My last thread didn’t quite serve its intended purpose. This is no thread about the pros and cons of corporations. It’s good to know that it’s so easy to become an LLC as long as you don’t become a corporation, but I already know I want to incorporate. Now I’d like to be prepared for the paperwork. Not the paperwork to get it started; the paperwork after setup.<!—-> <!—-><!—->
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It’s my understanding that there are annual meetings. Will I be able to conduct these meetings in about 5 minutes by sitting down once a year as the company president/vise president/secretary (one man show), filling out a multiple choice form I made myself regarding meeting minutes, and then hiding it forever after in my file cabinet?<!—-> <!—->
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I’ve also heard there are other records that must be kept. Exactly what ells would I have to record? Somebody also said something about “notifications.†What are these “notifications†that I will have to concern myself with?<!—-> <!—->
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Finally, if you can recommend any way to simplify the paperwork, or if you can recommend a book that addresses corporate paperwork, please do so.
Thanks in advance for any help you can offer.<!—-> <!—->
–T
Replies
At the time that you hire a lawyer to help you set up the corporation, you should have him/her explain these things to you as well.
I am not a lawyer, but had a one-shareholder/one-officer corporation once, in Illinois.
--- Will I be able to conduct these meetings in about 5 minutes by sitting down once a year as the company president/vise president/secretary (one man show), filling out a multiple choice form I made myself regarding meeting minutes, and then hiding it forever after in my file cabinet? ---
That's what I did, except I didn't have a multiple-choice form.
--- Somebody also said something about ?notifications.? What are these ?notifications? that I will have to concern myself with? ---
If you have an annual meeting, you have to give notice to all of the invitees in advance of the meeting. As a one-person show, I don't remember whether or not I sent notices to myself. I think that I made a simple notation in the annual minutes that notice was waived by the only person who was entitled to attend.
As to other considerations, the big one is you want to be extra careful to completely separate your finances from those of your coporation, or you could become personally liable for your coporation's debts. That means your corporation gets its own credit card, it doesn't use yours. You don't borrow money from your corporation, especially at below-market interest rates, but even at market rates it's a bad idea. No shared bank accounts. Separate bookkeeping/accounting records.
If you are a paid employee of your corporation, as well as its sole shareholder and officer and director, then your corporation deducts your tax withholdings from your paycheck and pays employment taxes on your behalf, just like for any other employee. You have to pay yourself a fair salary -- if you get paid an exhorbitant amount of money compared to your peers, the IRS may determine that you are really paying yourself dividends from corporate profits, not an employee's salary. Distributed dividends get taxed twice -- once to the corporation as profit, and once to the investor as dividend income.
That's all I can think of for the moment.
Edited to add: Nolo Press publishes a lot of good self-help legal books. I'm quite sure they have one or more on incorporation. There are also an assortment of books on this topic in the books section of office supply stores like Staples, Office Max, Office Depot.
Rebeccah
Edited 3/16/2007 6:01 pm by Rebeccah
My atty recommended a "close" corporation. Google that and see if its not what you are looking for in regards to simplicity. Mine's an S corp for the tax reasons.
You will probably need to file an annual report with the state, on their simple form, with a fee. Elapsed time 30 minutes/year.
You need to have an annual meeting and record what was discussed. You should write up a resolution for such things as opening an account or line of credit, etc. Elapsed time a couple hours/year.
You need to maintain your corporate operations as strictly separate from your personal. That means it has its own bank account and you do not comingle funds, etc. It is a completely separate entity.
You need to file corporate tax returns at the end of the year, separate from your own. Mine costs me $490 per year done by my CPA. This is based on a perfectly organized Quickbooks file that I email him. If I made him sort thru a shoebox the fee would triple.
You need to sign all contracts etc. "Journeyman Carpenter T, for JCT Inc."
Like Rebeccah says, your lawyer will draft the articles of incorporation and file them, and brief you on how to operate cleanly. Your accountant will file for Sub S status and advise you to keep the response letter from IRS in your safe deposit box.
If you own property or have other assets you should incorporate your biz. Very few here are LLC but that seems to vary from state to state.
You need a good book and you need to study it BEFORE you go to your lawyer. Then, when you are in there, you will be able to discuss the matter, somewhat intellignently, and when he explains what you are supposed to do, LISTEN TO HIM, THEN DO IT!
It's not rocket science, but a thorough understanding is crucial to keep up with the paperwork. I think Mike's program is best: have an annual sitdown with the same attorney at least once a year, more if situations come up.
blue
"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
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