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Casual Articles - Four Dumbest S Corporation Setup Mistakes
As entrepreneurs, we are faced with wearing many hats. Some hats fit us beautifully while others are not quite as flattering. However, as the “stylist” of your business you must find a way to wear the cap of sales, marketers beret, promoter fedora and the list goes on and on. While you can outsource some of these functions, the one hat you MUST wear, and wear with flair, is that of Chief Boundary Officer.Because your personal brand is the unique recipe of YOU it consists of many ingredients that make up ALL of the parts of your business, which translates into an
A couple more quick points: Large businesses do like Delaware for a variety of reasons—mostly having to with how sophisticated the Delaware chancery courts are. But this applies to really big businesses that will litigate in Delaware—not small businesses. And Nevada does offer corporations a no-income-tax haven—but you need to set up a real business presence there, with an office, employees, property—the whole enchilada.
Mi
Strange thing management isn’t it; it’s not a career path we choose as a child, alongside the fireman, policeman, brain surgeon & astronaut. But one that a great deal more of us find ourselves slipping into, and yes I mean slip into, we never choose it, it kind of snuck up on us. At school your career guidance teacher takes you hand and sings the praises of a good university education, forgetting to mention that most arts degrees serve little purpose and hold no stock with most employers, i.e. psychology, philosophy, history and the list goes on, what job has this prepared
Some of the mistakes are made by entrepreneurs and investors trying to save money on accountants and attorney fees. And I guess that’s okay--albeit penny-wise and pound-foolish.
But you know what really irks me? Some of these mistakes—in fact, most of them—are made by attorneys and paralegal services… Professionals who should know better.
But enough whining. Without further fanfare, here are the four dumbest mistakes that I see people make again and again when it comes to setting up a new S corporation.
Mistake #1: Not Using an LLC
An LLC is almost always the place to start if you want to end up with an S corporation. Why? I like to tell students and clients that LLCs are akin to lite beer. Remember the lite beer commercials? Same great taste but with half the calories?
LLCs work like that. LLCs provide you with all the same great liability protection, but they require only half the red tape.
This might all seem irrelevant, but LLCs can make an election to be treated as an S corporation for income tax purposes. Acccordingly, you want to use an LLC as the basis of an LLC in almost all cases—and not a corporation.
Mistake #2: Forgetting about the Foreign Corporation Registration Rules
Read those tempting advertisements for Delaware or Nevada corporations? The advertisements sound pretty good, but most small businesses shouldn’t use out-of-state llcs or out-of-state corporations.
Here’s why: If you’re doing in business in, say, New York, you’re not going to be able to avoid state taxes by forming your llc or corporation in, say, Nevada. The tax and corporation laws in your state will require you to register your out-of-state, or foreign, llc in the states where your business operates. Those same laws will require you to pay state income taxes in the states where you earn your income.
A couple more quick points: Large businesses do like Delaware for a variety of reasons—mostly having to with how sophisticated the Delaware chancery courts are. But this applies to really big businesses that will litigate in Delaware—not small businesses. And Nevada does offer corporations a no-income-tax haven—but you need to set up a real business presence there, with an office, employees, property—the whole enchilada.
Mis
Know exactly whom the decision maker is that you're trying to target before you start your IT marketing and prospecting. In this article, you'll learn why it's extremely important that you define as tightly as you can who the decision maker is, and how to do that.If there's a particular industry you're trying to reach with your IT marketing, getting to know the decision maker will be a lot easier. Once you know your niche it's going to be a lot easier to find the trade groups, to find the lists you need to run to, to find the conferences you need to go to, to figure ou
Mistake #1: Not Using an LLC
An LLC is almost always the place to start if you want to end up with an S corporation. Why? I like to tell students and clients that LLCs are akin to lite beer. Remember the lite beer commercials? Same great taste but with half the calories?
LLCs work like that. LLCs provide you with all the same great liability protection, but they require only half the red tape.
This might all seem irrelevant, but LLCs can make an election to be treated as an S corporation for income tax purposes. Acccordingly, you want to use an LLC as the basis of an LLC in almost all cases—and not a corporation.
Mistake #2: Forgetting about the Foreign Corporation Registration Rules
Read those tempting advertisements for Delaware or Nevada corporations? The advertisements sound pretty good, but most small businesses shouldn’t use out-of-state llcs or out-of-state corporations.
Here’s why: If you’re doing in business in, say, New York, you’re not going to be able to avoid state taxes by forming your llc or corporation in, say, Nevada. The tax and corporation laws in your state will require you to register your out-of-state, or foreign, llc in the states where your business operates. Those same laws will require you to pay state income taxes in the states where you earn your income.
A couple more quick points: Large businesses do like Delaware for a variety of reasons—mostly having to with how sophisticated the Delaware chancery courts are. But this applies to really big businesses that will litigate in Delaware—not small businesses. And Nevada does offer corporations a no-income-tax haven—but you need to set up a real business presence there, with an office, employees, property—the whole enchilada.
Mi
Are you ready to get started with your job search now that the New Year is here? Don't know where to start? Wondering where to find the hidden job market? One of the best ways to get off to a good start, of course, is networking. However, that's going to take a lot of time; time that you may not have due to the need to produce income as soon as possible. How about networking on paper?
Have you sent out letters to all of your contacts letting them know you are currently in search of a new job? If not, this is a great place to start. It will also take a little time, bu
This might all seem irrelevant, but LLCs can make an election to be treated as an S corporation for income tax purposes. Acccordingly, you want to use an LLC as the basis of an LLC in almost all cases—and not a corporation.
Mistake #2: Forgetting about the Foreign Corporation Registration Rules
Read those tempting advertisements for Delaware or Nevada corporations? The advertisements sound pretty good, but most small businesses shouldn’t use out-of-state llcs or out-of-state corporations.
Here’s why: If you’re doing in business in, say, New York, you’re not going to be able to avoid state taxes by forming your llc or corporation in, say, Nevada. The tax and corporation laws in your state will require you to register your out-of-state, or foreign, llc in the states where your business operates. Those same laws will require you to pay state income taxes in the states where you earn your income.
A couple more quick points: Large businesses do like Delaware for a variety of reasons—mostly having to with how sophisticated the Delaware chancery courts are. But this applies to really big businesses that will litigate in Delaware—not small businesses. And Nevada does offer corporations a no-income-tax haven—but you need to set up a real business presence there, with an office, employees, property—the whole enchilada.
Mi
Basically make money at home classified into two categories:
1.Make money for selling products at home.
2.Make money for serving people at home.Let’s talk about make money At home for selling products at home; there are tow major ways to sell products at home:
1.Selling your own products. 2. Selling other’s own Products.
In this Article I will focus about making money at home for selling other’s products and cover its advantages and its disadvantages and talk about the other ways later.Before we start let’s describe other products and how t
Here’s why: If you’re doing in business in, say, New York, you’re not going to be able to avoid state taxes by forming your llc or corporation in, say, Nevada. The tax and corporation laws in your state will require you to register your out-of-state, or foreign, llc in the states where your business operates. Those same laws will require you to pay state income taxes in the states where you earn your income.
A couple more quick points: Large businesses do like Delaware for a variety of reasons—mostly having to with how sophisticated the Delaware chancery courts are. But this applies to really big businesses that will litigate in Delaware—not small businesses. And Nevada does offer corporations a no-income-tax haven—but you need to set up a real business presence there, with an office, employees, property—the whole enchilada.
Mi
Whatever business you are in, either online or offline,
you've got to constantly generate business/product ideas.If you've ever wondered how on earth those big corporations
and companies generate wonderful and irresistible products
plus powerful and revolutionary ideas, here are the 11
basic principle behind it all and the greatest of news is
that it can be applied to any business.1. Pick up an existing product, add additional benefits and
offer it at the old price or at a cheaper price.2. Strip an existing product to the basics and offer the
A couple more quick points: Large businesses do like Delaware for a variety of reasons—mostly having to with how sophisticated the Delaware chancery courts are. But this applies to really big businesses that will litigate in Delaware—not small businesses. And Nevada does offer corporations a no-income-tax haven—but you need to set up a real business presence there, with an office, employees, property—the whole enchilada.
Mistake #3: Electing to be Treated as a C Corporation
A long time ago if you wanted to turn an LLC into an S corporation—before July of 2004 as I recall—you first had to turn it (for tax purposes) into a C corporation. You did this by filing something called an 8832 Entity Classification Election with the IRS service center in Philadelphia. Then, once that entity classification took effect and the LLC was considered a C corporation, you made a second election to have the new C corporation treated as an S corporation. You did this by filing another form called a 2553 with the same IRS service center you’ll later file your corporate return with.
This two-steps-to-an-S corporation process was pretty much a disaster. Thankfully, the IRS finally threw its hands up and said you only need to file the S election paper (the form 2553).
Some people still want to do it the old, unfortunately. Which is really dumb. The old way doesn’t work very well. And, in a worst case scenario, you may end up with your LLC converted to a C corporation but not converted to an S corporation.
Note: If you do foul up an S corporation, know that the IRS is very, very forgiving. You might want to get an accountant’s or attorney’s help if you get into this trouble, however.
Mistake #4: Electing to be Treated as an S Corporation Too Early
Once a business generates profits well in excess of the amounts paid to owners for salaries, an S corporation election saves the owners big money--sometimes tens of thousands of dollars per owner per year.
But you don’t want to elect S corporation status too early if you were smart enough to start off your business as llc. This is especially true if you’re the only owner of the llc.
By electing S corporation status, the llc needs to file an expensive corporate return, needs to begin doing payroll--even if the only employee is the owner, an
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