Business Formation
Don't Limit Yourself Of Your Business Goals and Potential, ALWAYS Think That The Sky Is Endless
Welcome to Entrepreneurship!! Starting a new Business journey can be exciting and stressful at the same time. Texas Essential Bookkeeping Services is here to take the stress away from you by establishing your Business Formation. It’s a simple process that can be done within a week depending on the business structure that you select.
Becoming a Business owner will also open many more promising doors for you and your Business in the future. I strongly believe that it’s all about how you position yourself in your desired industry, know your worth and network to meet more like minded Business persons like yourself. Always think positive when you’re told No and always accept rejection with Grace with the understanding that all things aren’t meant for you but when you have a positive mindset there’s no end to your success as an Entrepreneur.
Essential Formation Package Includes
- Name Availability Search
- 24-Hour Document Preparation
- FREE Corporate Compliance Tool: BIZ
- Obtain Federal Tax ID Number (EIN)
- Customized Corporate Bylaws & Minutes
- Print Delivery
- Registered Agent Service
- Shipping & Handling
- Customized Corporate Kit & Seal
Name Availability Search
Texas Essential Bookkeeping Services will check your desired name against the state registration database to determine name availability. This process reduces the likelihood of your documents being rejected by a state official.
24-Hour Document Preparation
No Delays! Once your order is placed we confirm the availability of your company name with the state office. If the name is available we prepare and submit your formation documents for filing within 24 hours.
FREE Corporate Compliance Tool: BIZ
Texas Essential Bookkeeping Services B.I.Z. (Business Information Zone) is a FREE corporate compliance concierge tool that allows you to receive reminders for important due dates like tax deadlines & annual report filings, view and print official business documents all stored securely in the cloud.
Obtain Federal Tax ID Number (EIN)
Businesses are required to obtain a Federal Tax ID, also called an Employer Identification Number (EIN) which is used to identify the business entity. With Texas Essential Bookkeeping Services Tax ID service, we will obtain your company's Tax ID from the IRS once your business formation is approved by the state office.
Customized Corporate Bylaws & Minutes
The Bylaws of a Corporation are the set of rules governing how the affairs of a corporation will be conducted. Texas Essential Bookkeeping Services customized corporate Kit & Seal for Corporations and LLC’s includes CUSTOMIZED Bylaws and Minutes, Waivers, Notices, and Minutes of Meetings, Stock Transfer Ledger and Sample Corporate Resolutions.
Print Delivery
Your order includes free paperless delivery. You'll be able to download PDF versions of your documents. If you prefer to receive hard copies printed on quality paper, then add this option and your business documents will be mailed to you based on the processing speed that you choose. At an additional Shipping & Handling fee.
Registered Agent Service
Corporations and LLCs are required to maintain a registered agent. Please note that a Post Office Box or other “mail service” is often not sufficient to qualify as a registered agent. If you wish to keep your company’s address information confidential, designating Texas Essential Bookkeeping Services to act as your registered agent affords you that extra added layer of privacy. Texas Essential Bookkeeping Services can serve as your company’s registered agent for service of process in any state for an annual fee of $60 per year that is auto-renewed for your convenience.
Shipping & Handling
Texas Essential Bookkeeping Services S&H fees include multiple shipments of your documents to and from the state office during the formation process of your company. In addition, Texas Essential Bookkeeping Services will ship your final package including your company's state-approved formation document(s) using U.S. First Class Priority Mail service.
Customized Corporate Kit & Seal
Corporations and LLC’s are subject to many formalities after they are formed. Texas Essential Bookkeeping Services Corporate Kit & Seal for Corporations and LLC’s includes the tools your company needs to comply with these formalities and place for safekeeping of all of your business documents. Each quality binder is detailed in gold Customized with your corporate name foil stamped on the binder with matching slipcase. Your Customized Corporate Kit will also contain the following additional items: Customized Corporate Seal with your company name, state and year of Incorporation, 20 Personalized Stock Certificates containing your company name and state of Organization on the finest security paper available.
Deluxe Formation Package Includes
All of the items in the Texas Essential Formation Package, plus the additional items listed below
- Website Creation
- Professional Email
- Hosting Company for Website
- Professional Voicemail
- Operating Agreement
- Capabilities Statement
- Business Domain
Website Creation
A professional website will be built and designed on your domain. It will give descriptive details about your business and the services that you will be providing to you to your clientele.
Professional Email
It’s a must to have a professional email. It shows that you have a high quality of standards when it comes to your business. It sets you apart from all of the other business owners that doesn’t have a professional email. Your email address with @ your domain name instead @gmail.
Professional Voicemail
When you receive a business call and your not available to answers the caller will be welcomed with a professional greeting detailing information about your business, your tagline and additional contact information.
Hosting Company for Website
A web host, or web hosting service provider, is a business that provides the technologies and services needed for the website or webpage to be viewed in the Internet. Websites are hosted, or stored, on special computers called servers.
Operating Agreement
An LLC Operating Agreement is a legal document that outlines the ownership and member duties of your Limited Liability Company. This agreement allows you to set out the financial and working relations among business owners (“members”) and between members and managers.
It’s also a document which describes the operations of the LLC.
Capabilities Statement
A capability statement is a concise, one page document of your business competencies. Think of it as your business’s resume. Its purpose is to provide specific information that will convince potential customers to do business with you. When written well, it will differentiate your business from the competition!
Business Domain
A domain name is the address where potential clients can access your website. It can make the difference between creating a successful Web presence and getting lost in cyberspace. A domain name adds credibility to your small business. Any individual, business or organization planning to have an Internet presence should invest in a domain name. A domain name will also protect copyrights and trademarks, build credibility, increase brand awareness, and search engine positioning.
What Is LLC
A Limited Liability Company, or an LLC, is a relatively new business structure,
that first appeared in Wyoming in 1977, and is now recognized by every
State’s statute and the IRS. An LLC is neither a partnership nor a corporation,but a distinct type of business structure that offers an alternative to those two traditional entities by combining the corporate advantages of limited liability with the advantages of pass-through taxation usually associated with partnerships.
Limited Liability Companies are becoming more and more popular, and it is
easy to see why. In addition to combining the best features of partnerships
and corporations, LLCs avoid the main disadvantages of both of those
business structures. Limited liability companies are much more flexible and
require less ongoing paperwork than corporations to maintain them, while
avoiding the dangers of personal liability that come with the partnership. Some
examples of famous LLCs may surprise you – both Amazon and Chrysler are
organized as limited liability companies.
Ownership of an LLC
Owners of an LLC are called “members”. Since most states do not restrict ownership, members may be individuals, corporations, and other LLCs – domestic or foreign. LLCs can generally have an unlimited number of members. Most states also permit, so-called, “single member” LLCs, those having only one owner.
Members in an LLC are analogous to partners in a partnership or shareholders in a corporation, depending on how the LLC is managed. A member will more closely resemble a shareholder if an LLC chooses to be managed by a manager or several managers, because then those members who are not managers will not participate in day-to-day management of the company. If an LLC does not choose to utilize managers, then the members will closely resemble partners because they will have a direct say in the decision-making of the company.
Single- vs. Multiple-Member LLC
An LLC owner by more than one individual or entity is called a Multiple-Member LLC. All states also permit Single-Member LLCs – those having only one owner (member). By default, a Single-Member LLC is taxed as a sole proprietorship (in other words, treated as “disregarded entity” by the IRS), while a Multiple-Member LLC by default is taxed as a partnership.”
Advantages of Forming LLC
LLC is a relatively new type of business structure that combines the best features of the corporation with those of the sole proprietorship or partnership. An LLC has many advantages and benefits which cannot be enjoyed together in any other type of business.
- Personal Liability Protection:
An LLC is an entity separate from its owners. Being a legally distinct entity, the personal assets of each owner (such as a home, a car or a
personal bank account) are not reachable by business creditors. An LLC member’s liability is generally limited to the amount of money that person has invested in the LLC. Thus, LLC members are offered the same limited liability protection as the shareholders in a corporation.
- Tax Advantage:
LLCs allow for pass-through taxation, and that advantage is one of the biggest reasons for the recent popularity of the LLCs. Pass-through
taxation means that earnings of an LLC are taxed only once, basically being treated like the earnings from a partnership, a sole proprietorship or an S-Corporation. While neither partnerships nor sole proprietorships also offer limited liability protection, an S-Corporation comes the closest to an LLC. However, an S-Corporation is a much more restrictive business structure that is harder to maintain.
- Ease of Transfer: With an LLC it is easy to sell the ownership interests to third parties without disrupting the continued operation of the business. As a comparison, selling interests in a sole proprietorship or general partnership requires much more time and effort. An owner must individually transfer assets, business licenses, bank accounts, permits and other legal documentation. Ownership transfers in S-Corporations are also burdened with many restrictions.
- No Ownership Restrictions:
LLCs have no restriction on the number or types of owners. By comparison, S-Corporations cannot have more than 100 stockholders,
and each must be a resident or a citizen of the United States. None of these restrictions apply to an LLC.
- Easier to Raise Capital:
LLCs allow for many ways to raise capital. An LLC can admit new members by selling membership interests or even create a new class of members with different voting or profit-sharing characteristics.
- Greater Credibility:
As a registered LLC, a business will enjoy legitimacy and greater credibility when dealing with other companies, banks and potential partners or investors than would, for example, a sole proprietor. An LLC is recognized as a legitimate company and not as an individual engaging in business.
- Flexible Management and Ownership Structure:
Like general partnerships, LLCs are free to establish any organizational structure agreed upon by the members. Thus, profit interests may be
separated from voting interests. This offers the owners the ultimate flexibility to separate or combine the interests of the investors into the company and of the people actually running the day-to-day operation
What Is S- Corporation
S-Corporation is a regular corporation that has 100 shareholders or less and that passes-through net income or losses to its shareholders for tax purposes (similar to sole proprietorship or partnership). Since all corporate income is“passed through” directly to the shareholders who include the income on their individual tax returns, S Corporation are not subject to double taxation.
An eligible domestic corporation (C-Corporation) can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S Corporation. Generally, an S Corporation is exempt from federal income tax other than tax on certain capital gains and passive income. On their tax returns, the S Corporation’s shareholders include their share of the corporation’s income or loss
Filing With IRS And The State
S-Corporation Election is filed with the IRS (Election by a Small Business Corporation, Form 2553), and that election is recognized by all states. with the exception of New York, New Jersey and Arkansas, which require additional state filing.
S-Corporation vs. C-Corporation
- Like C-Corporations, S-Corporations are separate legal entities from their shareholders and, under state laws, generally provide their shareholders with the same liability protection afforded to the
shareholders of C corporations.
- Unlike C-Corporations, for Federal income tax purposes taxation of S corporations resembles that of partnerships. Thus, income is taxed at the shareholder level and not at the corporate level.
- Certain corporate penalty taxes (e.g., accumulated earnings tax,
personal holding company tax) and the alternative minimum tax do not apply to an S-Corporation.
- Unlike a C-Corporation, an S-Corporation is not eligible for a dividends received deduction (a tax deduction received by a corporation on the dividends paid to it by other corporations in which it has an ownership stake).
- Unlike a C-Corporation, an S-Corporation is not subject to the 10% of taxable income limitation applicable to charitable contribution deductions.
- Unlike a C-Corporation, ownership of an S-Corporation is significantly restricted (read next).
Retaining Profits of S-Corporation
Who Can Form an S-Corporation?
S-Corporations are more suitable for small and family businesses, and for those who start their business with small investment. Also, some existing businesses qualify for S-Corporation status.
To form S-Corporation or to change your existing C-Corporation into S-Corporation (also called “Election of S-Corporation Status” certain conditions
must be met:
- S-Corporation cannot have more than 100 shareholders.
- Profits and losses must be accorded to owners in proportion with their ownership stake.
Must use the calendar year as its fiscal year unless it can demonstrate to the IRS that another fiscal year satisfies a business
purpose.Shareholders cannot deduct losses in excess of their investment.
The corporation cannot deduct fringe benefits given to employees
who own more than 2% of the corporation.All shareholders must be either U.S. citizens or residents, estates, or
certain trusts.Can only have one class of stock. Preferred stock is not allowed.”
S-Corporation Advantages
- Forming S-Corporation generally allows you to pass business losses
through to your personal income tax return, where you can use it to offset any income that you have from other sources.
- S-Corporation shareholders are not subject to self-employment taxes. These taxes, which add up to more than 15% of your income, are used to pay your Social Security and Medicare taxes.
- When you sell your S-Corporation, your taxable gain on the sale of the business can be less than it would have been had you operated the business as a regular corporation
Taxation of S-Corporations
As already mentioned above, S-Corporations are not subject to corporate tax rates. Instead, S-Corporation passes-through profit (or net losses) to its shareholders and those profits are taxed at individual tax rates on each shareholder’s Form 1040. The pass-through (sometimes called “flow-through”) nature of the income means that the S-Corporation’s profits are only taxed once – at the shareholder level. The IRS explains it this way: “On their tax returns, the S-Corporation’s shareholders include their share of the corporation’s separately stated items of income, deduction, loss, and credit,
and their share of non-separately stated income or loss”.
S-Corporations therefore avoid the so-called “double taxation” of dividends in most states. There are however two exceptions to this rule:
- California: There is a franchise tax of 1.5% of net income of an S- Corporation (minimum $800). This is one factor to be taken into
consideration when choosing between an LLC and an S-Corporation in California. On highly profitable enterprises, the LLC franchise tax fees, which are based on gross revenues, may be lower than the 1.5% net income tax. Conversely, on high gross revenue, low profit-margin businesses, the LLC franchise tax fees may exceed the S-Corporation net income tax.
- New York City: S-Corporations are subject to the full corporate income tax at a 8.85% rate. However if the S-Corporation can demonstrate that a portion of its business was done outside the city, that portion will not be subject to the additional tax.
Retaining Profits of S-Corporation
S-Corporations (much like regular C-Corporations) are allowed to retain their net profits as operating capital. However, all profits are considered as if they were distributed to shareholders, and as a result shareholders might be taxed on income they never received (whereas a shareholder of C-corporation is taxed on dividends only when those dividends are actually paid out).
Converting S-Corporation Back to C-Corporation
S-Corporation status is not permanent and can be reversed back if so desired. For example, if the business becomes more profitable and there are tax advantages to being a regular C-Corporation, S-Corporation registration status can be dropped after a certain amount of time.
What Is A Corporation
Corporation is a legal form of organization of persons and material resources,chartered by the state, for the purpose of conducting business. Corporation is owned by shareholders, the Board of Directors governs the business, and elected officers manage the day-to-day activities. Corporations must adhere to corporate tax laws and file corporate taxes regularly.
A Corporation, also referred to as Standard Corporation, C-Corporation, or Regular Corporation, may have an unlimited number of shareholders, including foreign citizens, may be public (when shares are offered for sale to the public) or privately held (when shares are not sold to the public). Usually shares of the corporation are held by the founders, board members and private investors, such as venture capitalists, who may or may not sit on the board of directors.
C Corporation is the most common type of incorporation. C Corporation is considered to be a for-profit, state-incorporated business. Registration is done with state authorities and must abide by corporate laws in the state where it is incorporated.
Corporation provides protection to its shareholders from the corporation’s liabilities, thus the term “limited liability”. However, C-Corporations also have what is called “double taxation” – first the corporation is taxed on its profits,
and then shareholders are taxed on the distributions they receive, such as profit sharing payments or dividends.
Why Should I Incorporate?
Incorporating is one of the best ways to protect your personal assets while doing business. Most people choose to incorporate solely for this reason, but it’s not the only advantage of incorporation.
For example, owning a corporation can save you tax money, allows for a greater business flexibility, reduces your chances to be audited, provides tools for better itemization, and makes raising capital less complicated.
Advantages of Incorporating
- Limited Liability: A corporation is a legal entity that exists separately from its owners or shareholders. With some exceptions, shareholders are not liable for the debts and obligations of the corporation or from any litigation where the corporation is the defendant. Some form of insurance may still be necessary, but incorporation contributes an added layer of protection (also called “Corporate Veil”)
Tax Savings: Careful planning of your business expenses can result in lower overall tax rates. There are many tax benefits for doing business under incorporation, depending on your business income. Even if your young business becomes quite profitable soon, a corporation is entitled to many deductions otherwise not available to you, resulting in significant tax savings. An example of such tax-deductible expense would be salaries of your employees and yourself.
- Reduces Likelihood of IRS Examination (Audit): Non-incorporated businesses, particularly of higher gross income levels, are targets of many IRS Audits. Incorporated businesses have a much lower audit rate, even if they have high income levels.
- Anonymity: Depending on the state where you choose to incorporate in, a corporation can be established in such a way that shareholders/owners remain anonymous. Often the same level of anonymity can be provided for officers and directors.
- Added Credibility: A corporate structure communicates permanence and credibility, even if it’s a company with only one stockholder and
employee.
- Easier Access to Capital Funding: With a corporation it is much
easier to attract investors through the sale of stock.
- Easier Transfer of Ownership: Ownership of a corporation may be
transferred without substantial disruption of operations through the sale of stock. This way the need for complex legal documentation is reduced. Flexibility of Share Ownership: Owning shares gives you the flexibility needed, among other things, to effectively capitalize your business, or to retain key employees. To further capitalize the business successful C-Corporation can be taken public in a process called Initial Public Offering (IPO). You can also issue stock or stock options to your key employees, “binding” them to the business and thus retaining them (common in hi-tech industry among others).
- Longevity: The board carries on the corporation, not the owner. That means that a corporation formation can last longer than an owner-based company such as an LLC.
Main Disadvantages of C-Corp.
C Corporations have certain disadvantages. The main disadvantage is the fact that the profit of a C-Corporation is taxed to the corporation when earned, and the corporation does not get a tax deduction when it distributes dividends to shareholders. Then when dividends are distributed to the shareholders they are taxed again at the shareholder level. This phenomenon is called “double taxation”.
Similarly, when C-Corporation has a loss, its shareholders cannot deduct it from their personal income.
C-Corp. vs. S-Corp. vs. LLC
Other forms of incorporation of business organization include S-Corporation and LLC. Each of those types of entities have certain advantages and disadvantages when compared to the common C-Corporation.