Copyright © 2008 Stephen Malan
Almost any home business idea today involves Internet in one way or another. The good news is however, you can have a totally Internet-based business if you do it right. There are many advantages to this and in this article we want to talk about those.
When you begin to talk about Internet business ideas you first have to consider the product that you are going to be selling. Anything can be sold on the Internet today, but one problem people have is coming up with a product of their own to sell.
Many home businesses make this easy for you by providing a product, training, support material such as websites, and totally automating your business for you by collecting the money and shipping the product. Network marketing is one way this is done and so is affiliate marketing.
Many people choose to start their Internet business as an affiliate marketer, because they can get started for free. Affiliate marketing is an actual way to make money on the Internet today because your product and everything you need to make money is provided for you.
You get paid to make sales and the more you sell the more commission you earn on the products that you do sell. The downside to affiliate marketing is, if you strictly use the marketing materials and websites that are provided free by the affiliate merchant, you will be competing with thousands of other merchants doing exactly the same thing.
What makes affiliate marketing such an excellent home business is that you are able to interject your own personality by starting a website or blog for your product. This allows you to be different than the competition and to create your own Internet business in the way that you want to.
For people who want to work at home, affiliate marketing is appealing because all you need is a computer with Internet access. You don't need any special training, you don't have the inventory products, and you can work the hours that fit into your schedule, because the Internet is open for business 24 hours a day.
This is a very powerful benefit when you compare it to a traditional business. Most traditional businesses are open from eight to five, Monday through Friday and some are open on the weekends. You are really only open for business when either you or your employees show up. With an Internet business it never closes regardless of whether you're working or not.
What makes this truly a fantastic business idea is the fact that everything is Internet-based. For this reason people are flocking to affiliate marketing and looking at it as one of the best home business ideas and so can you.
Stephen Malan is a full time internet marketer based in Las Vegas, NV. USA. For more home business ideas, please visit his blog at http://www.homebusiness-blog.com or his website at http://www.thehomebizmart.com
Read more!
Why Home Business Ideas Involving The Internet Are The Best
Privacy & Data Security: Follow FTC Guidelines... Or Suffer The Consequences
Generally, you are required to protect personal information stored on your website's server by implementing reasonable and appropriate data security measures. If you fail regarding this general requirement, you will be subject to claims from website visitors whose information has been compromised.
In addition, the Federal Trade Commission (FTC) continues to aggressively file suits for security violations under Section 5 of the FTC Act which prohibits unfair or deceptive practices.
A good example is the enforcement action brought by the FTC against LifeIsGood.com for failure to implement reasonable and appropriate data security measures. This case is significant because the FTC expects all sites to follow guidelines provided in the settlement of the case.
Lifeisgood.com's Privacy Statement
Life Is Good collected sensitive consumer information, including names, addresses, credit card numbers, credit card expiration dates, and credit card security codes through its website. Its privacy policy claimed: "We are committed to maintaining our customers' privacy. We collect and store information you share with us - name, address, credit card and phone numbers along with information about products and services you request. All information is kept in a secure file and is used to tailor our communications with you."
The FTC Claims
The FTC alleged that, contrary to its privacy policy, Life Is Good failed to provide reasonable and appropriate security for the sensitive consumer information stored on its computer network.
Specifically, the FTC alleged that Life Is Good:
1. unnecessarily risked credit card information by storing it indefinitely in clear, readable text on its network, and by storing credit card security codes;
2. failed to assess adequately the vulnerability of its Web site and corporate computer network to commonly known and reasonably foreseeable attacks, such as SQL injection attacks;
3. failed to implement simple, free or low-cost, and readily available security defenses to SQL and similar attacks;
4. failed to use readily available security measures to monitor and control connections from the network to the Internet; and
5. failed to employ reasonable measures to detect unauthorized access to credit card information. The Settlement
In its settlement with the FTC announced in a press release dated January 17, 2008, Life Is Good agreed to implement the following 5 administrative, technical, and physical safeguards in the future. These 5 safeguards are 5 excellent tips -- delivered straight from the FTC -- that you should also follow:
1. Designate an employee or employees to coordinate the information security program.
2. Identify internal and external risks to the security and confidentiality of personal information and assess the safeguards already in place.
3. Design and implement safeguards to control the risks identified in the risk assessment and monitor their effectiveness.
4. Develop reasonable steps to select and oversee service providers that handle the personal information of customers.
5. Evaluate and adjust its information-security program to reflect the results of monitoring any material changes to the company's operations, or other circumstances that may impact the effectiveness of its security program.
Conclusion
Sometimes form is as important as substance. What I mean is how you do something, and the fact that you documented it at the time you actually did it, is sometimes just as important as the fact that you did it.
The settlement safeguards in the Life Is Good case are a prime example. Simply having what you believe is a good data security program is one thing, but being able to document that you went through the steps outlined by the FTC is another.
The Life Is Good case points the way to what will work for data security. So, it's highly recommended that you set up a filing system that preserves your documentation and indicates you went through these steps, and when you did it. Then set up a tickler to remind you to go through the steps on an annual basis.
We know that there is no data security program that is 100% safe from illegal intrusions. If you have an unfortunate data security breach, it's likely the FTC or a state regulator will come knocking at your door. That's why it's so important for you to be able to produce a file that clearly shows you implemented reasonable and appropriate data security measures in accordance with the FTC guidelines.
The future of your business may depend on it!
Chip Cooper is a leading intellectual property, software, and Internet attorney who advises software and ecommerce businesses nationwide. Chip's easy and affordable online contract drafting service coordinates website contracts such as Terms of Use, Privacy Policy, Subscription, Membership, and SaaS agreements. Visit Chip's http://www.digicontracts.com site and download his FREE report, "12 Sure-Fire Ways Your Website Can Get You Sued".
Read more!
The Advantages & Disadvantages of Incorporating Your Business
So you currently have your own business and you're pondering over whether or not you should incorporate it, or carry on as a sole trader?
Before you make the incorporation decision, you need to consider all of the advantages and disadvantages that incorporating brings.
This article will set out to explain the benefits and downsides to incorporation, starting with the benefits ...
Benefits of Incorporation:
Personal Liability Protection
An incorporated company is a separate legal entity responsible for its own debts. Shareholders only have responsibility for servicing debts and liabilities up to the value of their equity in the Company.
Creditors of a corporation can only seek payment from the assets of the incorporated business and not from the personal assets of shareholders, directors and officers.
As a small business owner of a non incorporated company, your personal assets are at risk if your business fails to service it's debts.
Personal liability protection is therefore a major benefit of business incorporation.
However, owners forming new corporations with small amounts of invested capital may well be asked to provide personal guarantees that credit will be honoured to reduce the risk of the lender.
Also, owners of incorporated businesses are required to personally ensure that the company makes its required tax repayments.
Protection From Legal Action
As with personal liability protection from debts above, the personal assets of the company's owners is protected by the separate legal entity status in cases where the incorporated company faces legal action.
However, owners can still be held personally liable in cases where the company is found guilty of criminal negligence.
Tax Advantages
Some incorporated businesses can enjoy lower taxation rates following business incorporation compared with partnerships and sole traders. One way of achieving lower taxation is to minimise the salary paid to the owners to reduce higher rates of personal taxation, and draw income from the business in the form of dividends which are taxed at a lower rate.
Obviously professional advice from a qualified taxation expert should be sought in all instances as all personal circumstances are different.
Other taxation benefits of incorporation are that once incorporated, many additional items of expenditure become tax deductible. For example medical expenses, entertainment expenses, vehicle and travel costs, recreational facilities and pension costs all become tax deductible. This can be a significant cash benefit. In particular money placed in an approved pension plan is tax free as is the funds growth.
Raising New Capital
Once you've incorporated your business, the ability to issues shares simplifies the process of raising capital investment. It's also easier to get loans and other finance approved from financial lending institutions if you are an incorporated company.
Transferring Ownership
The existence of shares also simplifies the sale of your business in the future. Also should an owner or director die, the business can continue to operate indefinitely.
Business Credibility
Having the words Inc or Corp in your business name gives a positive perception of long term financial stability.
Disadvantages of Incorporation:
Double Taxation
Once incorporated, earnings are subject to double taxation, whereby, company profits are taxed, and then the dividends paid to shareholders from the "net" profits are also taxed.
With a non-incorporated business, the income the owner receives from the business is only taxed once. Double taxation can be avoided if the corporation is registered as an "S-Corporation"
Statutory Compliance Costs
Compliance with legal and accounting requirements places a significant burden on companies in terms of staffing, cost and time. There are also fees associated with the initial company incorporation, and ongoing operations.
Loss of flexibility The separate legal entity status of incorporation also means that the company finances are separate from the individual's, therefore the individual cannot "borrow" money from the accounts of the corporation, and statutory requirements in general reduce the flexibility of what can and can't be done with the business and its finances.
The above are some of the key advantages and disadvantages that you as a business owner need to consider before you begin the process of incorporation. You should always seek legal advice as all cases are different.
Richard Taylor MBA is a Chartered Management Accountant and Company Director with a specific interest in small business start ups. Click on the following link to learn more about the pros and cons of becoming incorporated. http://www.incorporate-my-business.com
Read more!
Business Laws: What you Need to Know
Copyright © 2008 The Powerful Promoter
There are a myriad of things you must think about when opening any type of business whether it is a small business or a large corporation and one of those is how business law may affect you.Failure to pay attention to business and corporate law can land you in a world of trouble-both legal and financial. The good news is that you do not necessarily need to be a graduate of a fancy business law college or have a business law major to brush up on the basic ideas of small business law and corporate business law.
If you’ve paid attention to the headlines lately, you probably know that employment law for business is one of the number one areas where you can get into trouble if you aren’t up on all the employment laws and regulations. There are numerous laws that govern the employment of both regular employees and contract employees. Just for a broad overview, take a look at all the employment business laws you must meet:
• Civil Rights Act of 1966.
• The Equal Pay Act of 1963
• Americans with Disabilities Act
• The Immigration Reform and Control Act of 1986
• The Age Discrimination in Employment Act
• The Equal Employment Opportunity Act
• The Bankruptcy Act
• The Occupational Safety and Health Act
• FMLA, the Family Medical Leave Act
• Employee Polygraph Protection Act Labor Law
• FLSA, the Fair Labor Standards Act
And that’s not even counting the various state employment business laws that might apply to your business! If you aren’t sure of whether you are meeting all the regulations, it’s a good idea to get a checkup for your HR department.
Do you happen to work in the international arena? If you have anything at all to do with international business, then you should be aware of the many ways in which international business law can affect you, your business and your bottom line. At a minimum, you need to make sure that you meet general international business laws, specialized export laws, import laws and any laws of the foreign country in which your business operates.
And what about the business law scene at home? Were you aware that in addition to Federal business law and international business law, you are probably required to meet State business law regulations? Do you know whether you need a business permit or license? Failure to obtain one can result in the shutdown of your business and hefty fines and penalties. This is just one of the ways that state business law, such as California business law, can affect the health of your business if you aren’t careful to stay on top of things.
Finally, what about Internet and online business laws? Were you even aware that there was such a thing? The Internet has exploded so much in the last decade that the government has found it necessary to institute Internet compliance laws. If you operate a website of any kind and do not meet the compliance regulations, that site could be shut down and you could face criminal prosecution and hefty fines.
Of course, no one should ever attempt to navigate the complexities of any type of business law alone and the best course of action is to always seek the qualified professional advice of a business law firm, but hopefully these tips will help you to understand a little bit more about business law requirements.
Matt Bacak became "#1 Best Selling Author" in just a few short hours.
Recent Entrepreneur Magazine’s e-Biz radio show host is turning Authors, Speakers, and Experts into Overnight Success Stories. Discover The Secrets To Unleash The Powerful Promoter In You! Sign up for Matt Bacak's Promoting Tips Ezine ($100 value) just visit his website at http://www.powerfulpromoter.com or http://www.promotingtips.com
Read more!
Legally Starting a Small Business
Copyright © 2008 Elias Stassinos
Here's how to legally start your business.
First, regardless of the business you are starting, you will most likely need a business license.
The legal requirement to get a business license is valid regardless of whether you business is a home-based business, an online internet business, a contractor's business, or a professional's business, such as a doctor's medical office - you need a business license to start a business. The business license requirement is a requirement in addition to a required license you might need from the state if you are a professional such as an attorney or hairdresser. Depending on the location of your business, or the type of business, the business is filed at the state, county or municipal level of government. Here's a business license service: http://www.bizpermit.com
Second, if you using a trade name that does not include your legal name, you need to file a Trade Name Certificate or DBA (Doing Business As).
If your trade name includes you last name but also includes a suffix such as "& CO" or "& Associates" or anything that denotes additional business owners, you need to file a DBA. You can also file a corporation or LLC instead of filing a DBA, but that may be a little more expensive. However, even if you file a Corporation or LLC, and the corporation name or LLC name is different from the trade name you will use to conduct business, you need to file a DBA.
Third, if you sell wholesale (i.e., if you sell to retailers) or buy wholesale to resell retail, in other words, if your business sells or leases taxable items or services, you will need to obtain a state sales tax id number (also called a seller's permit, wholesale license, retail license or resale permit).
You will need a reseller's number to buy wholesale, or if you are a wholesaler, you will need it to sell wholesale. For example, if you have a toy store, you will be able to buy wholesale without paying any taxes for the toys to the wholesaler and, subsequently, charging taxes to your customers when you sell the toys.
Fourth, if you are an employer, you will need to obtain a federal employer tax identification number as well as a state employer tax identification number. These numbers are required if you are an employer. Employers pay taxes both to the federal and to the state government.
The above licenses are the minimum you need to start. If you want to protect your personal assets from business creditors or againsts law suits against your business, it is a good idea to incorporate or form an llc.
------------------------------------------------------------
You can hire an attorney to file your business documents, a less expensive legal service or you can do it alone. After obtaining the required business licenses discussed above, and opening your business accounts, you are legally able to start business operations.
Elias Stassinos, Esquire is a trademark and incorporation attorney that has assisted thousands of small business owners and entrepreneurs launch their first business enterprise. Visit his law firm Website: http://www.stassinos.com . Attorney Elias Stassinos, Esquire is also a corporate legal counsel for the leading online legal filing service at http://www.businessnameusa.com .
Read more!
Don’t File Your LLC or S-Corp Without Reading This
How Choosing the Wrong Business Name Could be the MOST Expensive Decision of Your Career
Ok, so you've decided to start a business, either by yourself, with a couple of friends, or maybe even with a couple of colleagues from your last "corporate gig." You sit down at your first impromptu "business meeting" over a case of cold coke (insert other favorite beverage here) and you start your checklist:
1. Million Dollar Idea: Check
2. Office Space (or an extra room/basement in your house): Check
3. Business Plan: Check
4. Business Name: ...
... a blank stare stretches across everyone's face and thus your business has hit its first of many roadblocks on the road to becoming "The Next Fortune 100 Company." So, you do what every other start-up business does, you start listing words that describe what you do, try to combine them to create something new, brainstorm them and email back and forth over several days, nag every person you come into contact with to get their opinion, and FINALLY someone comes up with a name that everyone loves (or more likely at least everyone can live with it) and "The Business" is born.
Now here's where there is a hidden step that no one probably told you about. Let me explain.
For the purpose of this illustration, let's suppose that you pick the name "XYZBiz" While you're positive that millions of dollars of venture capital, private jets and an office on the 152nd floor of the coolest building downtown are just inches away, there are a couple of things that you may not be aware of… Important things like -- Is there another business called XYZBiz anywhere on earth? Before you file your corporate paperwork, start printing up brochures, buy XYZBiz.com and build your website, this is a serious question that has to be answered.
"Why does it matter?" you may ask. Well, there is a large body of law in the United States, as well as in almost every other nation in the world that prevents competitors from using the same name. So, if there is another XYZBiz operating anywhere in the good old U.S. of A. (we'll leave the rest of the world out of this for now) and if you were to start offering your products and services in the same geographical area (which is a real problem to figure out now that the internet has erased many geographical boundaries), then the other XYZ Biz "impostors" (who are undoubtedly not nearly as good as you) could have a Trademark Infringement Claim against you. And if they were to pursue it, it could be very costly. Because remember, if you are served with a lawsuit, you are REQUIRED to respond to it no matter how ridiculous it may sound. And, as you might have guessed, at this point you will need to hire a lawyer to handle this situation, and I can tell you that this call is much more expensive than the one I'm about to tell you about.
The truth is that this is a very common issue that sometimes goes unnoticed, but often ends up in a costly visit to the courtroom. So, you have two choices, you can wing it or you can opt for the safer route: do a little homework for yourself and then call an attorney who specializes in trademarks. Now, I know that the mere mention of the word "attorney" conjures up many feelings in all of us, but I can assure you there are some very helpful attorneys out there… I can think of at least one right now! And the trademark process is really not that expensive. Certainly it's not nearly as expensive as defending yourself against a multi-million dollar corporation or even worse a "sinking ship" company that is just looking for a way to scrape some money out of anyone they can.
Trust me…or you can learn the hard way for yourself.
© 2007 The TM Lawyers
To get more information on trademarks, go to TheTMLawyers.com. JW Dicks & Nick Nanton, founders of The TM Lawyers are experienced lawyers who have spent a great amount of time working in the intellectual property and licensing fields. The TM Lawyers is a division of Dicks & Nanton P.A. a boutique law firm that specializes in Building Businesses & Brands.
Read more!
Business Licenses Required to Legally Start Your Business
Copyright © 2008 Elias Stassinos
Here's a list of business licenses you need to start your business.
All starting businesses need one or more business licenses and tax ids before legally starting business operations. After reading this article you will know exactly what business licenses you need to start your business. First, all starting businesses need a business license.
There are a few businesses that are not required to have one but that's a small percentage compared to the percentage of businesses that need a business license to legally operate. The business license requirement applies to all businesses: Home-based businesses, online internet businesses, contractor's businesses, professional businesses and any other type of business. If you are a professional, such as a mechanic or hairdresser, you might need to apply for a professional license directly from the state. However, you will still need to obtain a business license in addition to your professional license. Depending on the location of your business, or the type of business, the business license is filed at the state, county or municipal level of government.
Second, you may need to register a DBA. If you using a business name that does not include your last name, you need to file a DBA (Doing Business As), also called a fictitious business name, an assumed business name, a trade business name, a trade firm name or a business name certificate.
Keep in mind that even if you use your last name as part of your business name, and the business name also includes a suffix such as "& Co," "& Sons," "& Associates" or anything that denotes additional business owners, you need to file a DBA. Incorporating or forming an LLC is like the registration of a DBA business name so long as the corporate or LLC name is identical to the name you are using to conduct business. So, if you incorporate or form an LLC, you don't need to register a DBA business name. However, even if you file a Corporation or LLC, and the corporation name or LLC name is different from the business name you will use to conduct business, you need to file a DBA. Here's a link to an inexpensive and professional DBA filing service: http://www.businessname.net .
Third, if you sell or lease taxable items or services, in most states, you are required to obtain a state sales tax id number (also called a seller's permit, wholesale license, retail license or resale permit).
The reason that the state wants you to have this tax id number is that, as a retailer, you will be collecting sales taxes, which you will need to later pay to the state. You will need a sales tax id number to buy wholesale, or if you are a wholesaler, you will need it to sell wholesale. For example, if you have a toy store, you will be able to buy wholesale without paying any taxes for the toys to the wholesaler and, subsequently, charging taxes to your customers when you sell the toys.
Fourth, if you will hire employees, you will need to obtain a federal employer tax identification number as well as a state employer tax identification number.
These tax id numbers are required if you are an employer. Employment taxes are paid both to the federal and to the state government. Note that a federal tax id is also you business id number - just like a social security is your personal id number. Even if you are not required to have it, it is a good idea to obtain one and use it to open a business checking account. Otherwise, you will need to use your social security number to open a business bank account. Here's a link to a company that can obtain any tax id number for your business: http://www.tax-id-number.info .
Finally, incorporate your business or form a Limited Liability Company (LLC) to avoid personal or civil liability.
You are not required to incorporate or form an LLC but it is recommended because a corporation or LLC is a separate "person" or legal entity and, thus, separates you from the business. Filing a DBA, does not protect your personal assets. However, if you incorporate or form an LLC, your debtors can only satisfy claims from your company's business assets not your personal assets such as your home or automobile.
You can hire a lawyer to file your business licenses, a less expensive legal service or you can do it yourself. After obtaining the required business licenses discussed above, and opening your business accounts, you can legally start business operations.
Obtain all required business licenses for your business so you can start making money!
Elias Stassinos, Esquire is a business attorney that has assisted thousands of small business owners and entrepreneurs launch their first business enterprise. Visit his law firm Website: http://www.stassinos.com .
Read more!
DBA Law - Don't Get Caught - Get a DBA
Copyright © 2008 Elias Stassinos Elias Stassinos, Esq. is a business law
How To Get A DBA
Here is what is a dba or how to get dba. Keep in mind that you are required to obtain a DBA Business Name in California, Florida, and most other states if your business name does not include your last legal name or if you incorporated or formed an LLC and you do business in a name different from the LLC or corporation name.
What is a "DBA" Name?
"DBA" means "Doing Business As...". In using a DBA a person or a company is operating their business using a business name other than their real, actual name. For example, John Jones, a reseller of clothing items, starts a new business called "American Resellers". His business name is not his own name, thus he must registered a DBA. However, let's say that John Jones does business as "John Jones wholesale", then a DBA is not required to be filed because the owner's legal personal last name can be ascertained within the DBA business name.
Likewise, if you incorporate or form an LLC and if the Corporation, or LLC, or any other corporate entity, does business under a name other than the legal name of the Corporation or LLC, then a DBA must be registered. If your Corporation's or LLC's name is "Advisors, Inc", and your corporation is doing business with the same corporate name "Advisors, Inc", you do not need a DBA. However, if your "Advisors, Inc " corporation does business under the name "Biz Advisors" for instance, then the corporation or LLC must file a DBA. Here is an inexpensive and professional dba filing service that can help you file your dba: http://www.businessname.net . Can I Use Any Name or Any Word In My DBA Business Name? Generally, you can use any word as part of your business name, such as "Landscape King", "American Nationwide Jewelry", "Day Care One" or "Mimi's Cleaning Service" and so on. Your products, location, first or last name or any other name may be part of your DBA business name. However, most states may not let you file a dba name with an "Inc.", "LLC" or any other similar suffix that denotes a corporate entity. So, if you want a DBA, after you incorporate or form an LLC, select a name that does not include corporate suffixes. For example, if your corporation's legal name is "IDM, Inc" and you want to file a DBA of "IDM California, Inc" you will not be allowed to file it. However, if you file the exact same name without the "Inc." suffix, you can file it. If I incorporate or Form an LLC, Do I need to file a DBA for my corporation?
You need to file a dba if your corporation's name is different from the name you doing business. Example: Your corporation's name is "XYZ, Inc", and the corporation is doing business as "John's Auto Repair". You need to file a DBA under the corporation.
What Do I Need a DBA for?
First, it makes you legal. I.e., it helps you comply with the legal requirement that all person doing business under a name other than their legal name have to file a DBA. Second, it is a required filing to open a business checking bank account in the name of the business. Without a DBA registered, it will be almost impossible to open an bank account - banks will generally not open an business account without your filed copy of your DBA registration certificate. Note that some banks may also ask you for your business license. On the other hand, if you form an LLC or Incorporate, you don't need to file a DBA. When you see your banker, just show him your corporate certificate and he may not even ask you for a business license.
What if I Incorporate, Form an LLC or Get a Business License.
Would I still Have to File a DBA? Yes, you can incorporate or form an LLC and not file a DBA. If you do incorporate, you will not have to file a dba. However, in most states, getting a business licenses does not relieve you from the requirement that you file a DBA. Also, incorporating will not eliminate the requirement that you also get a business license.
What information is included in DBA Business Name application?
Most DBA Business Name applications must contain the following information: The name and address of the small business owner. A description of the small business starting business operations. And various other information pertaining to the business or the business owner.
What if I do not file a DBA Business Name?
Most states require a DBA Business Name filing. In California and most other states, you are require to have a DBA Business Name before you start your business and there is a fine. In some states, may be a misdemeanor not to file it.
attorney. Visit his website: http://www.stassinos.com . Mr. Stassinos is
also a corporate counsel for http://www.businessnameusa.com , a
business licensing company .
Read more!
The 5 Biggest Mistakes Made by New LLCs
Copyright © 2008 Amyli McDaniel
Mistake #1 Doing Business Before the LLC is Formed.
You are personally liable for any business activities or transactions that take place before your LLC is formed. A person can sue you years later for something you did today. If your business becomes successful, those early acts could cause you to be the subject of a personal lawsuit. Don't think it has not been done. With over 70,000 lawsuits filed a day, this world is filled with people and their predatory litigation attorneys looking for successful small businesses to attack.
Mistake #2 Failing to Actually Issue Ownership Interests in the LLC.
Many business owners create an LLC but never actually issue ownership interests (known as Membership Units) to the persons that are going to be owners of the LLC (known as Members). It can be easy for you mistakenly think that because you created the LLC, you are automatically the owner of the LLC. The fundamental premise of an LLC is that it is its own separate entity. When an LLC is formed by a state agency, it does not have owners. Membership Units or a percentage interest in the LLC must be issued to the persons who will be the owners. This issuance transaction should be in writing. The LLC Operating Agreement is the typical place where the LLC issues shares to Members. Make sure that after your LLC is formed, you complete this next step.
Mistake #3 Failing to Create a Management Structure.
An LLC needs to have a management structure. A management structure determines who has the authority to make decisions on behalf of the LLC. There are two management structures. A member-managed LLC is when the members automatically have the rights to operate and manage the LLC business. The second is a manager-managed LLC which creates a corporate type structure. A Board of Managers is created and persons who are appointed to that Board have the authority to run the business. The best place to create a management structure is in the LLC's Operating Agreement. All LLC's should have an Operating Agreement as this agreement creates the set of rules for your LLC.
Mistake #4 Failure to Get Investment Obligations in Writing.
The LLC Acts of most states require that all agreements by a Member of an LLC to contribute money to the LLC must be in writing. An oral agreement is not enforceable under the law. If you are planning on starting a new business with other persons, you will likely get together and decide on how much of the business each of you will own and on what obligations each of you are agreeing to with respect to that business. Obligations usually include how much money you are each going to contribute to the business or what kind of services and time commitment each of you will devote to the business.
These conversations take place but in many multi-member LLCs, they are never placed in writing. Without a writing, any oral promises are not enforceable. If you issue Membership Units based on an oral promise and the Member fails to deliver, you cannot take back the Units.
Mistake #5 Thinking that an LLC is a Foolproof Layer of Liability Protection
Yes, it is established that a Member of a properly formed and maintained LLC is not liable for the debts, obligations and lawsuits of the LLC merely by being a Member of the LLC. But, in a realistic business context, persons who are Members are usually not passive owners of the LLC. They are also active managers and operators of the LLC business.
In today's litigious world, all businesses should be run through a limited liability entity such as an LLC. The LLC liability protection is a significant protection vehicle. However, the LLC layer of protection does not extend to all potential liabilities that can arise in the midst of running an LLC. Do your homework in performing the administrative and other tasks of your LLC and retain the proper professionals to advise you when appropriate. There are certain standards and formalities you need to meet or else you run the risk of being personally liable (this risk is known as piercing the veil risk).
The LLC laws do not cover personal negligence. Your LLC should always have insurance to cover these types of business related accidents. Do not ever think that the LLC is enough to protect you in these circumstances. Similarly, there are some laws that hold you liable regardless of whether you are operating through an LLC. The most obvious one that might apply is if you are a licensed professional. Doctors, lawyers, accountants, real estate brokers and dentists, for example, are always personally liable for acts of malpractice. If you are a licensed professional, make sure you get the proper insurance. Also, there are certain tax, environmental and securities laws that you can be held personally liable for if your LLC is in violation of those laws and you were the responsible manager.
Finally, you cannot use your LLC to engage in fraud or hide behind the LLC to protect yourself when you engage in fraudulent or unlawful acts. If you break the law or try to defraud others, the law will hold you personally accountable.
In summary, the LLC is a wonderful vehicle for providing Members with limited liability protection. But, in order to preserve that protection, you cannot just form an LLC and then forget it exists. Make sure you do the necessary things to honor your LLC as a separate entity and also know that the LLC should not be your sole means of protection- get insurance when it makes sense and always invest in the required knowledge for operating your business which includes getting the right help when needed in your business!
Amyli McDaniel is a business lawyer with over 10 years experience representing small businesses. She has particular expertise in the LLC or limited liability company - a popular legal entity for small businesses. Amyli is the author of the popular eBook "The Six Step LLC Formula for Limited Liability Protection" and founder of http://www.TheLLCExpert.com a website with valuable information for the LLC business owner. info@TheLLCExpert.com
Read more!
Why the LLC Could Be The Best Tax Option For Your Start-Up Business
Why the LLC could be the Best Tax Option for Your Start-up Business.
Your start-up business is taking off. In fact, you just got your first check.
Now, you need to get that money in the bank.
You don't have a business bank account? How are you going to cash that check?
In order to open a business bank account, you need to have your business license showing your trade name, your Federal Employer Identification Number, and your Certificate of Incorporation for a corporation, or Certificate of Formation for your LLC, or your partnership agreement for a partnership.
If you don't have these already, it's probably because you are still trying to figure out what type of entity you should form for your new business.
Unfortunately, it's not always easy to figure out which entity type is best. Should you be a sole proprietorship, partnership, LLC, S-Corporation or C- Corporation?
What's worse, you may be best off starting as one entity type, then changing when your business grows or gets more profitable.
If you've never gone through an entity change, I'm warning you now that the process can be a bit painful. You have to open new bank accounts, get a new Federal EIN, make sure your payroll tax deposits are made to the right account, change your 1099 information with all your customers, etc. If you change mid-year, you could end up filing multiple payroll and income tax returns, too.
Forming an LLC is one way to keep this process as simple as possible.
You see, an LLC is not a recognized tax entity. It is a legal business type, but the type of tax return your LLC files varies by the number of members and can even change with a simple election or two with the IRS. Since an LLC can choose which type of tax return to file, you can choose or change your tax type, without having to change your legal setup or Federal EIN. This can be a major time saver for your business.
Let's go through your options.
If you form a single member LLC (only one owner), the IRS default is that this is a disregarded entity. Essentially, the IRS ignores the fact that you formed a separate legal entity for tax purposes, and you report your business activity on Schedule C of your individual income tax return. You file and pay taxes just like a sole-proprietorship.
If you form a multi-member LLC (more than one owner), then the IRS tax default is a partnership. Your LLC would file a partnership tax return, and the income or loss would flow through to the individual owners' tax returns. The partnership return allows you to distribute income or losses to partners (members) based on criteria other than ownership percentages. This can be useful if you have members in different tax brackets, or if you would like to be able to distribute start-up losses to the member who invested the most money in the business.
If you would like to have your LLC file a different tax form, you can use Form 8832, Entity Classification Election http://www.irs.gov/pub/irs-pdf/f8832.pdf to choose how you would like to be taxed. Using this form, you can have your LLC elect to file a C-Corporation or S-Corporation tax return.
If you would like to change from the default entity type, you should file the election within 75 days of forming your LLC. You also cannot file the election more than once every 60 months, unless the first time it was filed was during the initial formation of your business. If you want to be taxed as an S-Corporation, you also need to file Form 2553, Election by a Small Business Corporation http://www.irs.gov/pub/irs- pdf/f2553.pdf within two and one-half months of forming your LLC.
With an S-Corporation, the income from your business is taxed on the individual member's tax returns based on their ownership percentage, and members pay payroll taxes on their wages just like any other employee. A C-Corporation pays taxes on its income separately, but individual members also pay taxes any wages and dividends they receive from the corporation.
Corporations are required to keep corporate minutes, must file an annual report, and must have an annual shareholder meeting in order to maintain legal limited liability. The legal requirements for maintaining an LLC can be much simpler. It's a good idea to consult a business attorney in your state to make sure your business is on track with your state requirements.
If you are in a rush to get your business rolling, starting an LLC could keep your options open. You can get your business started right away, and still have time to consult an accountant before you make a final decision on how you want to be taxed. You can even change your mind down the road, without having to change all your business accounts.
Don't forgo professional advice, but consider the LLC if you need more time. That way, you can spend your time building your business, rather than filling out more paperwork!
Discover Why Most Businesses Fail and What Are the 10 Steps You Should Follow to Dramatically Increase Your Odds of Success. Todd Jensen Explains What Are the Things You Need to
Do to Start a Successful Enterprise and How Do You Avoid the Traps That Cause Business Failure.
FREE Details:
==> http://www.freebusinessstartupinfo.com
http://www.newein.com
Read more!
