service that she never took the time to understand what being a business owner could mean to her.

In our business, we talk to many people in the same situation.  They don’t give themselves credit for running their own business. They work in a variety of professions; independent contractors, consultants, day care providers, technicians, multilevel marketers, or they might even work for someone else but also run a part-time business.  Well, if you have income coming from other sources beside W-2 income, you might be a business owner with all the benefits that come with it.

“You would be brain dead not to start your own business,”  says Sandy Botkin, CPA, Esq.

The IRS wants to give you credit for running your own business. As a business owner you get all sorts of tax deductible benefits from the government.  If you take it one step further and incorporate your business, then you really start to see some savings…no more self-employment tax, 100% tax deductible medical reimbursement plans, paid life insurance, not to mention the liability protection a corporation can provide you.

So go ahead…admit you’re a business owner. Now take the time and really understand what that means to you and the best way to structure your business to take the greatest advantage of being a business owner.

Nevada LLC- Forming a Business

Forming a Nevada LLC can be an advantageous move for any business. The state does not require income taxes for individuals or corporations, which makes it a very popular place to live or own a business. However, you must keep in mind that unless you are a Nevada resident operating a business strictly in Nevada, you will need to apportion the other operations of your business to states where they occur. Therefore, if you don’t work solely in the state of Nevada, you still end up paying some taxes for the other states that you’re operating in.

One of the many advantages of having a Nevada LLC is that the company directors, shareholders, and owners don’t have to live in the state. Business proceedings don’t even have to take place in the state of Nevada, and it’s the invested parties aren’t even required to be US citizens. However, you need to keep in mind that any business proceedings that are conducted outside of the state of Nevada will be subject to the business laws and regulations in the state where they are conducted. Still, having a Nevada LLC can be a big advantage.

You can form a Nevada LLC for a business entity, or even if you just want a means of personal assets protection. The protections afforded by the state of Nevada for corporations keep personal assets from being attacked by people who file lawsuits or creditors seeking retribution. Another is managed of forming a company in the state of Nevada, is that there is much more privacy afforded to corporations. With fewer disclosure requirements and less public information about the businesses, many high profile business owners seek a corporation in the State of Nevada to maintain their privacy.

Forming a Nevada LLC is not a complicated process. As long as you utilize the professional resources that are available to you and take the time to understand what you’re getting into, you can easily read the rewards of Nevada incorporation in owning a Nevada LLC. It doesn’t matter whether you have a few real estate properties that you want to protect through an LLC, or if you have a full scale business operation that needs to be incorporated. Your reasons for incorporating within the state of Nevada or forming an LLC don’t matter so much because of the fact that you can do it for just about any reason you can come up with.