Posted September 24, 2007 — No Comments
Business structures such as a limited liability company (LLC) , Limited Partnership (LP), S Corporation and C Corporation are legitimate, legal structures. When you form one of these entities, you also reap certain benefits in terms of tax savings, limiting liability, protecting assets, etc. However, in order to enjoy these benefits, you need to meet the specific requirements set forth by the federal government and states in order to preserve that business structure. Too often, business owners form one of these entities, file their articles of incorporation/bylaws and begin operating their business. Unfortunately, many tend to forget to keep up with holding regular director and shareholder meetings, keeping complete corporate minutes and filing the appropriate annual reports with the state.
Besides the fact that these are important requirements for owning one of these business structure, failure to maintain these standards could potentially lead to several problems. Problems that will require business owners to either pay out or loose money. For instance, the IRS likes to scrutinize business structures, especially when it comes to qualifying deductions. If you find yourself being audited, do you know one of the first things they are going to ask for? You guessed it, copies of your minutes and corp./LLC documents. They want to ensure that you have indeed been operating as a corporation or LLC and have been holding meetings and recording minutes diligently to prove it. If you respond, “I don’t have them,” or “They’re not quite up to date,” chances are pretty good that you are going to loose deductions. Why? Because without those records, you can’t say you have a legitimate business structure in place. You MUST operate your business like a business and follow the correct business formalities. If you don’t, the structure can’t benefit you.
Another potential problem should you fail to hold meetings and keep adequate records comes into play should a court action ever be brought against you and your company. Having a strong ongoing record of your business activities ensures that you have operated your business with the highest integrity and have documented all relevant key activities. It lends legitimacy and credibility to your business dealings and informs the court that you are in compliance with the law’s requirements as they relate to your business structure.
Finally, failure to meet the requirements of a business structure may potential lead to a situation where your shareholders, officers, and directors find themselves held personally responsible for the acts of the business. This is commonly referred to piercing the corporate veil and opens everyone up to personal liability.
Meeting the ongoing requirements necessary to operate a corporation, limited liability or partnership is an absolute must. Holding shareholder and director meetings to elect officers, keeping detailed records of all relevant meetings and business activities, and filing all annual state documents may take time out of your day, but better that than money out of your pocket and possible dissolution of your business structure.
Popularity: 54%
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Posted April 10, 2007 — No Comments
How important is it to have a great idea for starting a new business? I think that the idea is not really important at all. I often hear from people around me about what great ideas I have for business. It might seem like it when looking at one of my existing businesses that it was great idea, but it wasn’t at the start.
I started many of my businesses by accident. When I look back on how I came up with the ideas I can say there was no major thought process behind any of my business venture. I didn’t even have any substantial experience in those businesses when I started.
I knew I would be moving to Nevada and I tried to think of what I could do there. I knew Nevada was a very popular state for incorporation because of the very friendly business climate. So I figured it might be worthwhile to try an incorporation service. I also started another business in real estate, but I will talk about that later. Let’s go back to the incorporation business.
First, I went to Google trying to find other companies offering an incorporation service. I was trying to figure out how they worked, what was their pricing, if a person needed a lawyer to incorporate a business or if I could do it myself, what were the state fees, what forms must be used, etc.
The next step was to start it. This is the most important step in any venture. Unfortunately, from what I’ve seen around me, most people never do this step! I decided to offer just one service: Nevada corporation. I didn’t want to start by offering all kinds of company structures and additional services. Honestly, it was too much information at that time so I wanted to keep it as simple as possible so I could handle it. So one service was complicated enough at the time.
After that I decided to create a website. I forgot to tell you that I was really cheap (“didn’t have too much money to spend”) so I designed the site myself. I am not a webmaster or graphic designer. I know very basic HTML so I could do basic table designs or forms which people could fill out and send to my email. That was all that I needed for making my first website. You can see it here in the Internet Archive:
At the start I even used free web hosting. Later, when I received my first order I paid the cheapest hosting company I could find at $25 per year. That didn’t work well so I upgraded to $50 per year when the money started flowing in. The most important lesson was that I tried to do it the simplest way possible. Do you see some genius idea behind this business? Being realistic, these were very amateur web pages done by an amateur who tried to start something.
This beginning led to a business which is processing over 500 orders every month and is one of the top five incorporators in the state of Nevada with sales of two million dollars per year. I added step by step small improvements over time. Today, we have a very unique business with great ideas our competition doesn’t have. But most of the suggestions came from our customers or from what I learned along the way in terms of what needed to be improved.
So if someone tells me that they want to start a new business and the only thing they are missing is a great idea, I just have to say that it is nonsense. No great ideas are necessary. I think the most important thing is to find a way how to start very simply and improve on that way. Instead of writing business plans or doing market research just do what I did. Find a way how to start very simply and don’t invest too much money. You are not risking almost anything just a little bit of your time, but the reward can be great.
Popularity: 89%
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