Learning Center

BUSINESS COMPLIANCE REQUIREMENT

Category: Staying Compliant

After incorporating a business or forming an LLC, prepare yourself for ongoing compliance requirements. Failing to regularly meet ongoing requirements in a timely manner can have big consequences for small businesses.

Understanding internal requirements

Business compliance requirements fall into two categories: internal and external. Internal requirements are actions that must be taken within the corporation or limited liability company by the directors and shareholders or members and managers, respectively. Although they are the most commonly overlooked, internal requirements must be documented as part of company records. It may be necessary to present these records when selling the company or in the event of a lawsuit.

Corporations. Corporations (both C corporations and S corporations) have the strictest internal requirements, including holding initial and annual director and shareholder meetings, adopting and maintaining updated bylaws, issuing stock to shareholders, and recording all stock transfers.

You’ll need to record Minutes of Meetings whenever a corporate meeting is held. You’ll need to note every action or decision for the company in these minutes. Minutes content typically includes: time and place of meeting, attendance and chair of the meeting, any actions (purchases, elections, etc), and signature of recorder and date.

LLCs. While it’s not required for an LLC, it’s recommended that you maintain an updated operating agreement, issue membership shares, record all membership interest transfers and hold annual meetings of members and also of managers, if the LLC is manager-managed.

Compliance kit: Many small business owners use a compliance kit to organize records. These include items such as sample bylaws or operating agreement, stock or membership interest certificates and transfer ledger, a corporate or LLC seal, and sample meeting minutes.

Understanding external requirements

External requirements are imposed by the state in which your business is incorporated and any state where it is registered to transact business (has undergone foreign qualification). State compliance requirements often include an annual state filing (annual report) and payment of a corresponding state fee. Here are some things to keep in mind as you address your requirements:

Annual reports: Most states require corporations and LLCs to file an annual report (also known as a “Statement of Information”): Most states require some form of an annual report filing (some every year; some every two years). Specific due dates also vary from state to state — in some cases, it’s on the anniversary of your business’ incorporation date; in other cases, it’s when your annual tax statements are due; and in some cases, it’s at the end of the calendar year. Be sure to know your specific filing deadline (check with your state’s Secretary of State’s office). Missing this deadline can result in penalties and late fees. In either case, states typically require that a fee be paid when statements are filed. These range from $10.00 to $300.00 or more.

Franchise tax: Some states also have a franchise tax—a fee paid to the state for the privilege of operating as a corporation or LLC in that state. States employ different formulas, which may be based on business revenue or number of authorized shares and par value, for calculating this tax. In California the minimum tax is $800 per year. In other states, such as Delaware, it is lower at $250 per year.

Initial reports: Finally, a few states such as California and Nevada also require initial reports/statements to be filed and fees to be paid within the months following incorporation. Your online incorporator or registered agent will let you know if your state has this requirement.

In states such as New York, these fees can increase depending on how many partners you haveOther states charge a lower flat fee, some as low as $20 a year. This fee is in addition to any franchise tax.

Record any changes for your corporation/LLC by Filing “Articles of Amendment”: Did you change your address? Drop the ‘.com’ from your official company name (or any other name change)? Authorize more shares? Did a board member or director leave the business? Any time you make a change to your corporation or LLC, you can basically count on having to file an official notification (referred to as an “Amendment”) with your state. In many states, these are called Articles of Amendment.

File DBAs for any name variations: For a corporation or an LLC, DBAs must be filed under the corporation or LLC whenever you conduct business using a name that’s different than your corporation or LLC name – i.e. if CorpNet, Inc. is doing business as CorpNet.com or CorpNet, then DBA’s need to be filed by CorpNet, Inc. doing business as “CorpNet.com or CorpNet”. Depending on where you live, DBAs are filed at the state and/or county level.

Don’t forget to close an inactive business by dissolving your corporation/LLC: Maybe you moved your focus from an LLC or corporation you formed years ago. You haven’t promoted your business, it has no revenue and no customers. You still need to file a formal termination (called “Articles of Dissolution” or “Certificate of Termination”) for that LLC or Corporation. Otherwise, you can still be charged fees associated with the business. You’ll still be expected to file an annual report (where applicable). You’ll still be required to submit tax returns to the IRS and state.

Facing the consequences

If a corporation or LLC is sued and unable to show it met all corporate or LLC formalities and state requirements, a judge can rule that the company has been acting more like a sole proprietorship or general partnership. This can result in “piercing the corporate veil” meaning that limited liability protection disappears and leaves individual owner(s) assets vulnerable if a lawsuit judgment is made against the company.

There are also consequences on the state level that can happen prior to piercing the corporate veil. If a corporation or LLC does not comply with a state’s annual or ongoing requirements, that company is no longer in “good standing.” Each state has different parameters for good standing, and many impose late fees and interest payments on outstanding annual statement and/or franchise tax fees. Being out of good standing long enough may lead to administrative dissolution, in which all benefits of being a corporation or LLC are lost.

Getting compliance assistance

Many online incorporators and professional registered agent service providers offer online compliance management tools specifically geared towards small business owners. These tools help make compliance with all formalities as easy and convenient as possible. If you formed your business as a corporation or LLC, be sure to take the time needed to ensure it stays compliant and keeps its valued entity status.

    LLC S Corp C Corp Sole Proprietor (DBA)
Legal in all states Limited Liability Protection yesOwner (members) are not liable for company debt yesOwner (shareholders) are not liable for company debt yesOwner (shareholders) are not liable for company debt Owner is liable for company debt
  Finances yes Finances are separate between owner and business. yes Finances are separate between owner and business. yes Finances are separate between owner and business. Finances between business and owner can be same
Formation & Administration Number of owner(s) yesUnlimited number of owners Maximum 100 owners yesUnlimited number of owners
  Easy & cost of Formation       yesRelatively easy & cheaper to form
  Business lasting duration yes  yesWith proper planning LLC can last for generations yesWill last even if shareholders leave

yesWill last even if shareholders leave

Sole Proprietor ships do not exist when the owner quits or passes away.
  Raising Capital or Loans yes  yesCan raise capital through investors but cannot sell stocks. yesCan raise capital and distribute stock up to 100 people yesCan easily raise capital with unlimited people Can only receive bank loan
  Owners Legal status in USA   yesOwners must be USA citizen or residents    
Management Management of business Owners, professions managers or directors Owners, professions managers or directors Owners or professions managers yesOwner & business are the same.
  Add delete or change owners yes  yesOperating agreement will govern yes  yesBylaws will govern yes  yesBylaws will govern If you add owner it will be considered general partnership
  Buy sell business yes  yesOperating agreement will govern yes  yesBylaws will govern yes  yesBylaws will govern Owner can buy sell business
  Management Flexibility yesPermits to choose from large variety of management structures Management structures are largely dictated by state and federal law. Management structures are largely dictated by state and federal law. Management structures does not exist
Taxations Pass-through taxes yesMembers are taxed on their personal tax returns. The LLC itself is not taxed. yesShareholders are taxed on their personal tax returns. The company itself is not taxed. Taxed both at the corporate level and again on shareholders' individual returns. yesTaxed only on owners tax returns
  Double taxation     yesC-Corp income is taxed at the corporate level first, then again at the personal level. This is called "double taxation."  
  Can lower tax rate     yesOwners can split corporate profit among owners and corporation, paying lower overall tax rate.  
Corporate Maintenance Annual meetings & record minutes   yes* Required to hold annual meetings or record meeting minutes, * Adopt and maintain bylaws, *Record stock tranfer yes* Required to hold annual meetings or record meeting minutes, * Adopt and maintain bylaws, *Record stock tranfer  
State Filing & Fees   yesThe owners are required to file documents (called "Articles of Organization" in most states) with the state. yesThe owners are required to file documents (called "Articles of Incorporation" in most states) with the state. yesThe owners are required to file documents (called "Articles of Incorporation" in most states) with the state.  
  Formation fees yesMust pay state fees to incorp yesMust pay state fees to incorp yesMust pay state fees to incorp  
  Ongoing state fees yesVaries by state, but typically an annual report and/or franchise tax is due every year. yesVaries by state, but typically an annual report and/or franchise tax is due every year. yesVaries by state, but typically an annual report and/or franchise tax is due every year.  
  Additional fees yesIn CA, franchise tax due the first year of the business & In NY, it is a required to publish a notice in an official legal newspaper.      
   
  Sole
Proprietorship
General
Partnership
C
Corporation
S
Corporation
Limited
Liability
Company
Limited
Partnership
Limited
Liability
Partnership
State filing (& filing fee) required for creation    
Ongoing
state filings
and fees
   
Limited
liability
protection
    Maybe
Perpetual
duration of
the business
    Maybe Maybe
Strict
ongoing
corporate
formalities
         
Flexibility
in who
manages
the business
         
Business
taxed at
entity level
      Maybe    
Pass-through
income/loss
 
Double
taxation
           
Ease of
raising
capital
    Maybe    
Ease of adding
owners/
transferring
ownership
interest
    Maybe Maybe Maybe

Delaware & Nevada Advantages

Information to help you understand your options and choose the right business type or estate plan for You, your family or Your Business

Delaware advantages

Delaware has long been known as a premier location for organizing and locating businesses. In 1899, Delaware adopted a general incorporation act aimed at attracting more businesses to the state. Delaware began to stand out as a corporate haven due to its law which gives significant latitude to corporate management to operate and control the business.

58% of Fortune 500® Companies and over 50% of companies on the NY Stock Exchange are Delaware corporations. Delaware is known as a business-friendly state and is a good choice if you intend to “go public.”

Delaware is also the leading incorporation state in part because it has a separate Court of Chancery, which handles corporate law cases quickly and with more expertise. The Delaware Court of Chancery is often considered an advantageous venue for shareholder lawsuits. It hears only business cases and uses only judges, no juries. For large corporations with thousands or hundreds of thousands of shareholders, this can be a big plus.

A Delaware LLC allows the members and managers to remain anonymous, making it easier to hide assets. By naming us (Legal Whoosh) as the registered agent, you can remove all reference to you and the other investors. In fact, the only people who have to know about the income and assets of your Delaware LLC are the folks at the IRS. That makes it incredibly difficult for a potential creditor to identify where you have money invested or parked. For more on Delaware Click here…

  • Delaware’s business law is one of the most flexible in the country.

  • The Delaware Court of Chancery focuses solely on business law and uses judges instead of juries.

  • Businesses that do not do business in Delaware pay no sales tax, corporate income tax, or property tax.

  • Taxation requirements are often favorable to companies with complex capitalization structures and/or a large number of authorized shares of stock.

  • Shareholders, directors and officers of a corporation or members or managers of an LLC don’t need to be Delaware residents.

  • Delaware corporations and LLCs need not have an office in Delaware

  • Stock shares owned by persons outside Delaware are not subject to Delaware taxes.

  • You are not required to disclose any information about the beneficial owner of an LLC to the state of Delaware or Legal Whoosh in order to form or maintain an LLC. Not all states protect your identity like this. In Delaware you are required only to have a designated contact person and a Delaware registered agent.

  • You don’t have to actually do business in Delaware to form a Delaware LLC because the state permits so-called foreign investors (meaning someone from out-of-state).

  • A single person or investor can form a Delaware LLC without anyone else. He or she can serve as President, Vice President, Secretary, and Treasurer!

  • There are very low costs involved in forming most standard Delaware LLCs. The actual filings fees with the Secretary of State are roughly $250 plus an on-going annual fees are less than $150 per year for a small company.

  • There are no minimum capital requirements for forming a Delaware LLC. You could establish one with only a few hundred dollars if you wanted. This makes it an attractive choice for many start-ups that don’t have a lot of money to invest.

  • Increased Privacy - Delaware does not require director or officer names (in corporations) or member/manager names (in LLCs) to be listed in the formation documents.

Nevada advantages

Whoever said there was more to Nevada than glitz and lights was right! Nevada is quickly exploding as one of the fastest growing states in the country and one of the primary reasons for that is the pro-business environment. Nevada is considered a “tax haven” – and for good reason. Thanks in-part to the gaming industry, Nevada has both privacy and tax advantages Nevada has no business income tax, franchise fees, capital gains tax, state corporation tax or inheritance tax – NO TAX. None

Furthermore, unlike other states, a Nevada LLC does not require firms to file a list of company assets. That means that there is no record of the assets being linked to you in any way except for your filings with the IRS, which are protected by law. This means that if you can avoid any other records linking you to the money.

  • Nevada has no I.R.S. Information Sharing Agreement.

  • Nevada doesn't tax corporate profits or LLC profits.

  • Nevada doesn't tax corporate shares or LLC ownership. Some states (not many, mind you) tax individual shares in a company.

  • Nevada has no franchise tax.

  • Nevada has no personal income tax.

  • Nevada doesn't have an Information Sharing Agreement with the IRS. (There's no information to share, because there is no income tax department).

  • Shareholders in a Nevada corporation and owners in a Nevada LLC are not a matter of public record-shareholders can remain completely anonymous.

  • Officers and directors of a Nevada corporation can be protected from personal liability for lawful acts of the corporation.

  • Nevada corporations may purchase, hold, sell or transfer shares of its own stock.

  • Nevada corporations and LLCs may issue stock for capital, services, personal property, or real estate, including leases and options. The directors may determine the value of any of these transactions, and their decision is final.

  • The Nevada secretary of state's office provides excellent customer service and excellent web support.

  • The members do not have to be residents of Nevada - or even of the U.S. for that matter.

  • Nevada’s annual fees are normally $325 per year. (An annual list of principals for $125 and state business license for $200).

  • Meetings of members and managers are not required to be held in Nevada. They can take place anywhere in the world!

  • Single-member LLCs are allowed. One person may hold all positions in the company. (This is not the case in every state!)

  • There is very little disclosure required. This is the main reason why anyone interested in privacy will often form their corporations or LLCs in Nevada.



Expand Your Business to the United States of America

The United States of America offers you the economy, markets and business climate that you need to expand your business internationally. The United States of America has everything your company needs to expand its operations internationally:

Select USA Click here…


  • The world's largest economy: The USA's gross domestic product (GDP) is US$14 trillion, and its per capita GDP is more than US$47000—higher than all major developed economies.

  • A commanding consumer market: The USA has some 310 million U.S. consumers and a median household income of over US$50000.

  • Competitive investment and business climate: The USA ranks number 2 in AT Kearney's Foreign Direct Investment confidence index rankings; number 4 in the World Economic Forum's competitiveness rankings; and number 5 in the World Bank's "Ease of Doing Business" rankings.

  • Highly Educated and Productive Work Force: The American work force is highly educated. Forty-two percent of Americans between the ages of 25 to 64 have completed a level of education beyond high school, which is fifth among all developed countries.

  • World’s Top Universities and Colleges: The United States is the home to the world’s best university and college system. One study ranks various American universities among the top four out of five universities in the world.

  • Protecting Intellectual Property: The United States is the world’s leader in protecting intellectual property rights (IPR), whether patents, trademarks, copyrights, or other forms of IPR are involved. For example, about a million patent and trademark applications are received each year.

  • Vast internal markets to leverage your business opportunities: The United States provides unique market opportunities, whether you are selling to a niche or have applications all along the supply chain.

Expatriate: A foreign citizen may be a corporate officer and/or director, and may live & work for the LLC or corporation in the United States on L1 or E2 visa and achieve USA permanent residency (Green card)

The 2 most popular states are Delaware & Nevada to register as your Corporate Home

Choose Delaware as you LLC state Click here

Choose Nevada as you LLC state Click here

US Small Business Administration Click here….

Select USA Click here….

6 Benefits of Foreign Non-Residents Filing Corporations or LLCs in the United States

1) Limited Liability Companies (“LLCs”) are popular business structures for partnerships and individuals, due to the attractive tax and legal benefits, and personal liability protection that they afford. As a non-U.S. citizen, incorporating a business in the United States is generally similar to the procedure required for a U.S. resident. Because U.S. citizenship and residency are not necessary.

2) Company incorporation in the United States is administered at the state level —not the federal level — for both foreign nationals and U.S. citizens.

3) For foreign businesses, The Internal Revenue Service (IRS) issues Taxpayer Identification Number (ITIN) which satisfies as a tax processing numbers who have to pay U.S. taxes but are not eligible for a Social Security number. Residents and non-resident aliens as well as foreign nationals fall into this category.

4) To receive pass-through profit distributions (called dividends) and to avoid double taxation many foreign citizens form a limited liability company (LLC) instead of a C corporation.

5) A foreign citizen may be a corporate officer and/or director, and may live & work for the LLC or corporation in the United States on L1 or E2 visa and achieve USA permanent residency (Green card)

6) You can open a bank account in USA as well as your home country which will also be a good Asset Protection strategy, just get your company formation documents certified with an “Apostille” or “Certificate of Authentication”. An Apostille, which is an agreement between countries to accept each other’s documents

Online Reference
Dictionary, Encyclopedia & more
Word:
By:

Documents Pet Trust Pet Agreement
Legal in all states Yes Yes
Enforceable during Pet Owner's lifetime Yes Yes
Binding contract between pet owner & guardian (caretaker) Very Strong Weak
Service, Medical providers & Community of care Yes Yes
Keeps pets together Yes  
Signed by Pet Guardian so as to confirm agreement Yes  
Can allocate trust funds during lifetime of pet owner. Yes No
Any funds must be used for pets Yes Yes
Funds left in the pet trust can be distributed to the Beneficiary name in the Pet Trust after pet(s) passaway Yes No
Can name Successor trustee to take care of the trust after owner pass away Yes No
Pet Trust can be Created by:
Pet owner
Pet owner & Spouse
Pet owner & Other person (e.g., family member, domestic partner, etc.)
Yes No
Provisions for Future pet(s) ie: pets children Yes No

States that allow Professional LLC States that allow only Professional Corporations
PLLCPC
Arkansan: PLLCAlabama = PC
Colorado= PLLCAlaska= PC
Dist. of Columbia = PLLCCA: PC
Florida = PLLCConnecticut = PC
Idaho = PLLCDelaware = PC
Iowa = PLLCGeorgia =PC
Kansas = PLLCHawaii = PC
Kentucky = PLLCIllinois = PC
Maine = PLLCIndiana = PC
Massachusetts =PLLCLouisiana = PC
Michigan = PLLCMaryland =PC
Minnesota= PLLCMissouri = PC
Mississippi = PLLCNew Mexico = PC
Montana = PLLCNew Jersey = PC
Nebraska = PLLCOhio = PC
Nevada = PLLCOregon =PC
New Hampshire = PLLCRhode Island = PC
New York = PLLCSouth Carolina =PC
North Carolina = PLLCSouth Dakota =PC
North Dakota =PLLCWisconsin= PC
Oklahoma =PLLCWyoming= PC
Pennsylvania = PLLC
Tennessee = PLLC
Texas = PLLC
Utah =PLLC
Vermont =PLLC
Virginia = PLLC
Washington= PLLC
West Virginia = PLLC

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