Proper Formation
If you bought a package it should contain: Articles of Incorporation or formation (LLC'S) * Certificate of Status * Certified Copy * Banking Resolution(s) * Operations Agreement or Shareholders Agreement * Stock or Units of Membership must be issued * The Registry should reflect the ownership * Initial minutes should be completed * Resolutions should be made at this meeting to hire professionals etc. (If corporation) * Officers need to be elected * An EIN or FEIN should be applied for from the IRS * An election status should be made for tax purposes (or you may be doubled taxed) * A corporate seal should be ordered (although not truly necessary it does serve some purpose) * Any buy / sell agreements should be executed * Funding / promissory notes * An accounting system should be implemented * All officers should receive copies of all documents for tax purposes * I WILL DISCUSS ALL OF THESE IN THE NEXT
Is step one complete? If not lets discuss what those documents do and why you need them.
In Florida www.Sunbiz.com is the site to register your business. Although some of the questions are confusing many people can do this without an attorney. When asked select to have both the certificate of status and certified copy as options -both cost about $45 total and are important if you need to get a loan. A Banking Resolution allows the bank to open an account. If not the bank will still open the account but take in all documents and you will have a longer process but it will work. An operations agreement is a necessity. Many clients ask why would I need an agreement to agree with me? Stop thinking that way! The company is it's own entity-if you think You are the company you are already setting yourself up for failure! The company is hiring you to run it! Also if you have a partner and that partner wants to leave, dies, or just "quits" -how do you deal with this? This issue causes almost all partnership disputes.
IRS Issues such as Taxation
There are two reason why your formed your company - Taxation and Protection. The IRS does not care how they tax you only that they tax you. Even if you have a LLC you can choose to be taxed as a partnership, individual or "S" corp. If you don't have a clue you NEED a qualified taxation expert. Although everyone knows the term CPA it may not be necessary for the smaller companies. This is your choice, but you NEED someone. A dollar saved here may result in hundreds being spent later. If your business plan does not include a line item for accounting/taxation you need more help than this guide. Find a mentor or someone who you trust to help you or send you in the right direction. A good attorney will always work with your team.
Maintain the veil!
You must sign your documents as per your officer designation. Simple put..."John Smith, President." Just signing John Smith may give you a personal liability. Does your letter head state your correct company name? It needs to or you are considered an "alter ego" - (an individual). How about your business cards? Countless time I see business cards with "We buy homes" and a phone number - this may give personal liability! If you think you are the business then you need to rethink. You work as the president for the business. My experience as a litigation attorney shows that at least 1 in 3 businesses can easily be pierced giving personal liability to the owner. Also watch out for credit cards that offer "business" credit but ask for a personal guarantee. These cards are really personal credit cards with a "company" name on it.
Remember why you formed the company (Taxation & Protection)
No matter what you do - you need to maintain your corporate protection. An attorney will review many contracts for a small price. (We charge as little as $75). Litigation retainers start at $2,500! Your attorney needs to be a small part of your business early or they will be a larger part later. All companies are called "Legal Entities" - there is a reason for that. I urge all new business owners not to cut costs to the point of not having their legal entity - "Legal." If you have questions please send them to gsarris@affinitylawfirm.com This article by itself it not meant to provide legal advice only useful information. Please obtain an attorney to review your documents and procedures as this short manual does not deal with many issues. Thanks for reading my "manual." - Gust G. Sarris
