Basics of Starting a Business:

If you are starting a business, the question is, “How are you going to own the business?”  You have 2 choices:  You could own it as a sole proprietorship, which is the easiest way to own a business:  you do nothing other than open a business.  It’s also the worst possible way to own a business because you and the business are the same: There is no separation between you and the business.   So, when the business gets sued, they are suing YOU personally.  And when they sue you personally, they can take everything you own.  If that’s not bad enough, you will pay the highest taxes possible when you do business as a sole proprietorship. These are just two of many reasons why smart business people never do business as a sole proprietorship.

The right way to own your new business is as a corporation or limited liability company, a/k/a/ an LLC.  (LLCs are more complicated because there are many different kinds of LLCs: single-member vs multi-member, manager-managed vs member-managed, LLCs taxed as an S Corp, a C-Corp, a sole proprietorship or as a partnership.  You have to really know what you are doing if you are setting up an LLC.  DO NOT attempt this on your own.)  Have you ever wondered why smart business people set up corporations or LLCs?  Here’s why:  When you own your business in a corporation or LLC, you and the business are no longer the same: the business is separate from you.  The business is now owned by the corporation or LLC.  That means, when the business gets sued, they cannot take your personal assets.  Why?  Because YOU are NOT the business:  When they sue your corporation, they are not suing you! So, write this down: “corporations and LLCs protect your personal assets when your business is sued.”  In addition, corporations give you the best tax breaks.  Have you ever heard of “business deductions?”  “Fringe benefits?” There is one type of corporation and LLC that gives you by far the most numerous and generous fringe benefits and deductions to let you pay the least amount of taxes and let you keep more of your money. So, to sum it up, a corporation (or the right kind of LLC) protects your assets from lawsuits and lets you pay the lowest taxes.  That’s why smart business people always own their businesses as a corporation or an LLC.

 

How do I register my online store with my LLC/Corporation?

Login to your Amanda Seller’s account and simply change the store “owner” to the name of the LLC or Corporation.

What are Canadian citizens options for a business bank account?

The best practice is to open a U.S. bank account in the name of the company.  Second best is to open a Canadian bank account in the company’s name — if a Canadian bank will allow it.  Third best is to add your name to the existing personal account and deposit business income there.  I advise against the 3rd option. You will need an ITIN (Individual Taxpayer Identification Number) for when you file a U.S. tax return on income you may earn in the U.S.

By purchasing your services, are we forming a client-attorney or client-accountant relationship?

No. Merely filing an LLC or Corporation papers alone is not practicing law and does not create an attorney-client relationship.  If we establish a Trust or advise on legal matters, then we form an attorney-client relationship.

How do I open a business bank account?

You should deal only with state or community banks. National banks, such as Chase, Bank of America, Wells Fargo, etc., basically do not want your business.  Deal with smaller banks and you find it much easier to open your account.

Call the bank and ask what documents they will want to see before they will open your account — usually Articles of Organization showing you are the manager and the EIN -SS-4 letter from the IRS. Then make sure you have all the documents they’ve requested before going to the bank.

Ask the bank for any other requirements they have to open the bank account so you have full information. If they require a business address in the state, then contact a local UPS Store or other commercial outlet that rents mailboxes.  Use the street address for your address and the PO Box number list as a “Suite number.”

How do I obtain a Florida business license? (applicable to other states as well)

Several federal and state registrations are required to obtain approval for a business license in Florida. Review the business license regulations for the county in which you plan to operate your business. Each type of business requires a different application. The state of Florida provides easy access to all of the documents you need online.

1. Apply for a federal employer identification number (EIN) from the United States Internal Revenue Service; this number is requested on any Florida business license application. You can apply for the identification four ways: online, via telephone or fax and by U.S. mail. There is no charge for an EIN and although it is available as soon as the application is completed, it can take approximately two weeks before the number is recognized in the IRS database.
2. Visit www.myfloridalicense.com, select “License” and select Option 1 for new business license applicants. Choose the type of profession that applies to your business. Select the type of application that best fits your business. You can download and print the application or you can fill it out online. Pay the application fee. The amount will vary depending on the type of business you operate.
3. Obtain a sales tax registration number from the state of Florida’s department of revenue. All businesses must register to legally accept sales tax during business transactions. You can download and print the registration forms or fill them out online at ww.dor.myflorida.com. Select “Taxes” and then “Register to collect and/or pay taxes.” Select “Start a new registration” to enter your information. The information required will vary according to business type. Expect to supply the legal name of your business, the federal employer identification number, owner’s name and social security number, address and telephone contact information. Pay the $5.00 registration fee (as of May 2010).

Things Needed

–        Business license application

–        Federal Employer Identification Number

–        Sales registration number

–        Money for fees

Tip

• Read and make a list of all the requirements for your particular business application as soon as possible. Some businesses will need to pass a state inspection before the application is approved.

Warning

• Do not attempt to operate your business without the sales tax registration and business license, doing so can bring fines from the state government.

We do not want to incorporate in California, nor do we want to have to pay any CA taxes (other than the $800 minimum tax) that said – Do I need to get a reseller permit in California? Or can I get one in Wyoming given my first LLC is incorporated there and I technically have a physical address? Can I set-up my business bank account in California? Or does that automatically mean I’m a California company and thus pay business taxes on all income?

No. Yes. You should have an account in Wyoming (or the state of incorporation) at a bank that also has a branch in your hometown to make it easier to transact business.

I have been advised in the past to form an LLC by myself, what do you recommend?

You should not be a single person LLC. You should be a multi-member LLC taxed as a partnership.

Biggest question is when are we covered by the LLLP, when are our assets protected from liability associated with store and products sold? 

You should use the LLLP to protect personal assets from lawsuits against you personally.  Typically, these are bank accounts, investment accounts, stocks, mutual funds and personal property of value (jewelry, antiques, etc.).  Do not include in the LLLP assets that can cause a lawsuit, such as vehicles.

You will use the LLC to operate your store.  It protects you from personal liability when the business is sued.  The LLC will also provide tax deductions for business expenses, which lowers your personal income tax liability.

Do I need insurance for my business?

Talk to a commercial insurance agent about the different policies available for a later stage of the business.

The only thing that we still do not understand is how can we make sure that we do not pay tax twice. We have spoken to our UK accountant and he said that he will include our USA income in with our UK income calculate the total tax due and then offset the USA tax paid. Is this the correct way?

Yes, that is correct. You will receive a credit in the UK for any taxes paid in the US, which is the “offset” your accountant is referring to.  This is pursuant to a tax treaty between the US and the UK that prevents double taxation.

Puerto Rican citizens with an eCommerce business:

You will need to obtain a Merchant Registration Certificate because you are a resident of Puerto Rico.  You can get the application for the Merchant Registration Certificate at:

http://www.hacienda.gobierno. pr/downloads/pdf/formularios/ AS%202914.1.pdf

You will also need to register the business with the Puerto Rico Department of the Treasury for Sales and Use Tax The website to do this is at:

https://suri.hacienda.pr.gov/_/?Language=ENG#7

If you have not already applied for an Employer Identification Number (EIN), you should get one online at:

https://sa.www4.irs.gov/ modiein/individual/index.jsp

If you have questions about any of the forms, you will get the best answers by calling the government agency that issued the form.  The phone number for the agency is listed on the agency’s website.

You should not continue to use your personal bank account. You may set up an account in Puerto Rico or in Florida where your business entity is registered. You’ll need all of your formation documents and registration information.

If you choose to set up a Florida bank account, you will need a Florida address. You can use a store that handles shipping and mailings and has post office boxes.  The store should also forward mail to your place of business. You should use the street address of the mailbox store for your address and use the mailbox number as a suite number.

When filling out the reseller’s certificate:

Where it asks for:

Seller’s Name is _______?  ENTER YOUR ENTITY NAME

Address: ___? ENTER YOUR PUERTO RICAN ADDRESS

Part II – Purchaser’s Information

1. a. I certify that I am engaged in business in Puerto Rico and that my Merchant’s Registration number is: ______? CONTACT THE DEPT. OF TREASURY AT 787-722-0216 FOR THE NUMBER.

5. Indicate the reason for the exemption or exclusion and provide the requested information, as applicable: RESELLER
6. I am engaged in the business of __________________ and I mainly sell ________________________? ONLINE RETAIL SALES. THE PRODUCT YOU ARE SELLING.
7. I am purchasing:
8. Tangible personal property for resale?  YOU FILL THIS OUT WHEN YOU KNOW WHAT YOU ARE BUYING FROM A WHOLESALER.

How does sales tax play into my eCommerce business?

Each seller on Amazon determines what sales tax needs to be collected and remitted on their Amazon products.

You go into Account Settings > Tax Settings and then follow the instructions to set up the tax rates.

If you warehouse your own inventory, you’ll need to get a sales tax permit for your state. If you use Amazon to warehouse your inventory, you’ll need to determine where your inventory is being stored and whether the presence of inventory in that location creates a tax obligation. Wherever you have a tax obligation, you’ll need to get a sales tax permit for that state or states

Amazon will calculate and collect sales taxes for the purchases of your products.  You’ll be responsible to file the sales and use tax returns. There are software supplies who offer services to speed the process.

When filing for an EIN, what do we do if we live in one state but our entity is in another?

Enter your primary residence address in the field requesting your state of residency and the address to receive mail. Your registered agent (if applicable) will forward mail to you that they receive.

Do we need a permit or authorization of any kind to operate the entity from our residence?

If you’re running an FBA store, you probably do not need a license to run the business from your home. There may be local street restrictions if you’re having deliveries or there may also be HOA restrictions if you live in a community like that. You would have to consult your HOA bylaws.

Is a woman owned eCommerce business favorable?

A woman owned business for Amazon requires only that a woman own 51% of the entity.  This gives you several advantages, one of which is that it allows people who want to buy only from women owned businesses to use a filter to find them.  This way your store is more prominent on Amazon, hence more sales.

Quarterly Tax Returns:

Generally speaking if your tax due on April 15th is less than $1,000, then you don’t have to file a quarterly tax return.  When you get past $1,000, then you have to start making quarterly payments.  At this point, you probably don’t need to make the payments.

A few of things to consider are:

Did you owe more than $1,000 for taxes in 2016? If yes, you may need to start making quarterly payments.

Did you start or stop working at a job other than your business?

Do you expect your income to change significantly during 2017 in your business?

If any of those questions cause you some concern, please let us know and we can do a more in-depth analysis and give better advice.

eCommerce Businesses in Texas:

Does the Certificate of Filing (1a) or Letter of Acknowledgment from the Texas Secretary of State’s office (1c) serve as my business license?   NO. If not what document serves as my business license?  YOU WILL NOT NEED ONE IN TEXAS.

Does the Texas Resellers certificate you provided also serve as my Tax ID or do I need any other supplemental documentation?  NO.  YOU WILL APPLY FOR THE EIN ONLINE AS DESCRIBED IN THE ATTACHMENTS YOU RECEIVE ACCOMPANYING YOUR ENTITY DOCUMENTS.

When I complete the Texas Resellers certificate form at any point in time of purchase and sign any of the related documents provided, do I need to send you back any documentation?  NO.  SEND TO THE WHOLESALER AND STATE.

In relation to setting up an account – I plan to set up the account as a business account under _______. As I am new to this are there any other steps I should take while setting up the business bank account or do you already plan to send some of those details while providing the EIN on some pointers to effectively set up a business bank account?  YES.  SEE ATTACHMENTS ACCOMPANYING YOUR ENTITIES DOCUMENTS.

Documents Received After Approval by Secretary of State:

In the Articles of Organization, do I leave all the boxes as they are currently? In other words, am I not supposed to check any boxes? DO NOT CHECK ANY BOXES.

With regard to keeping minutes, how often am I supposed to record meeting minutes monthly? Quarterly? Or just annually? ANNUALLY.

What does “Limited Power” mean?

“Limited Power” refers to a limited power of attorney, which authorizes Asset Defense Team personnel to sign your name to filing documents in order to expedite the filing process.  “Limited” means that the authorization to sign your name is limited to signing only filing documents necessary to create your entity.

Why did you not complete my resale certificate?

We have the resale certificates for all 50 states, so you do not have to spend hours looking for the right form to use.  We can provide the correct resale certificate form to use and information about how to use the resale certificate.  Because resale certificates request specific information that only you will know, such as the items you are purchasing for resale, we are not able to fill out resale certificates for you.

If the company owns only 1% as the general partner would I be liable for the other 99% if someone sued the company?

As a limited partner, you have no liability regarding the FLP.  Only the general partner has POTENTIAL liability.

Also, if I purchase real estate and/or vehicles for the LLC, should those go under the LLC or the FLP?

The FLP is designed to protect your personal financial assets, such as bank accounts and investment accounts.  Real estate should be held in a separate LLC.  As for the vehicle, if you are using it in your business, it can be owned in the LLC that owns the business.  Be sure to talk to your accountant before you buy a vehicle to assist you in qualifying for the vehicle deduction.

What do I do with my FLP and how are bank accounts affected?

Your FLP is designed to hold and protect personal financial assets, such as bank accounts and investment accounts.  The FLP does not change your ability to withdraw or deposit — you have full control.  If you open additional accounts in the future, you can put them in the FLP so they will be protected.

Sales Tax Nexus:

Sales taxes are indeed a “fuzzy” area as the rules keep evolving, such as what constitutes a “nexus.”  It differs from state to state. You need a competent CPA or an accounting firm that has the software to handle your state sales tax issues efficiently.  This is much too complex to try to do on your own. States often take a guess at what you owe, so do not necessarily consider Ohio’s statement as the correct amount.  Again, you should have a professional who handles sales taxes calculate what you really owe in Ohio and other states.  They can save you money — and keep you out of trouble.

I have been told that I could register my ____ entity in another state. I am thinking of investing in ____ and was wondering if I can register my ____ LLC/Corp/LP there?

Yes, you can register a _____ Corp in another state, but that does not mean it is the wisest thing to do.  You will have to continue to pay all ____ annual fees in addition to the other state’s fees.  You will also need a registered agent in the state you plan to move to either way.  Some states are much less expensive than others, so it is better to have entities filed in one state rather than filed in another and registered in the state of your choice. You may want to dissolve the original entities at some point, which would also dissolve your entities in the other state.  There are liability reasons to have separate filings as well.

What is it called when I purchase a real estate deal where I take over a mortgage?

This is called a “Subject To” deal in which you assume the payments on the existing mortgage.

We are looking to include some partners in our deal. What would be the best way to structure the deal to protect everyone? How can we structure a JV or include a partner in the LP? We might use different partners for different deals. 

How you structure depends on whether the investor is making an equity investment or a debt investment. If equity, the investor is buying a membership interest in an entity that owns the property. If debt, the investor is merely making a loan to you or your entity, which is repaid with interest. There are pros and cons to each type of investment. Please contact us if you would like to discuss further.

We entered into a Purchase & Sale agreement in Texas, I think we need to set up a limited company as well in Texas. Do we? We are thinking of using a system for future names for the limited companies. We plan to use “Example Company ____ (state)” for our future names, depending on the state. Is this ok? If someone searches this name will they be able to see all of Example Company because they all use the same name “Example Company (state)”?

Yes. It should be fine as long as the name is available in the state of your choice. They would have to search in all 50 states to find each “Example Company…”. Even if they did, you would have no more liability because you have correctly separated the liability from one company to the next.

Is an FLP more protective than an LLC?

An FLP protects better than an LLC because that is true, but only in certain states.  In Florida, an LLC is just as protective as an FLP.  The biggest difference is cost.  The filing fee for an LLC in Florida is $161.00 USD versus $1,061 for an FLP (amounts vary). A Canadian can only use an LLC if they already have an FLP.  The funds from the LLC should flow to the FLP and you will take all income from the FLP. This approach avoids a double tax, which would occur if you took income directly from the LLC. In summary: The difference between the LLC and the FLP in Florida is cost, specifically in filing fees.

Steps to Open a Bank Account:

Generally, mid-level to smaller banks are easier to work with rather than large national banks.  Avoid Bank of America, Wells Fargo, Citibank, Chase and other large banks. The requirements to open a bank account in the US are very stringent as a result of the 9/11 attacks — laws designed to prevent terrorists from opening bank accounts, stop money laundering, etc. Here are the requirements:

To open a personal account:

1. You must be physically present at the bank in the US.
2. You must present your original passport (Copies unacceptable).
3. You must present a 2nd form of ID with your physical mailing address on the ID.

Acceptable documents include (Must be in English):

1. Bank Statement
2. Utility Bill
3. Other document showing your physical address

To open a Business account, all of the requirements above must be met, and in addition:

1. The Articles of Organization for your corporation:
2. The corporation’s tax ID number (EIN);
3. An officer of the corporation.

EIN Application:

Is the entity subject to federal excise taxes?

No.

Which category does the business fall under?

Retail – Online Seller

Distribution of Available Funds (Article ll, 2.09 and 2.10). How does this work? How do we get paid by the entity?

You will take either a salary, distribution of funds, or both. A distribution is like a stock dividend.

Company Accounting (Article IV, 4.02 and 4.03) – Income Tax Information and Capital Accounts.

No issues as long as you take distributions in the percentage of your ownership.

Income Tax Filing – Do we continue to file as individuals, or do we need to file taxes for the entity separately?

The entity files a federal form 1065, but income flows through to you and you pay personal income tax. Best to discuss with your accountant.

Banks for Foreign Citizens:

Call each bank before leaving home for the United States. Explain that you are from _____ and that you want to open a bank account for your business entity. Explain that you have a Corp/LLC in ____ state. Ask what documentation the bank will require. You will need an EIN (Employer Identification Number), which is a tax ID number assigned to your entity. We will send you the SS-4 form, which will contain all of the info you will need to talk to the IRS. Then follow the procedure below:

Apply by Telephone – International Applicants

International applicants may call 267-941-1099 (not a toll-free number) 6:00 a.m. to 11:00 p.m. (Eastern Time) Monday through Friday to obtain their EIN. The person making the call must be authorized to receive the EIN and answer questions concerning the Form SS-4 (PDF), Application for Employer Identification Number. Complete the Third-Party Designee section only if you want to authorize the named individual to receive the entity’s EIN and answer questions about the completion of Form SS-4. The designee’s authority terminates at the time the EIN is assigned and released to the designee. You must complete the signature area for the authorization to be valid.

Is our LLC setup as a Non-pro Rata?

Yes. Article 2.09 of the Operating Agreement provides for non-pro rata distributions and discretionary distributions.

Do each of my entities have to file their own tax returns?

Yes, each entity must file its own tax return.

How should my FLP own my corporation? What is the appropriate way to leave your company to your heirs, should I use a trust?

The shares of your corporation can be owned by your FLP, which protects the shares better than owning them in your name.  A trust is the appropriate way to leave your company to your heirs – and all other assets as well.

What are the advantages of the C-Corp versus an S-Corp?

Losses in an S-Corp can be deducted against other income.  However, these losses are operating losses, which does not include the amount you have paid to a third party for coaching or education expenses related to your business.  Operating losses are the difference between how much it costs to operate the business versus how much income you earn.  If you spend more to run the business than you make, you have an operating loss. C-Corps allow you to write off operating losses up to $3,000 per year. If you have losses greater than that, you can carry the additional losses forward and deduct them in future years.  S-Corps allow you to write off 100% of your operating losses in a year. If the company is making money rather than losing money, then C-Corps provide better deductions and fringe benefits than an S-Corp, which lowers your taxes better than an S-Corp.

I have a house in my name that is income producing. Can I put this house in the name of my company for asset protection so that if someone wants to see who owns this house, my name will not be on any documents stating ownership of the property?

Assets can be lost when owned by a corporation. Assets are protected in an LLC.

If I buy rental property in the future, how can I setup their asset protection?

It is best to close in the name of the entity rather than transfer title after closing.

I have a 401k and I want to buy other rental property with these funds to purchase real estate properties. How can I ensure these funds are protected?

It depends on whether the 401k is with a former employer or a current employer. If a former employer, you can roll the funds into a self-directed IRA and use the funds to buy properties. If the 401k is with a current employer, you can borrow up to $50,000 and use it to buy properties.

If anyone tries to search assets under my name in public records, what is the best state to register my entity so it is safe from litigation and its information cannot be pierced by court litigation? Is there a best state?

Piercing the corporate veil does not depend on the state. It depends on whether you operate the company correctly. In many states, using a land trust can provide the anonymity you are looking for.

How can I make property and financial assets safe from litigation and judgements? What is the best place to keep these assets safe from litigation?

A Family Limited Partnership (FLP) is a very strong entity to protect personal assets from lawsuits.

How does asset protection work before, during, and after litigation?

You can only setup asset protection structures well before litigation. After you are notified you may be sued, it is too late.

How can I access my assets in the future, I heard there are five states that prevent anybody from piercing the record as well as accessing the assets?

This is not true. You have complete control over your assets that are protected by a Family Limited Partnership (FLP).

What are the tax implications when a house is in the FLP? Do we not get the homestead exemptions (capital gains) upon sale? Will it trigger the Due on Sale clause? Can you write off the mortgage expense? Does the FLP include all personal assets only or are the business interests included as well? Will the FLP be a 99% Limited Partner in the LLC or Corporations?

This is current. Homestead protection is lost and no capital gains exemption unless personal residence is in your personal name. This is why we usually do not transfer a personal residence to an FLP. We use the FLP to protect cash, savings, and cash-like investments, such as securities and personal items of value. Lenders typically grant permission when transferring title to a personal residence. No exemption when transferring title to rental property. No, mortgage interest is not a business expense. All assets, including your business interests, can be held safely in the FLP. The FLP can, when appropriate, be a 100% member/shareholder.

With all of the protection offered by other entities, such as LLC’s or Corporations, what additional protection would an FLP provide? Does it make sense to form it now?

The business entities protect the assets in the LLC’s when you are sued personally. However, all of your personal assets are seizable when you are sued personally without an FLP. Thus, the FLP protects your personal assets when you are sued personally. Yes, if you want to protect personal assets.