Understanding How to Make Your Small Business an LLC

When a small business converts itself into a limited liability company (LLC), it will gain many legal and tax benefits. One of the most advantageous reasons for a small business to become an LLC is that it protects the owner's assets in the event that a lawsuit was to arise. Also, if a business was to go under and file bankruptcy, as a LLC, the owner's assets are once again protected. So, how do small business owners go about turning their companies into LLC's? Let's take a closer look.

Step 1: Choose a Business Name

More times than not, a small business can continue operating as an LLC with its original name; however, this does not always apply. Sometimes, there will already be a business operating as an LLC with the same name. In this case, a new business name will have to be chosen.

Step 2: Choose a Registered Agent

A registered agent accepts any official mail that is sent to an LLC business, including LLC documents. An LLC must partner with a registered agent, or it will not be in legal compliance with a wide range of laws. Some states will allow an LLC to be its own registered agent.

Step 3: Filing Paperwork

Once a name and registered agent have been established, it is now time to file the appropriate paperwork with the Secretary of State office. When filing this paperwork, there will be a fee involved, ranging from $100 to $800. Also with this fee, small business owners will have to submit a copy of the Articles of Organization. A copy of this document can be located online and printed for free. The purpose behind this document is that it tells the Secretary of State what a particular business' name will be, who will be working for it as well as the nature of the company.

Step #4: Create an Operating Agreement

Some states will require business owners to create an operating agreement, which states how workers will be paid and what their responsibilities will be.

Step #5: Publish the LLC

Some states require that new LLC's publish their openings in local newspapers. In addition, LLC owners may be required to submit an Affidavit of Publication form.

Step #6: Obtain Permits

All LLC's must obtain the appropriate type of business licensure, and some of them will need to obtain permits.

Step #7: Update Banking Accounts

LLC's must obtain an Employer Identification Number that is issued by the IRS. This number must be used to establish a business bank account. If a bank account is already in place, the number must be used to update the account information.

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Reasons Why It Is Important to Assign Someone Power of Attorney

Establishing the extent of, and limitations to, the agent's power is essential to a successful relationship between the two parties. An agent can be anyone the principal trusts (who is typically 18 years old or older) to carry on the principal's important matters, which may include financial, personal tax, and real estate matters. The letter of attorney may identify alternative agents if the named agent dies, becomes legally disabled, resigns, or refuses to act on behalf of the principal. A letter of attorney sets the standard for the amount of authority that the agent will have. It should be very specific about what powers are being granted and what limitations are placed on these powers.

With a durable letter of attorney, the document typically states that the transfer of power is effective immediately or when the principal is unable to coherently make decisions on his/her own due to some disability or incapacity. If the durable letter of attorney is to become effective when the principal becomes disabled or incapacitated, the definition of "disability" and "incapacity" should be included in the power of attorney, along with a method of showing the existence of a disability or incapacity. This helps the agent and third parties know when the powers pass to the agent. This is important because some third parties may be cautious about recognizing the agent's power to act on behalf of the principal. A statutory power of attorney, simply tracks the language from the State's letter of attorney statute. To make a legally binding, it must comply with all state laws, and should be signed, dated and notarized by the principal.

Medical power of attorney assigns an agent to make health care decisions for the principal when a physician certifies in writing that the principal is no longer able to make these important decisions. For example, a person is unable to make health care decisions while in a severe coma. Despite the significant grant of power, an agent is obligated to follow the principal's instructions when making decisions on his/her behalf and the principal may revoke the authority granted to the Agent. Two witnesses must be present for the signing of the written medical power of attorney, and there are limitations on who may serve as witnesses.

The letter of attorney is a valuable tool that can provide the principal with the peace-of-mind that his/her affairs will be taken care of. If you would like to know more about durable, statutory and medical power of attorney, consult with a trusted legal professional.

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LLC FAQs - What Is an LLC?

When in the process of creating a new company, the business organizers have several options to choose from. The decision will impact tax status, liability and how the profits are shared. Although the options depend on the type of business that is being formed, owners can choose from corporation, sole proprietorship, partnership or the relatively new limited liability company (LLC).

The LLC is a flexible option for organizing the owners of a company. The LLC partners are called associates. Individuals, partnerships or any other business entity can all be associates in an LLC. The main benefit for choosing this method is that all owners are protected from any losses that the LLC might incur. The company is an entity on its own. Associates are not personally responsible for taxes, and if it is sued, only the company itself will bear any responsibility from damages. The main benefit to forming an LLC for the associates is the ease in which it is possible to get the profits. The losses stay on the books of the company.

This form of a company has been on the law books for over 30 years. In 1977, it began in Wyoming, but adoption was slow until Florida followed suit in 1982. It was in the 1990's that forming a company as an LLC really took off and started becoming a popular option that took the place of the other business ownership formats. Since then, it has remained on of the most popular options when creating a new business.

The structure of an LLC is simple. There can be an infinite number of partners in the entity, or there can be just one. Although corporations require bylaws and annual meetings for shareholders, these are not required by an LLC. The only requirement is to record the formation of the company with the secretary of state and pay the proper filing fees.

Among the many benefits of forming an LLC, there are a few disadvantages to associates who choose to structure their company this way. Since each state has its own laws governing LLCs, your company will be treated differently state to state. The earnings of the members of an LLC are also subjected to a self employment tax. This is not the case for corporations where profits are passed on as distributions and are not taxed this way. The final disadvantage only applies in certain states. Some states will apply a tax to an LLC but not to a business formed as a partnership. In those states, it may make more financial sense to form a partnership instead of an LLC.

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Name Change - Changing Your Name The Legal Way

There are many reasons for one to change their name and these range from marriage, security, simple desire to change name or for religious purposes. Whichever it is, changing a name has to be done legally according to the laws of your state. It is considered a serious crime to change your name in an effort to evade debts. Since change of name is of legal importance it is therefore required that you get a court order before you can change your name.

Changing your name will affect a lot of things some of which you will have to change as well. For instance after changing your name you will be required to also change your bank account name, driver's license, passport, voter's registration, social security card, will, title deeds including any signed contracts that carry your old name. It is evident that changing your name may also present future problems that you may not be aware of. It is therefore advisable that you do a little bit of research before proceeding with the process so you don't get any surprises.

Name change laws vary from state to state. It is therefore important to know beforehand what is required by your state. For example some states in the US require all name changes to be registered with the Social Security Administration, Bureau of Consular Affairs, United States Postal Service and the Department of Motor vehicles within a stipulated deadline ranging from 10 - 60 days. Some states in the US only grant a name change when the petitioner has presented a sound reason for changing a name and the courts have found no ulterior or illegal motives associated with the request.

Marriage is another reason for one to change their name. After marriage a woman may change her surname legally and revert to her previous surname after a divorce. The condition of changing a name as a result of marriage is not only limited to women.

Some religions encourage changing of name as a symbol of repentance. In many US states this is considered as a good reason to change a name. So whatever your reason for changing a name is always check if it is acceptable in your state.


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LLC Vs S Corp

If you're just starting a business or you're ready to take your business to the next level, you have a lot of decisions to make, and one of the most important decisions you'll face is how to structure your business for legal protection and taxation. For many small businesses, the two most popular types of business entities are the LLC and the Subchapter S Corporation, or S Corp. In the LLC vs S Corp debate, there are a lot of factors to consider when you're considering which is best for you and your business. Here are a few things to consider:

LLC vs S Corp

LLC Pros:

* An LLC is relatively easy to maintain. LLCs require fewer forms than S Corps and taxes only need to be filed once a year.

* Formal meetings are not required, which means there's also no need to keep minutes.

* Start-up costs are lower than those associated with an S Corp.

* LLC members are not bound by profit-sharing regulations -- they decide how profits (and losses) are distributed.

LLC Cons:

* If a member declared bankruptcy or dies, the LLC will be dissolved and you will have to reform your LLC.

* For tax purposes, owners are considered self-employed, which means they have to pay roughly 15% in self-employment taxes on the company's entire net income.
S Corp Pros:

* S Corps offer considerably greater tax savings than LLCs; rather than paying a self-employment tax, only the wages of the business' employees are subject to employment tax. The rest of the company's profits are paid out as a distribution, which is subject to a much lower tax. (However, when S Corp owners pay themselves low salaries in order to receive larger distributions, the IRS may reclassify the distribution as wages.)

* S Corps are considered as being independent of their owners, which means if an owner dies, retires or sells their shares, the S Corp will maintain its status.

S Corp Cons:

* S Corps require significantly more paperwork and recordkeeping than LLCs; regular meetings must be held, minutes must be kept and bylaws must be established.

* S Corps have a much more complicated taxing procedure, and many more tax forms are required. What's more, forms must be submitted throughout the year, not just on April 15.

* Not all states recognize S Corps, and the way an S Corp is treated can vary considerably among states, so spend time learning how an S Corp is treated in your state.

Your business is your livelihood, and if you don't have the right legal and tax structure, you could be leaving yourself open for considerable loss. Use this article as a jumping-off point and then seek the advice of a good attorney who can help you decide whether an LLC or S Corp is better for your business' needs.

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Top 10 Reasons You Need A Living Trust

Now, you might say: "I don't need a trust. I don't have a large estate. I don't need fancy planning. It's too expensive anyway. And complicated. So I just don't need a trust!" And so you ask: "Why would I want to have a trust?" I'm going to describe in a few simple words why you will benefit from a trust. First, let me explain what a trust is. A trust is a . . .

Probate Administration: How It Works

Probate administration is something that many people fail to fully grasp. This is compounded by the difficult times in which such administrative action is necessary, usually after a person has passed on and their last will and testament is acted upon. It is important to understand the basics of probate administration because families often find it difficult to come to agreement about money, property, or other inheritances after a loved one has passed away. The administrator is responsible for the smooth transfer of assets or pieces of the deceased person's estate to their beneficiaries. There are a few basics that are crucial to understanding the process and you don't have to be an attorney or probate administer to see the complexity of such a position.

The first basic tenet of probate administration is the fact that it costs money. This may seem like a simplistic statement, but many families are caught unaware of the potential costs of having their loved one's assets divided up in court. If at all possible, the hiring of a probate administrator is something that should be agreed upon before the deceased person passes away. This ensures that the deceased person's wishes are honored and the family is treated fairly and properly by the administrator. It is not uncommon for administrators to charge fees which can be later deduced from the value of the estate or assets. These costs are usually deducted before the assets are split between the family members and beneficiaries. The executor of the will, or the person who is officially tasked with carrying out the actions described in the will, will work closely with the administrator and the family to make sure the last wishes of the deceased are honored and respected. In many instances, if the estate owes money and has to go to probate court, the executor is required to provide a fidelity bond which acts as a sort of deposit against the possibility that the executor will abuse their power to distribute the deceased's assets.

Another important concept to keep in mind is that there is usually a strict time limitation for the beneficiaries to receive the assets or portions of the estate. Probate administration planning should be incorporated into he last will and testament of the deceased whenever possible. If one is not selected before the time of death, a petition can be filed by the family members that will help to resolve the administration issue and nominate one to take care of such duties. On a related note, real estate or personal taxes as well as lawsuits and settlements can also be levied during the first few weeks or months after a person passes on. These are also time-sensitive judgements or actions and will most often come out of the estate or assets before family even gets to divide them up.

Such an administrator also helps to notify creditors that the deceased person has passed and acts as a middleman of sorts for the family. The administrator will likely help the family notify these creditors and help them to publish or post legally-necessary notices. This allows each creditor to clear out any remaining accounts or settle them with the deceased's assets prior to the distribution to the named beneficiaries. This can be a long, complex process, especially if the person who passed away had lots of credit card debt or loans with banks and other creditors. Just like with taxes or lawsuits levied against the deceased, the beneficiaries are second in line to receive their loved one's assets and estate.

Each state handles probate differently and it is certainly worth your time to research and learn more about the details of the transfer of assets to beneficiaries after a loved one passes. The best way to be prepared and reduce the need for probate administration or even the potential for inter-family legal struggles is to have a conversation with your loved ones about such issues. Make sure their decisions are in writing and hold up to legal scrutiny. Once a person is gone, family members often scramble to be first in line for any benefits or inheritances. It is amazing that when money is on the line, the family's social dynamic can change almost overnight.

If a person passes on without a last will and testament, the spouse or next of kin is usually awarded the estate or assets associated with the estate. Again, these assets are handed over after the Federal and state governments make sure no back taxes or liens are owed and after creditors give their input according to the legal contracts entered by the now deceased. An excellent way to avoid all the probate headaches is to create a trust that allows for a probate-free transfer of money to the family of the loved one who has passed.


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Why Everyone Needs at Least a Living Trust

There is one thing we all share in common: our days on this planet will come to an end - probably by surprise. That is about as basic a 'common denominator' as you can possibly get. To protect our loved ones from having to endure years of court procedures and legal fees, the Revocable Living Trust ('RLT') is a widely-used way to avoid the two related court proceedings known as Probate and Conservatorship, and to pass our assets on to one's loved ones with favorable tax planning.

WHAT IS CONSERVATORSHIP?

Conservatorship is court proceeding. It arises when someone cannot manage their financial affairs and it's time to have someone 'step in'. Maybe they've suffered a stroke or are in a coma or some other disabling condition. The court can appoint a 'Conservator' over the person or the estate or both. The conservator's job is to temporarily manage the financial affairs and property of the person they have been appointed for. This is often done by someone who's either a professional (a bank, a CPA, attorney, etc.) but sometimes it might be a family member who has the experience to warrant a court appointment. The conservator is given legal powers by the court that remain in place until the person recovers and is able to regain control over their financial affairs, or until death, whichever occurs first. Many times a person who has undergone a conservatorship proceeding may be placed in a residential treatment facility and the person who has been appointed as their conservator will manage their finances, bills, obligations, contracts, housing and other financial decisions on their behalf.

WHAT IS PROBATE COURT?

Probate is also a legal proceeding. When a person has died with no will the court supervises the estate, ordering property distributed according to the deceased person's instructions, or if there is no will, then according to local state law. An executor or personal representative is appointed by the court and he or she has the responsibility to report back to the court as matters are accomplished. Tax returns are prepared and filed. Bills are paid. Mortgages are satisfied. When the court is satisfied that all of the heirs have been identified, the bills, taxes and debts paid off, the remainder is distributed to the persons entitled under the Will. Dying without a will is dangerous. It can trigger distribution of assets that you do not control and may not have wanted.

LIVING TRUSTS AVOID THESE PROBLEMS.

With a Living Trust in place, you avoid both Probate and Conservatorship proceedings. That's because once you execute the trust and transfer ownership of your checking account, savings account, home and other property into the trust's ownership, the trust is in fact the 'owner' of the property. You of course are both the trustee (administrator) and the beneficiary during your lifetime. Under the trust, you decide who will take over as trustee afterward, and you alone decide who gets what and when. The successor trustees may be your most responsible child, a grandchild, a trusted fiend or relative or even a financial institution such as the trust department of a bank. With the Living Trust in place, you can simply bypass the need for either Probate or Conservatorship altogether.

If you are concerned about someone 'contesting' the trust, there is a way to avoid that problem. One way is to specifically disinherit someone by name so they can't later claim to a judge that you 'forgot them'. Another way is a way that I personally think is better. You leave that person a much smaller amount (say one dollar or five dollars) but no more, and you include a provision in the Living Trust that if any person contests your trust instructions, they are to be treated as if they died before you and are therefore entitled to nothing at all. This is an easy way to avoid having someone try to tie up your estate in litigation and at the same time penalize them completely if they choose to cause you any problems as to how you wanted to distribute your estate.

WHAT SHOULD THE LIVING TRUST OWN?

The Living Trust is a separate 'person' under the law and can own various kinds of property. Typically the kinds of assets that go in to a Living Trust include: your Personal Residence, Personal (not business) bank accounts, credit union accounts, certificates of deposit, brokerage or trading accounts, stock of subchapter 'S' corporations, personal furniture, tools and furnishings, and collections such as art, sculpture or other kinds of collections that may be of value. Basically, anything you want to avoid probate.

TAX PLANNING and THE LIVING TRUST.

There are some good opportunities for tax planning with the Living Trust. Using your Unified Credit, as of 2006 you are able to pass up to $2,000,000 (per person) down to your children. That's the number for single people. Married persons can each pass the same thing, so for a couple that means up to $4,000,000.

AVOIDING MISTAKES.

The most common mistake made with a Living Trust is the failure to properly 'fund' it. That means actually changing the ownership of your personal residence, personal checking accounts, etc. over to the legal name of your Trust. Some will establish a Living Trust, sign the appropriate documents (including the Power of Attorney for Health Care, the Pour-Over Will, Directive on Artificial Life Support, etc.) but never actually change legal ownership of their assets into the Trust.

Funding the trust means that you will record a new deed on your home in the county where the property is located. You'll also visit your bank or credit union and sign new signature cards as the 'trustee' of your Living Trust. If the bank or credit union needs a copy of your trust, remember that it is a private legal arrangement. So instead of allowing them to copy all the private provisions, simply provide them with a photocopy of the 'Abstract' (sometimes called the 'Certification') which sets forth the powers of the trustee and indicates who established the trust, etc.

Your Living Trust can literally save your surviving family members thousands of dollars in legal costs, probate fees, conservatorship fees, and months and months of administrative time. With a Living Trust as the owner, assets may be transferred relatively quickly and with a minimum of involvement by outsiders who might otherwise disrupt your plans for the loved ones you wish to benefit.

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7 Advantages of Living Wills

Although the word will is used as part of a living will, it really isn't a will at all. Basically living wills, also known as inter vivos trusts, advance directives or healthcare directives, are documents that express the preferences and desires regarding medical treatments of a person in case they are later unable to communicate their wishes due to permanent unconsciousness or an illness that is terminal. Often they help people who want to avoid artificial life support as well as other more advanced medical procedures to sustain life so they can have a natural death. Today they also include things like organ donation, artificial resuscitation, and tube feeding as well. When these wills are valid, health care professionals are bound to carry out the instructions in the living will.

These wills are not just a choice for the sick or the elderly. They are an important choice for anyone, since anyone can end up dealing with accidents or sudden illnesses. Not convinced that you need a living will? Well, here are a few of the advantages of having a living will that may change your mind.

Advantage #1 - Refuse Treatments You Don't Want - One of the main advantages of having a living will is that it allows you to refuse any treatments that you do not want. Perhaps you do not want artificial resuscitation or a feeding tube in certain cases. With your inter vivos trust you can specify the treatments that you do not want given to you. Some people feel that certain treatments are against their moral beliefs, and the living will gives them the opportunity to make sure they are not given these treatments in a time where they cannot voice their opinion and dissent.

Advantage #2 - You Know the Outcome - Having a living will also is advantageous because it allows you to know the outcome before it happens. You never know what type of accident could happen or what type of disease could attack your body. However, when you have your document in place, you can know what the outcome will be if you have one of these problems and can no longer make your own medical decisions.

Advantage #3 - Prevent Arguments Among Family Members - A living will can also help to prevent arguments among family members if something unfortunate happens to you. No doubt you have family that cares about you, and all of them may have different ideas of the best treatments if you are ill and unable to make your own decisions. The last thing you want is your family arguing about your treatments. So, having your healthcare directives in place totally eliminates any arguments that could occur with your family members.

Advantage #4 - Make Decisions Easy for Your Family - Making a decision about a dying loved on or a permanently ill loved one can be so hard for the family. It can be a lot of pressure to make these kinds of decisions. However, when you have your living will done, your family will not have to make the decisions for you, which makes it so much easier for them.

Advantage #5 - Insure Doctors Follow Your Wishes - No doubt you want to be sure that your doctors follow your wishes in the end. With an advance directive, you can insure that your doctors do follow your wishes and that they don't just do what they feel is best for you. This allows you to be in control of the decisions made instead of the doctor.

Advantage #6 - Authorize Treatments You May Want Given - While a living will allows you to refuse treatments, it also can help you to authorize treatments that you may want given to you as well. There are many medical treatments that require authorization from the patient, and you may be in a position where you cannot do this; however, if you have the authorization in your will for certain treatments, it can insure you get the treatment you need.

Advantage #7 - Eliminate Financial Encumbrance for Your Family - Often people who end up with permanent illnesses end up needed long time care, which can be very expensive. Some people prefer not to leave this type of financial encumbrance on their family. With your living will, you can choose options that will eliminate financial encumbrance for your family so you don't have to worry about them searching for financial resources to help pay for your treatment and care.

So, I hope that explains what a living will is and why it is a good idea to have one.

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Getting Started On Your QDRO

Filing a QDRO document is required if you are divorcing and have a retirement plan or account that needs to be divided. You can file a QDRO, or it can be filed by your former spouse. Either way, law counsel is always a good idea.

You may contemplate waiting to worry about your retirement account until you are a little closer to retirement. Experts however, warn against this as you may reduce the chances of being able to claim your money as more time goes by.

You can get started by gathering as much information on yourself, your former spouse, and your plan as possible. You will also need to have a copy of your divorce decree. You can then fill out the QDRO with the help of your legal counsel.

After you have completed your document and looked over it, you will need to send it to your spouse or former spouse and his or her lawyer for approval. Neither party needs to sign it before more approval is received from the plan administrator and the court systems.

Once your plan administrator has received the document, you may be requested to make changes before your document can be approved. Once the document is approved, you may then receive instructions on how to receive your award.

You might have the option to receive your reward all at once, but more likely, you will be awarded in monthly payments. You may also want to look into the possibility of rolling your payments into your own 401k, penalty free. Depending on the plan you have, the cooperativeness of your spouse, and other factors, you should be able to complete a QDRO process in two to six months.


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