Business Startup

Changes to Tax Code That Make LLCs and S Corps More Attractive

Changes to Tax Code That Make LLCs and S Corps More Attractive

With the Tax Cuts and Jobs Act a new tax deduction for pass-through business income was created (LLC, S Corp, Partnership and Sole Proprietorship income). The deduction allows for a 20% deduction of qualified business income. There are a few limitations, but in general this means that 20% of business net income can be a deduction on the owner’s personal tax return. *

Before the Tax Cut and Jobs Act a C Corporation had a range of tax rates between 15% and 35%. After the Tax Cuts and Jobs Act the corporate rate is now a flat 21%. For most large corporations this is a win with a lower tax bracket, but if you were operating as a C Corporation with net profits less than $50,000 this is an increase of 6%.

For this reason we are seeing:

  • An increase in the formation of LLCs (Liability protection; lower state fees overall; less paperwork)
  • An increase in new Corporations electing S Corp status
  • Existing Corporations making elections from C Corp to S Corp status with the IRS

Sole Proprietorships are not recommended in an asset protection strategy. With a Sole Proprietorship there is no protection for personal or business assets.  A Sole Proprietorship has no Charging Order protection or “corporate veil protection”.

Nevada currently is the only state that has a Charging Order provision for closely held corporations.

* PLEASE NOTE: There are a few limitations to the Qualified Business Income deduction such as W-2 wage limitation; Service business limitation and higher income level limitation. Please seek advice from YOUR tax professional for your specific situation/goals. 

Some information contributed by Elite Bookkeeping & Tax Services.

https://americancorpenterprises.com/charging-order-protection-for-nevada-corporations/

 

 

 

Business Financing and Incentives-Resources by State

Business Financing and Incentives-Resources by State

Are you in need of some business financing in your state? Here are links to resources for loans, grants and tax incentives for you.

Alabama   https://www.adeca.alabama.gov/Divisions/ced/cdp/Pages/SSBCI.aspx

Alaska   https://www.commerce.alaska.gov/web/ded/FIN.aspx

Arizona   https://www.azcommerce.com/start-up/incentives

Arkansas   https://www.arkansas.gov/adfa/SSBCI/SSBCI.htm

California   https://www.business.ca.gov/StartaBusiness/FinancingYourBusiness.aspx

Colorado   https://www.advancecolorado.com/funding-incentives

Connecticut   https://www.ct.gov/ecd/cwp/view.asp?a=1097&q=253520&ecdNav=|

Delaware   https://delaware.gov/topics/startasmallbusiness.shtml

Florida   https://www.enterpriseflorida.com/why-florida/business-climate/incentives/

Georgia   https://www.georgia.org/small-business/finance/

Hawaii   https://invest.hawaii.gov/business/financing/

Idaho  https://business.idaho.gov/

Illinois    https://www.illinois.gov/Business/Pages/financetaxes.aspx

Indiana   https://iedc.in.gov/programs-initiatives

Iowa   https://www.iasourcelink.com/funding

Kansas   https://www.kansas.gov/business/funding.html#

Kentucky   https://thinkkentucky.com/KYEDC/kybizince.aspx#SmallBusiness

Louisiana   https://www.opportunitylouisiana.com/incentives

Maryland   https://commerce.maryland.gov/fund

Massachusetts   https://massecon.com/business-resources/incentives/

Michigan   https://www.michiganbusiness.org/grow/incentives-taxes/#incentives

Minnesota   https://mn.gov/deed/business/financing-business/index.jsp

Mississippi   https://www.mississippi.org/home-page/business-services/entrepreneurs-small-business/

Missouri   https://business.mo.gov/incentives/index.html

Montana   https://businessresources.mt.gov/Finance

Nebraska   https://www.neded.org/business/start-a-business/loan-guarantee

Nevada   https://ssbci.nv.gov/About/About/

New Jersey   https://www.nj.gov/njbusiness/financing/

New Mexico   https://gonm.biz/business-resource-center/start/funding-sources-programs/

New York   https://esd.ny.gov/BusinessPrograms.html

North Carolina   https://blnc.gov/start-your-business/financial-resources

North Dakota   https://www.business.nd.gov/finance/

Ohio   https://development.ohio.gov/bs/bs_busgrantsloans.htm

Oklahoma   https://okcommerce.gov/in-state-business-resources/incentives/    

Oregon   https://www.oregon.gov/business/Pages/financing.aspx

Pennsylvania   https://community.newpa.com/programs/   

Rhode Island   https://commerceri.com/finance-business/

South Carolina   https://www.scbos.sc.gov/

South Dakota   https://sdreadytowork.com/Financing-Incentives.aspx

Tennessee   https://www.tnecd.com/advantages/incentives-grants/

Texas   https://gov.texas.gov/ecodev/financial_resources/loan_assistance

Utah   https://www.utah.gov/business/starting/financial_starting.html

Vermont   https://accd.vermont.gov/business/start/financing/lenders

Virginia   https://www.yesvirginia.org/ProBusiness/BusinessIncentives

Washington  https://www.access.wa.gov/topics/business/growbusiness/grantsloans

West Virginia   https://www.business4wv.com/b4wvpublic/default.aspx?pagename=financialassistance

Wisconsin   https://inwisconsin.com/grow/assistance/

Wyoming   https://www.wyen.biz/business-services/financial-services/funding-sources/

Documenting Your Business Activities

As stated in previous posts Corporate Record Keeping is essential when it comes to protecting your assets and tax benefits. Anything that is of major business consequence should be documented in your records. You need to show evidence that it was approved by the company.

Below are is a partial list of examples of business activities to document:

  • Amendments to the Articles
  • Annual Meetings of Shareholders/ Members
  • Annual Meetings of Directors/ Managers
  • Special Meetings of Shareholders, Directors/ Members
  • Authorization for Voting Proxy
  • Opening of bank account
  • Adding or changing bank signatories
  • Authorization to change or appoint company accountant
  • Authorization to appoint legal counsel
  • Authorization for payment of business travel
  • Changes to Bylaws or Operating Agreement
  • Changes in Stock/ Membership Certificates to correct errors or omissions
  • Changes in Officers/ Management (new appointments, resignations, dismissals)
  • Reimbursement for child care expenses
  • Independent contractor service (1099s for outside services)
  • Authorization for credit card
  • Authorization to establish line of credit for the company
  • Authorization for Foreign Qualification
  • Reimbursement for Life Insurance
  • Medical and Dental Reimbursement Plans
  • Mergers and acquisitions
  • Promissory Notes
  • Retirement Accounts
  • Purchase of Key-Man Policy
  • Real Estate leases or purchases
  • Setting salaries for Officers/ Managers
  • Authorization to pay for vehicle expenses (purchases, leases, maintenance, insurance, gasoline)
  • Dissolution of company

We do offer Corporate Record Keeping Assistance. For more information and sample forms, visit https://americancorpenterprises.com/what-we-offer/services/corporate-record-keeping/

 

New Rule Regarding Solicitation of Investors

Yesterday the Nevada Secretary of State posted a media release regarding new regulations that went into effect regarding public solicitations for investors. The article warns that it could open the floodgate to a wave of securities fraud and that investors should educate themselves of the new rule- Regulation D Rule 506(c) of the Securities Act.

In April 2012 Congress passed the Jumpstart Our Business Startups (JOBS) Act, which changed the way that this rule allows offerings to be sold. According to the article private placement offerings of securities, such as stocks, bonds and other instruments are exempt from SEC registration requirements. Furthermore the state of Nevada does not review them for verification of information or level of risk.

Additionally it states that under this new rule companies are allowed to publicly solicit investors and advertise the sale of securities without registering the offering with either the SEC or any state if certain requirements are met. These investments may be sold via television commercials, newspaper ads, internet sales and cold calls.

“This rule change provides a new solicitation platform that is another avenue for swindlers to scam investors, so I urge investors to perform due diligence and thoroughly check the offerings before investing,” said Secretary Miller.

Previously such offerings were only made known through investment professionals or word of mouth. As a precaution to protect investors from fraud, they should fully understand the following:

• These offerings often involve companies with a limited history.
• There may not have been a regulatory background check of the sellers, managers or officers of the company issuing the investment.
• They often promise higher rates of return- and come with higher risk.
• These securities are generally illiquid, which means you may have a limited ability to get out of the investment and may hold it indefinitely.
• You may be offered less information than a public offering.
• No regulator has confirmed that the risk disclosure or information about the company is adequate.

Regulation D Rule 506 investments, if sold via advertisements or general solicitation, may only be sold to accredited investors. An accredited investor is:

• A natural person must have a net worth , exclusive of your primary residence, of more than $1 million, or
• Have had an income over $200,000 individually, or $300,000 with your spouse, in each of the last two years, and expect to earn the same amount this year.

For a complete summary of the proposed regulations that went into effect 9/23/13 go to https://www.sec.gov/rules/proposed/2013/33-9416.pdf.

Find out more about American Corporate Enterprises by visiting our website at https://americancorpenterprises.com. At American Corporate Enterprises, Inc., we have the expertise to handle all your incorporation needs! Contact us Toll free (888) 274-1130 or (775) 884-9380 today.

At American Corporate Enterprises, Inc., we have the expertise to handle all your incorporation needs! Contact us

Toll free (888) 274-1130 or (775) 884-9380 today and visit our website at www.americancorpenterprises.com.

Asset Protection and Liability Insurance

When starting and operating a business, asset protection is of the utmost importance. You don’t want to spend years building your business only to be wiped out from a lawsuit.

No matter what type of business entity you’re using, the next level of asset protection should be liability insurance. This is for a couple of reasons. First, liability insurance usually provides competent counsel to defend any lawsuit. With the enormous cost of litigation these days, even if you’re successful at winning, you may lose an exorbitant amount of capital defending yourself.

The other reason is that the face amount of the liability coverage is the first amount paid in the event a judgment is entered against you. However, you need to be sure you read and understand any restrictions and limitations when obtaining your liability policy.

Why Incorporate Your Business
https://americancorpenterprises.com/why.html

Other recommended reading regarding your corporate records and asset protection.
https://americancorpenterprises.blogspot.com/2011/12/penny-savedcan-be-fortune-lost.html?spref=bl

Find out more about American Corporate Enterprises by visiting our website at https://americancorpenterprises.com. At American Corporate Enterprises, Inc., we have the expertise to handle all your incorporation needs! Contact us Toll free (888) 274-1130 or (775) 884-9380 today.

At American Corporate Enterprises, Inc., we have the expertise to handle all your incorporation needs! Contact us

Toll free (888) 274-1130 or (775)884-9380 today and visit our website at www.americancorpenterprises.com.