If you're thinking about how to incorporate in Florida, you know that incorporation isn't only a tax planning trick. Incorporating often meshes with the image you want to present and the brand you're trying to build. Furthermore, even for very small owner-operated firms, incorporation should offer legal protection. But all that said, you do want to harvest every available tax benefit--and sidestep common tax accounting blunders. Fortunately, you can typically enjoy the big benefits and avoid the big blunders by following three tips: Tip #1: Verify that Forming a Florida Corporation Will Be Tax-free A first, important tip--make sure that your incorporation qualifies for tax-free federal status. In other words, make sure that the very act of incorporating your business doesn't trigger income taxes to the incorporators. Setting up a corporation can trigger federal taxes for the shareholders if the shareholders contributing property to the corporation don't control the corporation after the setup. And setting up a corporation can trigger taxes if people contributing stuff to the corporation contribute more liabilities than assets or offload personal liabilities into the corporation. Note: A one-owner Florida business that incorporates should always meet the "control" requirement for tax-free incorporation if he or she owns 100% of the corporation after setup. Obviously, most business people should be able to avoid contributing personal liabilities (like personal credit card debt) to a corporation simply by exercising care. Accordingly, the real issue to watch during Florida incorporation is contributing fully depreciated assets like a car or equipment on which the business owner still owes debt. In this scenario, the incorporators may want to contribute additional assets or reduce the liabilities offloaded. Tip #2: Look at the Florida S Corporation Option Normally, corporations are taxed by the federal government on their profits at rates that quickly rise to 34% to 35%. But it gets worse: Florida's corporate tax laws hit regular corporations, too, with another 5.5% state corporation tax on profits. Some small Florida corporations and their owners avoid the federal and state corporate income tax by withdrawing all of the corporation's profit as shareholder-employee salary. But that half-clever gimmick triggers another double tax: Paying out profits as salary to shareholders means that shareholders both pay income taxes on the salary and also payroll taxes (Social Security and Medicare) on the salary. However, an S corporation (also known as a Sub S corporation or Subchapter S corporation) allows the corporation to avoid state and federal corporate income taxes and the shareholder to avoid payroll taxes on the non-salary part of the business profit. Note: A Florida S corporation typically does not even need to file a Florida corporation tax return, the F1120, with the state's Department of Revenue. Example: If a regular Florida corporation earns $100,000 in profit after paying the shareholder a fair wage, the corporation will pay roughly $22,000 of income taxes on the $100,000 of profit. When the corporation later distributes the profits (now only $78,000) the shareholder will again pay income taxes of perhaps $20,000. If the corporation opts for Subchapter S status, however, the corporation doesn't pay income taxes on the profits--only the shareholder (shareholders) does (do). The calculations can be a little complicated, but on $100,000 of profit, the tax savings would often be around $10,000. Tip #3: Consider Getting a Tax Accountant or Tax Attorney's Help If the stuff discussed in the preceding paragraphs seems a little too complicated to deal with on your own, you might want to get the help of a local, good tax attorney or a small business CPA who specializes in corporate taxation. Either professional can make sure that you avoid the traps and employ all the legal and tax accounting tricks related to incorporating your small business. Adjunct tax professor Stephen L. Nelson teaches S corporation and LLC taxation in the graduate tax school of Golden Gate University and is the author of two downloadable do-it-yourself small business guides, How to Incorporate in Florida and Forming an S Corporation in Florida.
Thinking about forming an LLC in New York? Interested in saving some money? Well, you can employ several cost-saving techniques to reduce (sometimes drastically) the costs of forming a limited liability company. You just need to be willing to do more of the legwork yourself... and then use one or more of the following tips:
Tip #1: Prepare the Articles of Organization Yourself Using the Free Form Supplied by State
Probably the first (and biggest) money saver to consider is preparing the articles of organization yourself. Now, admittedly, this sounds crazy. Would you perform brain surgery on yourself? Well, of course not! And why, then, would you think of doing corporate legal stuff like an LLC formation yourself?!
Here's why: Preparing the LLC formation paperwork is absolutely not like open heart surgery. The process is more like applying a taking an aspirin.
The limited liability company articles of organization which the State of New York mandates are simple to fill in (and available for no cost from the New York Secretary of State web site). You simply plug-in name of the limited liability company. You name the county where the LLC will operate. (Like, Albany or whatever.) And you give a contact person's name and address--someone who will act as the registered agent. And that is that. Seriously.
Tip: The exact website address of the free articles of LLC formation available from the New York Department of State website changes regularly. But if you search on the phrase "Department of State New York Form DOS 1336" you'll easily find them no matter where they're stored at the dos dot ny dot gov website.
Just to make this point, the forms you use to file your taxes or apply for a credit card are far, far more complicated that the form you use to setup an LLC in New York. If you are literate, you can prepare the LLC articles in less than five minutes. Accordingly, while you don't have to prepare the form, you should certainly consider doing it yourself if you're interested in saving some dough.
Note: Self-preparation of the NY LLC articles will probably save you several hundred dollars and possibly as much as a thousand dollars.
Tip #2: Use a Standard Limited Liability Company Operating Agreement
An LLC doesn't have corporate by-laws (by-laws govern a corporation). And an LLC doesn't use a partnership agreement (partnership agreements describe how the partners in a partnership work together). But a limited liability company does need (and New York law requires) an LLC operating agreement to lay out how the LLC manages itself and how LLC members interact with the LLC.
Note: New York state doesn't require an operating agreement at the point you file your articles with the Department of State. You have 90 days to write and adopt your LLC operating agreement, according to Section 417 of New York State's Limited Liability Company Law.
You may decide to have a good local lawyer write your LLC's operating agreement. But you can also often instead use or start from a standardized, boilerplate document and most everything you need.
In the case where you or your and spouse are the only owners, a simple operating agreement document (perhaps purchased off the Internet) may be a very reasonable option.
Note: Working from a boilerplate LLC operating agreement where you simply fill in the blanks will save you from paying $200, $300, $400 an hour or more for a good attorney. And note that you'll need several hours of legal advice to get a truly tailored operating agreement.
Tip #3: Hire Yourself As The Registered Agent
An easy money saving idea for New York limited liability companies: Be your own registered agent. In other words, agree to be the person that the state contacts and that other parties contact for "official " legal business.
To be your LLC's registered agent, you just give the New York Secretary of State your name. Typically, most years, you won't do anything in your role as the LLC's registered agent.
And in the odd year when you do have to do something because you're the "registered agent," probably all you'll really do is pass along a document (like a letter or notice) to the corporation's president (that's probably you anyway) or lawyer.
Note: Functioning as the registered agent should save you at least a hundred dollars annually--pretty good pay for a nothing job.
Tip #4: Consider Expediting Your Filing
One final tip: You may want to use the Department of State's optional expedited filing service to accelerate the setup process. Fortunately, expedited filing isn't very expensive. For an extra $25, you can 24-hour turnaround. Paying an extra $75 gets you same day service. And for people who are really in a hurry, an extra $150 gets you a two-hour processing.
Note: The Department of State reports that non-expedited requests typically take around a week to process. (Even that turn-around isn't bad, if you plan ahead.)
CPA and bestselling author Stephen L. Nelson taught S corporation and LLC tax law at Golden Gate University's online graduate tax school. Nelson is also the author of the downloadable do-it-yourself guides, Forming a LLC in New York State and Forming a New York S Corporation
Tip #1: Prepare the Articles of Organization Yourself Using the Free Form Supplied by State
Probably the first (and biggest) money saver to consider is preparing the articles of organization yourself. Now, admittedly, this sounds crazy. Would you perform brain surgery on yourself? Well, of course not! And why, then, would you think of doing corporate legal stuff like an LLC formation yourself?!
Here's why: Preparing the LLC formation paperwork is absolutely not like open heart surgery. The process is more like applying a taking an aspirin.
The limited liability company articles of organization which the State of New York mandates are simple to fill in (and available for no cost from the New York Secretary of State web site). You simply plug-in name of the limited liability company. You name the county where the LLC will operate. (Like, Albany or whatever.) And you give a contact person's name and address--someone who will act as the registered agent. And that is that. Seriously.
Tip: The exact website address of the free articles of LLC formation available from the New York Department of State website changes regularly. But if you search on the phrase "Department of State New York Form DOS 1336" you'll easily find them no matter where they're stored at the dos dot ny dot gov website.
Just to make this point, the forms you use to file your taxes or apply for a credit card are far, far more complicated that the form you use to setup an LLC in New York. If you are literate, you can prepare the LLC articles in less than five minutes. Accordingly, while you don't have to prepare the form, you should certainly consider doing it yourself if you're interested in saving some dough.
Note: Self-preparation of the NY LLC articles will probably save you several hundred dollars and possibly as much as a thousand dollars.
Tip #2: Use a Standard Limited Liability Company Operating Agreement
An LLC doesn't have corporate by-laws (by-laws govern a corporation). And an LLC doesn't use a partnership agreement (partnership agreements describe how the partners in a partnership work together). But a limited liability company does need (and New York law requires) an LLC operating agreement to lay out how the LLC manages itself and how LLC members interact with the LLC.
Note: New York state doesn't require an operating agreement at the point you file your articles with the Department of State. You have 90 days to write and adopt your LLC operating agreement, according to Section 417 of New York State's Limited Liability Company Law.
You may decide to have a good local lawyer write your LLC's operating agreement. But you can also often instead use or start from a standardized, boilerplate document and most everything you need.
In the case where you or your and spouse are the only owners, a simple operating agreement document (perhaps purchased off the Internet) may be a very reasonable option.
Note: Working from a boilerplate LLC operating agreement where you simply fill in the blanks will save you from paying $200, $300, $400 an hour or more for a good attorney. And note that you'll need several hours of legal advice to get a truly tailored operating agreement.
Tip #3: Hire Yourself As The Registered Agent
An easy money saving idea for New York limited liability companies: Be your own registered agent. In other words, agree to be the person that the state contacts and that other parties contact for "official " legal business.
To be your LLC's registered agent, you just give the New York Secretary of State your name. Typically, most years, you won't do anything in your role as the LLC's registered agent.
And in the odd year when you do have to do something because you're the "registered agent," probably all you'll really do is pass along a document (like a letter or notice) to the corporation's president (that's probably you anyway) or lawyer.
Note: Functioning as the registered agent should save you at least a hundred dollars annually--pretty good pay for a nothing job.
Tip #4: Consider Expediting Your Filing
One final tip: You may want to use the Department of State's optional expedited filing service to accelerate the setup process. Fortunately, expedited filing isn't very expensive. For an extra $25, you can 24-hour turnaround. Paying an extra $75 gets you same day service. And for people who are really in a hurry, an extra $150 gets you a two-hour processing.
Note: The Department of State reports that non-expedited requests typically take around a week to process. (Even that turn-around isn't bad, if you plan ahead.)
CPA and bestselling author Stephen L. Nelson taught S corporation and LLC tax law at Golden Gate University's online graduate tax school. Nelson is also the author of the downloadable do-it-yourself guides, Forming a LLC in New York State and Forming a New York S Corporation
0 Response to "If you're thinking about how to incorporate in Florida, you know that incorporation isn't only a tax planning trick. Incorporating often meshes with the image you want to present and the brand you're trying to build. Furthermore, even for very small owner-operated firms, incorporation should offer legal protection. But all that said, you do want to harvest every available tax benefit--and sidestep common tax accounting blunders. Fortunately, you can typically enjoy the big benefits and avoid the big blunders by following three tips: Tip #1: Verify that Forming a Florida Corporation Will Be Tax-free A first, important tip--make sure that your incorporation qualifies for tax-free federal status. In other words, make sure that the very act of incorporating your business doesn't trigger income taxes to the incorporators. Setting up a corporation can trigger federal taxes for the shareholders if the shareholders contributing property to the corporation don't control the corporation after the setup. And setting up a corporation can trigger taxes if people contributing stuff to the corporation contribute more liabilities than assets or offload personal liabilities into the corporation. Note: A one-owner Florida business that incorporates should always meet the "control" requirement for tax-free incorporation if he or she owns 100% of the corporation after setup. Obviously, most business people should be able to avoid contributing personal liabilities (like personal credit card debt) to a corporation simply by exercising care. Accordingly, the real issue to watch during Florida incorporation is contributing fully depreciated assets like a car or equipment on which the business owner still owes debt. In this scenario, the incorporators may want to contribute additional assets or reduce the liabilities offloaded. Tip #2: Look at the Florida S Corporation Option Normally, corporations are taxed by the federal government on their profits at rates that quickly rise to 34% to 35%. But it gets worse: Florida's corporate tax laws hit regular corporations, too, with another 5.5% state corporation tax on profits. Some small Florida corporations and their owners avoid the federal and state corporate income tax by withdrawing all of the corporation's profit as shareholder-employee salary. But that half-clever gimmick triggers another double tax: Paying out profits as salary to shareholders means that shareholders both pay income taxes on the salary and also payroll taxes (Social Security and Medicare) on the salary. However, an S corporation (also known as a Sub S corporation or Subchapter S corporation) allows the corporation to avoid state and federal corporate income taxes and the shareholder to avoid payroll taxes on the non-salary part of the business profit. Note: A Florida S corporation typically does not even need to file a Florida corporation tax return, the F1120, with the state's Department of Revenue. Example: If a regular Florida corporation earns $100,000 in profit after paying the shareholder a fair wage, the corporation will pay roughly $22,000 of income taxes on the $100,000 of profit. When the corporation later distributes the profits (now only $78,000) the shareholder will again pay income taxes of perhaps $20,000. If the corporation opts for Subchapter S status, however, the corporation doesn't pay income taxes on the profits--only the shareholder (shareholders) does (do). The calculations can be a little complicated, but on $100,000 of profit, the tax savings would often be around $10,000. Tip #3: Consider Getting a Tax Accountant or Tax Attorney's Help If the stuff discussed in the preceding paragraphs seems a little too complicated to deal with on your own, you might want to get the help of a local, good tax attorney or a small business CPA who specializes in corporate taxation. Either professional can make sure that you avoid the traps and employ all the legal and tax accounting tricks related to incorporating your small business. Adjunct tax professor Stephen L. Nelson teaches S corporation and LLC taxation in the graduate tax school of Golden Gate University and is the author of two downloadable do-it-yourself small business guides, How to Incorporate in Florida and Forming an S Corporation in Florida."
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