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Your Business License Questions Answered

Posted by American Ltd on Sep 17, 2019 10:55:50 AM

http://www.flickr.com/photos/kylesteeddesign/3When opening a small business, it’s important to research any business license and permit requirements that may apply to your industry. It does not matter if you're an LLC or Corporation not having proper licensure can be extremely detrimental to your business. It can cause unnecessary stress, confusion, and potential fines.

To help you avoid this and better understand the basics of business licenses, we’ve answered these 4 common questions. 

1. Why Do I Need a Business License?

Obtaining proper business licenses and permits ensures that your business is maintaining compliance with federal, state, and local laws. Keeping your business license up to date is just as important as paying your taxes and annual state fees.

When applying for a bank account, you will most likely be asked to present your business license. Your business license can also help you with business financing, and may make things smoother when filing your taxes.  

2. What Are the Different Types of Business Licenses?

Keep in mind that business license types and requirements can vary from federal, state, county, and city levels. The following are a few common types of business licenses and permits to help you gain a general understanding of what you may need.

Basic Business License: This is typically issued by the city or county in which you’ll be operating.

Health Department Permits: If you prepare, serve, or sell food products, this will most likely be required,

Sales Tax License: This license is typically required for the sales of products and services.

Zoning Permits: This permit states authority to use a certain area of land for a certain purpose.

Professional & Occupational Permits : These may be required for services that are regulated by the state. These services may include, but are not limited to:

Medical Services                Legal Services

Tax Servoces                    Real Estate Services

Be sure to review your state laws if you are in an industry that may require an occupational license.

Federal Permits: if your business involves any of the following, it is best to contact federal departments for specific requirements.

Alcohol, Tobacco, or Firearms  Ground Transportation

Drug Manufacturing                Broadcasting

This is a sample of industries that may require federal licensure. Please check with federal agencies for your specific requirements. 

3. Are There Penalties for Not Having a Business License?

If you do not obtain required business licenses and permits, you are highly jeopardizing the security of your company. Not having a business license can leave you legally vulnerable, result in high financial penalties, and in some cases may lead to imprisonment. Aside from this, it negatively impacts your credibility as a business owner and will cause long term negative effects for your business. 

4. How Do I Get a Business License?

Since business licenses are handled on many levels, we suggest doing research with your state to find out exactly what you may need. You may find that your local city hall, state’s government websites, or www.sba.gov are great resources.

Since researching all of the requirements on the Federal, State, Country, and City level can be a time consuming task. American Incorporators Ltd. offers a service that researchesdetails, and lists all of the licenses and permits you will need. The only thing you would need to do is answer a few quick questions about your business. If you’d like to learn more, visit our Business License page.

Having the proper business licenses and permits is just as important as incorporating your business. Do not leave this process out of your business plan. We hope that this eases your business license research process! If you have any questions, feel free to post below or contact one of our Incorporation Specialists by dialling 800.421.2661

For more information and answers to your 50 most common incorporation questions read our FREE eBook

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Topics: LLC Creation, Tips & Tricks, Corporation Creation, Business Maintenance, Business Licenses, Alabama

5 Tips on Naming a Business

Posted by American Ltd on Sep 12, 2019 2:25:23 PM

Today we're revisiting a helpful post, co-written with insight from Incorporating Specialist Curt Sweltz, a 15+ year contributor here at American Incorporators.

78375487Deciding on a business name will be one of the most exciting steps of your incorporation process. Your business name is going to be one of the largest parts of your brand's identity. You can get creative – but try to have the name maintain some relevance to your service or product. You’ll want the name to have a meaning to the customer. At the same time, don’t be too generic. If you use something like “National Service Co.,” chances are it will be less distinguishable from companies with similar names.

After you’ve ironed out the creative details, you’ll have to worry about state level issues. To make things easier, keep these tips in mind when naming a business:

  • Your name may be available in one state, but not another.

Corporations and LLCs are “state-level filings.” This means that if a name is available in Iowa, this does not mean it will be available in Kentucky. When a name is submitted to your chosen state of formation, the state checks it only against the incorporated and LLC names in their state records.

  • Create 2-3 Distinct options.

Adding “s,” “the,” “and,” or “&” is not enough to distinguish a name and will rarely change the acceptability of a name. For example, if a company is named “Frank’s Lawn Service LLC,” the state will most likely reject a request to form “Frank’s Lawn Service LLC.” 

  • An LLC may be able to have the same name as a Corporation.

While this is not the case in all states, California will allow an LLC to have the same name as a Corporation, even if they are not related. So, Joe Jacobs from Arkansas can form “ABC LLC” in California, and Amy Alan in Ohio can in incorporate “ABC Inc.” even though the companies have no relation.

  • Decide on a Corporate Ending.

This can be simple. Most states will require your business to have a “corporate ending.” Corporations can typically decide from Incorporated, Inc., Corporation, and Limited. LLCs can use LLC or Limited Liability Company. Keep in mind, these corporate endings do vary by state, and some states will offer more options.

  • Take advantage of your resources.

American Incorporators offers a free name search service in all 50 states. Checking the name before submitting your filing will save you time and money. 

So while it may seem like an easy step, naming a business can become complicated. Take a look at these articles with suggestions and stories about naming your business:

                8 Mistakes to Avoid When Naming Your Business.

                Tips on Naming a Product 

Don’t forget, our free name search is always available. If you’d like to do more research, our State Specific Information Section also offers information on state requirements. Please post any questions or share some the business name blunders you’ve encountered!

 

Editor's Note: This post appeared previously on our blog.

Topics: Tips & Tricks, State Specific Information, Naming a Business

Incorporating or Forming an LLC for the First Time?

Posted by American Ltd on Jul 17, 2019 9:28:48 AM

Answers to Your Questions

Incorporating or forming an LLC for the first time American Incorporators Questions Answers business formation

The incorporation process can seem confusing and scary to a first time entrepreneur. What to name your venture, where to incorporate, and whether to form an LLC or corporation are just a few of the many questions that arise before you even begin the process. However, incorporating does not have to be intimidating. 

In reality, assuming you have taken the time to consider and evaluate all of your options, it should be a relatively quick and painless process. On the other hand, putting off this process can have dire consequences; from making it hard to open a bank account, to leaving your personal assets open to a liability suit, to limiting your access to investors. So don’t delay – please continue reading to find out how easy and painless the process can be!

Choosing a Name:

There are numerous places to learn about naming your entity – with everything from name reservations to trademark searches.  Read more about the process: 5 Tips on Naming a Business

LLC or Corporation?:

Likewise there are numerous sites and articles devoted to explaining the differences between LLCs and Corporations: Comparing Entities 

If you have further questions about which entity type is best for your venture we encourage you to consult an attorney or accountant.

Where Do I Incorporate?:

Similarly there are many factors that go into determining if you should form your company in your home state or in one of the so called “special formation stated” like Delaware where pro-business courts and practices attract thousands of new businesses annually. For information on what makes Delaware distinctive please read: Where Do I Incorporate?

 

This article is designed to de-mystify the actual company formation process once all of the above decisions have been made. Once you know where you want to form, what you want to form, and what you want to call your company, you are ready to start the process. In order to do this you have three main options – enlist the help of a professional accountant or lawyer, use a company formation service company or file directly on your own. There are clear advantages and disadvantages to each approach, but we will focus on the advantages of using a formation service company like American Incorporators Ltd. As a service company with extensive relationships in all 50 states, American Incorporators is able to form your company quickly and inexpensively (using a lawyer or accountant will often cost a lot more money, while doing it yourself will tend to take a lot longer).

What You Need to Do:

All you will need to do is answer a few questions related to the nature of your business. Requirements vary slightly depending on the jurisdiction (state) where you are forming, but in general you will need to know the names of your members or directors, your business address and purpose, how many shares of stock you want to issue (only for corporations), and who you want to appoint as registered agents (this can almost always be provided by the person or company forming the company for you).

A corporate service provider like American Incorporators will prepare all of the necessary paperwork, file it with the relevant state authorities and follow up to make sure your business is properly recorded. Depending on the state (and the amount you are willing to spend for expediting in certain jurisdictions) this process can take anywhere from a few hours to several weeks. In most instances you will have your paperwork back and your company officially listed within a week. Once completed, you will receive a filed certificate of incorporation (or formation) that you can use to prove you are a legitimately established business. Other steps that should be taken at this stage include obtaining and Employer Identification Number (the business equivalent of a Social Security Number) and creating your operating agreement.

Your EIN allows you to hire and pay employees and is usually needed to open a bank account. The operating agreement sets the by-laws for how your entity will be run and helps you to begin the process of establishing the corporate veil that protects your assets. For more explanation on what that means please see: What is the Corporate Veil and How Can it be Protected?

Corporate service providers like American Incorporators regularly obtain EINs for their clients as part of the formation process – saving you valuable time and energy. They also can provide Corporate Kits which will include templates for Operating Agreements and many other important documents you may need in your business life.

incorporate answers first time business formation American Incorporators

Once you have all of these documents back you are ready to begin your official business life – working with clients and other businesses, reaching out to potential investors and realizing your entrepreneurial dreams! And in most cases it can be completed in a very short time for a very reasonable amount of money! So don’t hesitate to take this important step to get on your way, incorporate today

 

Find the answers to all of your major incorporation questions in our new eBook

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Topics: incorporation process, how to start a business, forming a business, easy incorporation, create a corporation

Separating Your Company Assets

Posted by American Ltd on Jun 26, 2019 11:02:00 AM

Bank Accounts and EIN's 

running a business bank accountOpening a business bank account is one of the first major steps in running your company successfully. By establishing a business bank account you can legally separate your personal and company assets and keep track of income and expenses. You will need to obtain a Federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS) in order to open a bank account.

 

 

How Do I Open a Bank Account? 

It is best to speak with your personal bank to be sure that you meet all of their individual terms and policies, but in general you will need to provide the bank with the company's Certificate of Incorporation or Formation, its EIN, a copy of the by-laws or operating agreement, and copies of any necessary business licenses.

What is an EIN?

An EIN represents an entity's registration with the IRS. Although you are not required to obtain an EIN for your business, you will need one if you want to open a bank account for your company and to file your annual tax return.  Sole proprietors use their Social Security Number for these purposes, but do not posses the same liability protection provided by LLCs and Corporations.  International clients who form US companies but do not have any US income and have no need for a US bank account do not need to obtain an EIN. We highly recommend all other individuals obtain an EIN when they form their business. American Incorporators can help by preparing the EIN application for your company or by obtaining the number from the IRS for you here.

 

Find the answers to all of your major incorporation questions in our new eBook

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What to Do After Incorporation

Posted by American Ltd on May 13, 2019 11:10:00 AM

Corporate Requirements After Incorporation

An important first step after receiving your company's incorporation documents is to hold an initial meeting to appoint officer and directors, as well as to issue shares of stock.

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Directors typically operate as part of a Board, making up the governing body elected by shareholders. They are responsible for the management of a corporation's business and affairs. Officers consist of roles such as President, Vice President, Treasurer, and Secretary. They are responsible for carrying out the Board's policies and for making day-to-day decisions. Shareholders are included in annual meetings and must approve any major company decisions, such as issuing loans, purchasing real estate, and issuing additional shares.

It is important to hold annual meetings with shareholders and maintain minutes of those meetings. In general, maintaining a thorough corporate record means recording all meeting minutes, using a share ledger, and saving copies of all filed documents (formation, amendments, annual reports, etc.).  Make sure to maintain good standing with your state and registered agent by filing all annual reports and paying necessary taxes and fees on time. 

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Top 3 Reasons to Incorporate Now

Posted by American Ltd on May 6, 2019 1:52:00 PM

How Will Incorporating Benefit You?

incorporate now questions advice

There are many benefits to incorporating. In order to determine whether or not incorporating is the best option for you and your business entity we advise that you consult a trusted accountant or attorney for financial and legal advice.  Incorporating can be a big milestone in the life of your business and American Incorporators can help every step of the way!

These are our top three reasons for incorporating:

1) It offers liability protection

By forming an LLC or Corporation you create a barrier between your personal assets and your company assets, should your company every be sued. In this case you can protect your personal assets from being seized.  

 

2) It lends a sense of legitimacy

Forming a legal business entity also lends a sense of legitimacy to your venture.  This can help attract investors, clients, and vendors.  People tend to have more faith in a company with Inc. or LLC at the end of its name.

 

3) It allows for longevity

If the initial owner dies, the business entity continues and shares can be passed on to others. Or if the owner wants to sell his or her shares in a company it is much easier to do if a legal entity has been formed. 

 

 

Find more answers to the top 50 questions about incorporating in our newly published eBook!

 

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Who's Running Your Company?

Posted by American Ltd on Apr 22, 2019 8:30:00 AM

Member-Managed or Manager-Managed? What's the Difference?member-manager manager-managed llc questions and definitions

A Member-Managed and a Manager-Managed LLC differ in the way that the company is run.

A member-managed structure is the most common approach. This approach is recommended for companies where the members plan to have an active role in the daily activity of the company. This grants the members authority to act on behalf of the business.

In a manager-managed LLC, the members act more like silent partners and leave the day-to-day management of the company to a member-appointed manager. This operating structure is applicable only if a single member will be involved in running the company - the manager appointed can be a member.

Whichever managing approach the LLC chooses for its operation, it is important that the agreed upon rules and processes are clearly outlined in the company's operating agreement. 

What if I need to change my directors or members? It is a simple internal process to change a director or member. The company would need to have a meeting to pass a resolution indicating the new members or directors. Meeting minutes would be kept to record this transaction of resolution being signed by the current directors or members. It is also allowable, although generally not required, to file an amendment with the state naming the new directors or members. This allows for more formal documentation since the amendment would become part of the company's public record. 

 

Find the answers to all of your major incorporation questions in our new eBook
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Why Do I need a Registered Agent & Address?

Posted by American Ltd on Apr 5, 2019 10:55:00 AM

The Importance of Having a Registered Agent and Address 

76132042The first and most important reason that your business needs a registered agent and registered address is that it is required by law.  The state in which you choose to incorporate your business in will not approve the initial incorporation/ formation certificate without providing a valid registered agent and registered address.  

The registered agent and address must be located in the state of incorporation or formation and must be a physical street address.  The registered address cannot be a post office box.  The primary responsibility of the registered agent and registered address is to accept all annual report and tax notices from the state and to accept any Service of Process on behalf of the company in the event of a lawsuit.  The registered agent must be available during normal business hours Monday – Friday to accept any Service of Process on behalf of the company.  If your corporation or LLC fails to maintain a registered agent and registered address, the state may declare the company void for noncompliance.  If a corporation or LLC is declared void or noncompliant by the state, it may lose all of the liability protections provided as an incorporated entity.

Need a registered agent and address? We can help! Click Here

 

Topics: Registered Agent, how to start a business, registered agent Delaware

Requirements After Forming an LLC

Posted by American Ltd on Mar 15, 2019 10:54:00 AM

An important first step after forming your LLC is to draft an operating agreement that outlines the rules and protocols of how the company will conduct business and who will be in positions of ownership and management. Specifically, the operating agreement describes the responsibilities of the managers and members, the percentage of member ownership, as well as voting rights. This operating agreement is crucial to providing liability protection to the members of the LLC. It should be maintained with other corporate records such as meeting minutes and membership certificates.

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In the operating agreement it is important to lay out the management style of the LLC. It can either be member-managed or manager-managed. A member-managed structure is the most common approach. This approach is recommended for companies where the members plan to have an active role in the daily activity of the company. This grants members authority to act on behalf of the business. In a manager-managed LLC, the members act more like silent partners and leave the day-to-day management of the company to a member-appointed manager. This operating structure is applicable only if a single member will be involved in running the company – the manager appointed can be a member.

It is important to maintain a membership ledger to keep track of stock issued to members.

In order to maintain good standing with the state of formation and the appointed registered agent, it is important to pay all annual fees to the relevant state authorities and registered agent in a timely manner.

Although requirements for LLCs differ, maintaining a thorough record of all meeting minutes, documents, and internal resolutions is crucial for the successful function of your LLC.

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Three Easy Steps to Incorporating

Posted by American Ltd on Mar 15, 2019 8:30:00 AM

Thinking of Incorporating?

Thinking of incorporating starting a business incorporation LLC first time steps necessary

Beginning the incorporation process can seem intimidating, but the process is actually easy! For your convenience, American Incorporators has provided this three-step comprehensive list of how to get started! 

Step 1: Select a State

Things to consider when selecting a state:

  • What state doe the entity of a physical presence in?
  • What state does the entity have employee(s) located in?
  • What state(s) does the entity conduct business in?
  • What state does the entity intend to open a bank account in?

Although American Incorporators does not provide legal or financial advice, if you answered any of the above questions with multiple states, you may be required by local agencies to register to do business in more than one state.

*Registering to do business in more than one state is known as a foreign qualification/registration – American Incorporators can assist with foreign qualification/registration

 

Step 2: Select a Type of Entity

Limited Liability Company (LLC)

An LLC is a legal entity separate and distinct from its owners, who are called "members." Members of an LLC may include any number of individuals, partnerships, corporations, trusts, nonresident aliens, etc.

Ownership: One or more members

Control: Members or managers, as set in operating agreement

Liability: Absent of any specific personal guarantees, the amount of risk for members is limited to their investment in the LLC. Their personal assets are generally beyond reach of creditors.  This protection is enjoyed by all members. LLC members may be active in company management without risking their limited liability status.

Taxation: Members may also enjoy the same flow-through tax benefits which are applicable to partners of a partnership (Taxes are collected on individual partners, not on the entity). 

S Corporation

An S Corporation avoids the double taxation inherent to general business corporations, in which both profits and dividends are taxed.

Ownership: Shareholders –By law, the number of eligible shareholders is limited to 100. Only individuals and certain trusts and estates are allowed to own stock.

Control: Owners share ownership through stock, and business is managed through a Board of Directors; certain legal regulations also apply. 

Liability: Owner’s liability is generally limited to assets in corporation.

Taxation: Corporation is not taxed; income is taxable to the shareholders at their personal income tax rate.

C Corporation or General Business Corporation

The C Corporation is the most widely used by both small and large businesses that plan to have shareholders.

Ownership: Shareholders –Unlimited number

Control: Owners share ownership through stock, and business is managed through a Board of Directors; certain legal regulations also apply. 

Liability: Shareholder liability is generally limited to the each has invested in the corporation, unless acting as guarantor of corporate debt.

Taxation: Corporation pays tax on business income at corporate tax rate. The profits are distributed to shareholders and are taxed at personal income tax rate. 

Non-profit Corporation

A non-profit corporation is designed to provide tax-exempt status for socially beneficial businesses that support charitable, religious, educational or scientific activities. It may not be used if you intend to run your business for profit. Most non-profit corporations have either tax-exempt or 501(c)(3) status, which exempts them from paying taxes on income. To obtain either of these tax designations, an Application for Recognition must be filed with the IRS.

General Partnership

A general partnership involves at least two people, with no maximum on the number of partners allowed. There are no state filings required to form a partnership. Taxes are collected on individual partners, not on the entity. A limited partnership is a statutory form of partnership consisting of one or more general partners who manage the business and one or more limited partners who invest in the business and do not participate in management.

Ownership: Two or more individuals or other entities according to the partnership agreement

Control: By the partners in accordance with partnership agreement

Liability: All partners are jointly and severally liable for all partnership debts

Taxation: Individual partners’ prorated share of partnership income or loss is included on the respective income tax return of the partner and taxed at personal or corporate rates

Sole Proprietorship

A sole proprietorship is a business conducted by one owner, who is taxed as an individual.

Ownership: Individual

Control: By owner

Liability: Owner is personally liable for all business debts

Taxation: All business income is considered personal income to the owner and is taxed at personal income tax rates

Step 3: Contact American Incorporators

To complete the process visit us online: https://www.ailcorp.com/packages

Or call: 800.441.5940

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