The Business Master Checklist to Review Before You Ever Start Another Business

Aug 6, 2019 by

Before you establish a new business you must review our master business checklist to help you determine, if a new business, or entity is necessary.

You have one business up and running with some success. You are considering starting another business and dividing your focus.

Perhaps you do not want to put all your “business eggs” in one basket. What if one business slows down and the other one picks up? As you know, the worst number in business is one – one vendor, one client, one affiliate, one bank account. Does that mean one business? Not necessarily.

Your Business Master Checklist Before Starting a New Business

Your Business Master Checklist Before Starting a New Business

First, what are your reasons for starting another business? Here is a the start of the business master checklist. Let’s consider them carefully:

  1. The first business is not working.
  2. You found a new product in another niche that should bring in more revenue.
  3. You want to diversify into another niche.
  4. You see an opportunity in your current niche and starting a new business (more so a new company) to service the opportunity in that niche.
  5. Your business partner was lame, and you started a new company and a new business, perhaps in a similar niche, to move on.

The first one is fairly obvious as to the concerns; yet, many fall into this trap.

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Questions to Help Determine if an LLC or Corporation is Best.

Jun 13, 2019 by

Which entity is best for your new business, an LLC or Corporation? When you form a new LLC or corporation, the process is so easy, with so many online websites. Filing the articles with a registered agent is the easiest part of the process. The challenging part is to determine how your corporation or LLC should be taxed at a federal and state level and to make sure you have a complete formation, one that has real liability protection, not just filing the articles, which has ZERO protection.

Ask these Questions to Help You Determine is an LLC or Corporation Best?

Ask these Questions to Help You Determine is an LLC or Corporation Best?

Here are some of the key questions we recommend you evaluate before you form an LLC (which may be taxed in four different ways) or a corporation that may be taxed as a C corporation or an S corporation.

  • What is your business and how does this affect your choice?
    • A personal service corporation, in the past, was a flat 35%; but since the 2018 tax cuts, that has now been reduced to 21%
    • 20% deduction for pass-through income, with some restrictions
    • Are you investing in real estate or do you flip real estate?
    • Are you an e-commerce seller with potential sales and state income tax requirements?
    • Do you own real estate? If so, are you a dealer or investor? How many properties do you own? How much total equity and what percentage of your total net worth is all the properties?
  • Do you have partners?
    • Is it a domestic partner in a community property state (there are 9)? This comes into play with a single or multi-member LLC. 
    • Is it a foreign partner in another country? If so, is there a tax treaty with your partner’s country?
    • Do you plan to have a buy-sell agreement?
    • Is one partner an investor? This has a big impact on how your LLC is managed. 
    • Do your partners have an SSN or ITIN (this is important for banking, U.S. merchant account, and sales tax registration in a few states).
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Distributions from an LLC

Apr 23, 2019 by

Knowing how your distributions from an LLC are taxed is critical to your LLC formation strategy. After your LLC is formed, your business is up and running, and revenue is flowing, will you come to that important point where you distribute money to the partners. That may be just you, your spouse, or other outside partners.

Some people just write checks from the LLC to themselves, as the owner, and really don’t consider the tax ramifications of their actions. This is especially important anytime you have a partner, whether that is a spouse, outside partner, or a separate legal entity.

LLC Distributions

LLC Distributions

Let’s address some basic fundamentals first, then get into more details:

The first step is to be aware of how your LLC is taxed. Are you a single member LLC taxed as an S corporation, or disregarded for tax purposes? If you have earned income and a single member LLC that will flow through to schedule C, you are basically operating as a sole proprietorship, but have the liability protection of an LLC).

Test question: Is there any payroll for a single member LLC? The answer: depends. If the LLC is disregarded for tax purposes, there is NO payroll to the owner. Is it possible for a single member LLC to have employees? Yes. If the single member LLC is taxed as an S corporation, the active member (owner) would have payroll and distributions. If you have a single member LLC taxed as an S corporation, of course, the only member is active. If you have a two-member LLC taxed as an S corporation, it is possible that the second member could be passive (this could be a spouse or silent partner). Would the passive member be the manager of an LLC? No. By definition, if passive, they would not be running day-to-day operations. Keep that in mind.

A single member LLC taxed as a C Corporation; there would be, at some point, some type of payroll to the owner of the C Corporation. Is it possible that there was only enough revenue in the LLC taxed as a Corporation to only pay business expenses and not enough profits left over for any type of payroll? That is possible. You may take dividends out of the LLC taxed as a C Corporation, but keep in mind dividends are NOT deductible to the LLC taxed as a C Corporation’s profits.

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Your LLC and Corporate Responsibilities as a Manager or Officer

Apr 10, 2019 by

Managers of an LLC and officers of a corporation have important responsibilities they must execute properly to give them personal liability protection.

Forming a separate legal entity is a huge step in separating your personal and business liability. You obtain liability protection with a separate legal entity the day you file the LLC or Corporation.

What most people do not realize is that after day 1 and beyond you are not protected unless you operate the entity as a separate legal entity.

LLC and Corporate Compliance is Vital

LLC and Corporate Compliance is Vital

That involves avoiding commingling of funds, proper capitalization, and proper minutes and resolutions in your role as the director, officer, shareholder or manager, member or member of an entity.

Typically, as a director of a corporation or a manager of an LLC, your liability is limited personally. As long as you operate within your role as the manager of an LLC or director of a corporation, Nevada will protect you as long as you do not commit fraud. Other states have a minimum fiduciary duty or duty of care.

Your LLC and Corporate Responsibilities are Vital for Compliance and Protection.

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82 Costly Sales Tax Registration Mistakes to Avoid

Mar 29, 2019 by

Your Steps to Simplify Your Sales Tax Compliance.

We created this new report recently for new e-commerce sellers looking to get into compliance with sales tax and are at the stage to get registered for sales tax in many states. This content is covered in various parts inside your Sales Tax System membership.

We wanted to share this report for you also as it is a great reference guide as you get into compliance with more states where you have physical or economic nexus.

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