Category Archives: Blog

Is Your Business in Danger of Folding? I Can Help

Corporation Lawyer If your business is in the process of folding, I may be able to help you pull it back from the brink or make the dissolution process go as smoothly as possible. When it comes to small businesses, one of the most common concerns is who will be responsible if the business dissolves. There are many unexpected problems that can occur during the life of a small business, regardless of its tax filing status, and each one can lead to questions of responsibility and management. The degree of liability you face depends largely on your status as a corporation, LLC or sole proprietorship.

When a Business Folds

If you own a business with a friend and your company has leased a building to operate from, numerous questions arise if your business entity undergoes major changes, such as a loss of revenue. What happens to the lease obligation depends on how it was written and how you and your business partner created your agreement. If your business is a corporation or an LLC, you and your partner will be largely shielded from liability for the lease in most cases. If the owners provided a personal guarantee on the lease, both your business and its owners are liable according to the lease terms. Partnerships and sole proprietorships do not offer the same protection from liability, so you and your partner are liable regardless of whether the owners signed personal obligations. In a different scenario, such as one in which your partner decides he wants to leave and dissolve the business, but you want to continue operating the business, the liability changes. Whether you are allowed to stay in the leased property or leave and sign a lease at a new location depends entirely on whether you are willing or able to buy out your partner’s interests in the business. If you are, you can continue operating the business as normal. If not, your landlord may allow a substitution of the new company or sole proprietorship in place of your former business. If you signed a personal guarantee and your landlord refuses to allow residence by any entity other than your corporation as it is listed on the lease, he may become a creditor. In this case, you may want to consult with me for guidance on how to proceed. If rent is paid on time, landlords generally have a difficult time removing an owner or guarantor from a property within the timeframe of the original lease. Incorporation lawyers such as myself may provide assistance when managing lease agreements.

Financial Obligations After Dissolution

One of the most common reasons to file for status as a corporation or an LLC is the ability to remain shielded from personal liability in the event that your business dissolves. When your partnership or sole proprietorship folds, you may be exposed to personal liability for remaining financial obligations, such as rent and business debt. When a corporation or LLC folds, you are required only to pay on assets in your business bank accounts and other financial assets directly related to your business. Smaller businesses may mingle personal and business assets, which can expose your personal finances to liability. To avoid this, contact my office so that I can help you ensure that your personal and business finances are separate. It is common for small businesses to use equipment such as cars, computers and printers for both business and personal purposes. While this may seem like the financially sound thing to do, it means that your personal means of transportation and digital access could be considered part of your business and subject to confiscation. I can help you create the best type of business entity to ensure that your personal assets are protected from confiscation in the event that your business dissolves and that you are not held liable for any of your business debts and other financial obligations. Having everything established in writing can prevent conflict between your and your business partner by ensuring that everyone understands the terms of your business agreement upfront. If you are considering dissolving a corporation, you may benefit from seeking assistance with contract negotiation to ensure that you are adequately protected.

Contact Corporation Lawyer Garrett Sutton for Assistance

Call the Sutton Law Center at (775) 824-0300 to work with corporation lawyer Garrett Sutton who can provide you with help dissolving your corporation the right way.

Our Corporation Lawyer on the Corporation Structures

Corporation Lawyer If you are looking to turn your business into an incorporated one or need legal advice on how to incorporate, then your corporation lawyer can help you to get started. A corporation lawyer will be able to help you to turn your business into either a C and S Corporation or a Limited Liability Corporation. Incorporating your business will give you tax advantages, liability protection, as well as others. The following information from your lawyer discusses how to incorporate your business and why it may make sense to do so.

Different Types of Business Structures

Over the past few decades, there have been significant changes to legal business structures that are available to business owners. In the past, the only direction that businesses could really take were to become partnerships or corporations. Corporations were also limited by the Internal Revenue Service by what type and how many shareholders they are allowed to have. The most recent type of business structure that has been created is a Limited Liability Corporation, or an LLC. An LLC will give both owners a liability protection as well as a favorable taxation pass. While forming a Limited Liability Company, incorporation may be beneficial for the business owner, but they can be costly to form.

Forming an LLC

An LLC is a legal entity that is separate and offers the owners protection. Both liability protection and a flexible taxation system are both offered in an LLC. This helps to bridge any gaps between the partnerships and the corporation. Your corporation attorney will be able to advise you which direction may be best for you to take with the flexible taxation that is offered with an LLC. An LLC will allow for you to select a management structure that you feel would be best for your business to operate successfully with. With an LLC, you are able to operate your business as a complex corporate structure on down to a more simple partnership. The choice is yours to decide. While an LLC may seem like the best business structure available, choosing a corporation may still come with some benefits for your business. A corporation provides protection to you from debts and liability. In a corporation, it is also easier to raise capital funds when compared to an LLC.

The Process of Incorporating

The formation of a regular corporation and a limited liability company have a very similar process. The first step is to draft a document called Articles of Formation, which is comparable to the Articles of Incorporation document. In order to incorporate, you will need to file both of these documents with your Secretary of State. An LLC is bound to less operational formalities than a normal corporation is. A formal corporation is required to hold meetings for their shareholders and record the minutes of these meetings. They are required to hold these meetings on an annual basis, as a minimum. It is not required for a limited liability company to hold these same meetings; however, your corporation attorney may recommend it.

Corporations

The corporation is one of the first modern business structures still in existence. A corporation offers the ease of raising capital funds, strong liability protection, duration, and the ability to easily transfer it. Once your business is incorporated, it becomes a distinct entity. This entity is entirely separate from you and any others who are part of the corporation. Your corporate attorney will be able to assist you in deciding if your business should be incorporated into one of the two major types: an S corporation and a C corporation. An S corporation refers to the classification of tax for a pass-through taxation. That means that the S corporation is not taxable. Any income and loss for the corporation will be handled through your personal income taxes. The number of shareholders are also limited in an S corporation. A C corporation can be either a Close corporation or a Professional Service corporation. Close corporations typically have very few shareholders and are small. Professional Service corporations can include professionals such as doctors. Both corporations are responsible for their taxes on their income.

Non-Incorporated vs. Incorporated Companies

Based on the information given, it may seem like an LLC would be the best move for a business. An LLC offers strong liability protection, good flexibility, and options for your tax classifications. In most states, an LLC can consist of just a single member. This will offer the same sort of benefits that a sole proprietorship would. If you choose to add partners, then it would be similar to a traditional partnership. There are some states that will not allow a single person to be an LLC. If this is the case in your state, it is recommended that you bring someone you trust into the LLC. If you choose to go this route then you can make an agreement between the two of you stating that all decisions will come from the proprietor. They can essentially be your business partner in name only. Your corporation lawyer will be able to assist you in determining what you need to do in order to become an LLC, if that is what you would like your business to be.

Consult with Our Corporation Lawyer

Why struggle with how to incorporate your business when you can rely on the professional experience of your corporation lawyer? Filing for a corporation status could be confusing and tedious. Leave it to the professionals at the Sutton Law Center to help you make the best decision for your business. The attorneys at the Sutton Law Center have the skills and knowledge that you can rely on to help you make the right decision in with incorporating your business. Call the Sutton Law Center at (775) 824-0300. The Sutton Law Center has the trusted attorneys who have the experience to help you make the best informed decisions when it comes to incorporating your business. Call today for your consultation!

 

 

How a Corporation Lawyer Can Help You Understand LLCs and Taxes

Corporation Lawyer If you have formed a limited liability company, our corporation lawyer may be able to help you sort through the various issues related to taxation. LLCs are not recognized as separate tax entities like corporations are. Instead, LLCs are recognized as pass-through entities by the IRS, as are partnerships and sole proprietorships. This means that all of the losses and profits made by your LLC go through the business and become the tax responsibility of you as well as the other LLC members. LLCs do not have to pay federal taxes, but they occasionally have to pay state taxes where they reside.

Income Taxes

The IRS sees LLCs as sole proprietorships, according to the number of people who make up your partnership. If you are the sole owner of your business, it is viewed as a sole proprietorship for tax purposes. However, because LLCs are not recognized by the IRS as tax-paying entities, they do not file tax returns. Instead, you have to report all of the profits and losses you made from the LLC when you file your 1040 tax return. If you leave money in the company account at the end of the year to cover business expenses, such as new equipment, you do have to pay taxes on that amount.

Multi-Owner LLCs

Because the IRS sees your LLC as a sole proprietor when you are the only operator, it is viewed as a partnership when you work with others. One-member and co-owned LLCs do not have to file taxes on their income but co-owned LLCs also pass taxes through to the partners that run them. Profits and losses are divided into shares known to the IRS as distributive shares. Distributive shares are arranged when you first form an LLC and should always be kept in writing. Incorporation lawyers may be able to help you draft an agreement that is equitable between partnership members. In most scenarios, each member of an LLC shares a part of the business, determined by the amount he invested. If you own 90 percent of an LLC, you are entitled to 90 percent of the profits in most cases. You can still divide the profits your LLC makes in a different way if you choose to, but this is the standard equitable division. The IRS calls this division special allocation, and it can be beneficial under many different circumstances. Whether you choose traditional or special allocation, you are treated as if every member in your LLC receives the same share. Each person is taxed based on the entire traditional distributive share he would receive, even if he received more or less money in actuality. This rule is necessary because it ensures that all LLC members are taxed on the money they are entitled to, even if they left some behind in the business. The 1065 form provided by the IRS must be filed each year, even though your LLC itself is not required to pay taxes. This practice ensures that the information you and your LLC partners are reporting to the IRS on your personal tax return forms is accurate. If there is a significant discrepancy, the IRS can investigate. The Schedule-1 form is required of each member as it breaks down the profits and losses from your individual 1040 forms. You must also attach a Schedule E form to your 1040 tax form.

Consider Electing Corporate Taxation

Keeping a large percentage of your earnings in your LLC can result in tax complications. If you plan to do so, consider asking the IRS to treat your LLC as a corporation for tax purposes. You can file the IRS Form 8832, also known as the Entity Classification Election, which lets you choose how you want your business to be treated. Your corporate income tax rates as a corporation only apply to the first $75,000 of the income your company earns. These are typically lower than LLC tax rates, which means that you can save a good deal of money over time. If you ask to be taxed as a corporation, you can receive tax fringe benefits, such as the ability to offer stock options to your employees. Incorporation lawyers can help you decide whether asking to be taxed as a corporation instead of an LLC is the right decision for your business.

Estimating and Paying Income Taxes

LLC members are viewed as self-employed workers by the IRS, and they do not have taxes withheld from their monthly paychecks. If you are a member of an LLC, you are responsible for figuring out how much money you will owe in taxes and making quarterly payments to the IRS.

Self-Employment Taxes

The IRS does not see LLC members as traditional corporate employees, so they do not have Social Security or Medicare withheld from their checks. This is important to remember when planning for your retirement. Most LLC owners have to pay taxes at the same rate as self-employed individuals. Most owners who work within the LLC fall into this tax rate, but if you are not an active member in the LLC, you may not be required to pay self-employment taxes. This tax area is somewhat vague, so it is important to be prepared to pay taxes on your LLC profits at the very least. If you are an owner in an LLC and are not required to pay self-employment taxes, your co-owners may still have to file on Schedule SE. LLC owners generally pay twice as much in self-employment taxes as other employees, but they can deduct half of their taxable income. The self-employment tax rate for owners of an LLC is 15.3 percent on the first $118,500 in profits for the year. You do not have to pay self-employment taxes on money you spend for your business. These write offs apply to expenses such as computer equipment, advertising, marketing and travel expenses directly related to your business.

State Taxes and Fees

In general, you have to pay state taxes according to the federal government tax standards. Depending on the state in which you do business, you may or may not pay a state tax. For example, California requires a tax on LLCs that earn over $250,000 each year in addition to your personal federal income taxes. There are annual fees that vary between states, and some pay no regard to income. California’s franchise taxes are significantly higher than the national standard of $100. LLCs are required to pay a significantly higher tax of $800, while many states do not require them to pay taxes at all. You should find out whether you are required to pay state taxes before making the decision to file as an LLC. Despite the federal benefits, some states may have cost-prohibitive tax policies that make LLC status a financially unsound decision. In other states, it could save your business thousands of dollars each year in reduced federal income taxes and no state taxes. For more information, contact a lawyer in your area to determine your state’s taxation requirements about LLCs.

Contact a Corporation Lawyer

Call the Sutton Law Center at (775) 824-0300 to speak with a corporation lawyer who understands LLCs.

 

 

Our Corporation Lawyer Explains Why a Series LLC May Not Be a Fit for You

Corporation LawyerAt the Sutton Law Center, your corporation lawyer is unlikely to recommend that you establish a series LLC as your entity structure for several reasons. Many investors are attracted by the idea of setting up series LLCs when they have several different investments, because they can then have one umbrella LLC with various series of investments contained within it instead of setting up individual LLCs for each separate one.

What a Series LLC Is

Limited liability companies, or LLCs, provide solid protections for business owners. They help prevent the owner from having personal liability if the business is sued, leaving only the assets held by the business itself to potentially be at issue in a lawsuit. When a business owner has multiple assets, they may be tempted to take advantage of a newer type of entity structure called the series LLC. Nevada is one of 14 states that allow this type of structure. In a series LLC, an investor can place different investments within series of investments held under the same LLC. Each individual investment series will have its own potential liability, meaning that if the company is sued regarding an issue with that particular asset, those held in different series should not be at risk. For example, someone who owns several different real estate rental properties may want to place all of them within series held by one LLC, rather than establishing separate LLCs for each one.

Potential Problems with Series LLCs

Your corporation lawyer will explain why choosing a series LLC may not be a good idea. One problem is that the majority of states do not recognize them. This means that if you do business as a foreign registered entity in another state and you are sued there, the court there may not recognize your series structure and allow the plaintiff to go after all of the assets held in your LLC, rather than just the assets in the particular category under which they are suing. Another problem is that they simply have not been tested in court yet, even in the states in which they are allowed. This means it is unclear how they may be treated by courts even in Nevada.

Contact a Corporation Lawyer

To speak with a corporation lawyer at the Sutton Law Center about the best legal entity structure for you, call (775) 824-0300.

Get a Free Guide on Asset Protection

request a Free 15-minconsultation

  • captcha

Sign Up for Our WeeklyNewsletter

  • captcha