Q. Are there other why reasons why a business incorporation makes sense?
A. Yes, here are a few:
- Many businesses also prefer to do business with formal corporations since it offers them a model that “seems” more professional;
- Incorporating or forming an LLC, while not simple, is not the high priced, complex, expensive, time consuming proposition that lawyers would have you believe (Colorado laws and preplanned agendas make it possible to incorporate without an attorney or high priced accounting firms);
- Incorporation, especially a “Sub S Corp,” gives the small business professional the protection of a corporation, more flexibility than an LLC, a partnership or sole proprietorship, plus it gives incredible potential for tax and employee benefits for the owners and their families while increasing the company’s status in the business community;
- With the right packages, corporations, or LLCs , can work easier with Independent Contractors and provide wage, benefit and retirement packages (to both owners and employees) that simply not available to the average self employed person or partnership.
- It is also easier to pass on your business to family since a “corporation” is a legal entity with a life of its own, whereas a sole proprietor business and partnership normally dissolves with the death of the individual owner or partner. Existing contracts, accounts payable and leases remain with the corporation and do not have to be renewed with the passing or incapacity of the owner;
- This ability to pass on the LLC company is more limited and it is definitely more difficult to colllect bills and enforce contracts for heirs. Not impossible but harder
- The same goes when the original Sub S owners wants to sell. It can be done in part (sell some shares) or whole (sell all the shares) or even sell the entire business. New owners and shareholders can also be brought on board by selling shares (from the shareholder) or the corporation can raise money by expanding the shareholder base and using the proceeds for corporate purposes.
Q. I’m a sole proprietor and it’s just me. Do I really need to incorporate or form an LLC?
A. That depends on your exposure to accidents, injuries, contracts, employees, Independent Contractors, government agencies and anyone or any group that might want to sue, litigate or file a grievance against you. If you ever have employees or use Independent Contractors, it is likely they can put you at risk by accidents, carelessness, illegal or fraudulent acts in your business name, misrepresentation and the list goes on and on. Never underestimate the number of people and organizations and even government agencies that want a piece of your wealth. Incorporation at least limits their access to your assets.
Q. What does a corporate structure look like?
A. There are a number corporation forms, but the BIG 3 are:
- A “C” corporation is the legal structure you normally envision in the big companies, such as AT&T, with stockholders, boards of directors, etc;
- An “S” Corp is designed for smaller business operations and has many of the advantages of a sole proprietor but with the legal benefits of a corporation. It also has a flexible, and favorable, tax structure for the owners;
- An LLC is much like a partnership (and to an extent a sole proprietor) with corporate protection. Taxes work very much like a partnership or self employed business person. Dissolution of the LLC is similar to a regular partnership. Partners pay personal and self employment taxes. The good part is that partners have personal liability protection similar to formal corporations.
Q. How hard is it to incorporate or form an LLC for my business?
A. The short answer is “not very.” Colorado has a simplified process that allows companies and individuals to incorporate their business using standard forms and formats. The long answer is that the “devil is in the details,” and those details can be hellish. While the formal process makes it very easy to set up the corporate status there are other, very important matters, such as business registration, IRS recognition, obtaining business and knows the ropes as well as the twists and turns of the process.
Q. So I need a lawyer and accountant, is that right?
A. Not necessarily. Colorado laws and procedures make it easy for an individual, or a consultant, working with a business owner, to create a corporation. Simple corporations, such as a “C” or “S” Corp or even an “LLC”, can be formed, without a lawyer and/or accountant if all the new ownership is “on board” and cooperative with each other. Many individuals form corporations on their own, or with special assistance, and then they run the matter by their attorney or designated accountants for a relatively quick, low cost, review and approval process. Once your corporation is up and running, you can do the bookkeeping yourself or hire a staff accountant/bookkeeper or hire a service to keep track of your financial transactions and taxes. In an “apples to apples” comparison, the book work and tax issues are not much more complicated for a corporation than a sole proprietorship or partnership operation. Far Point Colorado offers accounting and tax preparation services.
Q. When do I definitely need a lawyer or accountant?
A. Businesses that are very complex in nature, have some or all foreign owners or ownership, have varied ownership classes, are involved in owning other corporations, deal in regulated business matters, have real estate holdings that are offered for sale or rent, have large classes of stockholders, plan on issuing revenue bonds, do business in multiple states or work exclusively with state/federal regulatory agencies should see an attorney (and probably a CPA). Complexity may require the professional expertise of a lawyer and maybe an accountant. But Colorado does not require an attorney driven incorporation process and most entrepreneurs forming corporations can do it on their own or with limited assistance from companies such as Far Point Colorado business solutions.
Q. If I do the incorporation process myself, or have someone assist me, should I see a lawyer or an accountant review the paperwork and legal issues?
A. It never hurts to have others review your business plans and incorporation papers. By having a legal or accounting professional just review your paperwork you get peace of mind, and perhaps they will find an error or something else that needs to be added to your final work. Far Point Colorado meets and works with a variety of professional advisors at the request of our clients to make sure that you have the best of all worlds. If an attorney, accountant, or professional advisor suggests changes or adjustments to our plan for you, we will make those changes at no additional cost to you.
Q. What’s the best corporate status for me [and my partner]? Or for that matter, my family?
A. Far Point Colordo works with owners, entrepreneurs, prospective stock and shareholders, family members, etc to review business goals to determine the best business corporate model for any specific situation. Everyone, every group, every circumstance is different, Far Point Colorado professionals make sure that clients have the best professional advise possible and its guaranteed service comes at an economical price. Clients can call anytime, at no charge, for advice with issues that may arise.
Q. Why not use one of those on-line computer incorporations?
A. Mechanically they work fine, but what this on-line process lacks is the experience and feel that an individual consultant can give the business owner. For instance, few people realize that the initial meeting of the Board of Directors really sets forth the company’s Constitution by defining positions, titles, job descriptions, lines of authority, succession plans, etc and in troubled times, if they occur, the legal process goes back to that original meeting to establish “intent and fact.” This Constitution, as I call it, can be changed at subsequent Board Meetings but these factors must, at some point, be addressed. Nothing takes the place of foresight and preparedness. On-line mechanics can not beat “boots on the ground.” Far Point Colorado works with you personally!!