If you want to do business using an LLC, you will need to open a business bank account. Having a separate bank account for your LLC is required to protect your personal assets from business liabilities. Savvy entrepreneurs know they should never mix personal funds and accounts with company assets, so it’s important to know how to open a bank account for an LLC.

The process for opening a business bank account  can differ depending on which bank you are using and even the branch you go to. Non-US residents will also have to make some additional considerations when opening a bank account for an LLC.

Here we cover how an LLC can open a bank account and what documents may be required.

 How To Open a Business Bank Account for an LLC

The process for opening a business bank account for an LLC is not completely standard. Banking laws differ in each state, and separate banks have different policies for opening business accounts. Policies can even differ between separate branches of the same bank. Some branch managers understand LLCs better than others and may require varying amounts of documentation.

Although policies differ between banks, the following steps are generally required to open a business bank account for an LLC:

Step 1.) Form an LLC

Opening a business bank account starts with forming a business entity, like an LLC. Many business owners prefer LLCs because they are easy to both setup and manage.

Forming an LLC requires filing a formation document with the Secretary of State’s office. This document has different names in different states. Delaware, one of the most popular states for forming LLCs, calls the formation document a “Certificate of Formation”. Other states call the LLC formation document the “Articles of Organization”.

A Delaware Certification of Formation requires the name of the company as well as the name and address of the company’s registered agent.

Step 2.) Obtain an EIN Number

An LLC needs to obtain an EIN number from the IRS in order to open a business bank account. LLC Members must provide the bank with a copy of either the EIN Confirmation Letter (575 CP) or an EIN Verification Letter (147C) from the IRS in order to open the account. Federal law now requires even single member LLCs to obtain an EIN number.

An EIN, or “Employer Identification Number”, is the type of federal tax identification number assigned by the IRS to businesses, estates or trusts. An EIN number works like a social security number for a business entity and allows LLCs to pay federal taxes, do payroll and open bank accounts.

LLC owners can obtain an EIN number by submitting the Form SS-4 to the IRS either online, through the mail, or via fax. You do not have to submit the Form SS-4 on your own. Service providers, like IncNow, can submit the SS-4 application to the IRS and obtain an EIN for your LLC. Note that you should not obtain an EIN for an LLC until after the LLC is formed.

Step 3.) Provide Necessary Documents

A bank will require some supporting documentation in order to open an account for an LLC. Banks require proof that:

A.) The LLC legally exists; and,

B.) The individuals trying to open the account are authorized to act on the LLC’s behalf.

Banks typically require the following documents to open a business account for an LLC:

• The LLC Operating Agreement

Most banks will want to see a signed copy of the LLC Operating Agreement in order to open a business account. The LLC Operating Agreement lists the owners and managers of the LLC.

• Certificate of Good Standing

A Certificate of Good Standing is an official document that an LLC can obtain from the Secretary of State in its state of formation. Some states also call this document a “Certificate of Existence”. The Certificate provides proof that;

A.) The LLC legally exists; and,

B.) The LLC has paid its franchise tax balance and is compliant within its state of formation.

If you have a Delaware LLC, you can obtain a Certificate of Good Standing through a registered agent, such as IncNow.

• Statement of Organizer

In some instances, a bank may require additional documentation showing that the people listed in the Operating Agreement are actually connected to the LLC. One option is to provide a Statement of Organizer.

A Statement of Organizer is a corporate document stating that an Authorized Person requested the LLC to be formed while acting as a representative for the company’s initial Members. A Statement of Organizer can help certify who the initial Members of an LLC are intended to be at the time the company is formed.

• Other Public Filings

Some banks outside the United States may find that internal company documents are not enough to prove ownership in an LLC. In this case, a bank may request a copy of an official public filing stating the names of the LLC’s owners.

Some LLCs can simply provide the bank with a copy of the company’s formation document filed with the Secretary of State. Many states require LLCs to include the names of the company’s Members and Managers in the public formation document.

This can be problematic for Delaware LLCs however. Delaware does not require the names of LLC Members to appear on the company’s Certificate of Formation. Most Delaware LLC owners take advantage of this and protect their privacy by not including their names on the formation document.

Delaware LLC Members can file an amendment to the LLC’s Certificate of Formation with the Delaware Secretary of State to include an article providing the names of the company’s owners. Amending the Certificate of Formation creates an official public record of an LLC’s Membership that should satisfy almost any bank.

What is an LLC Bank Account? 

An LLC bank account is a business bank account opened specifically for a Limited Liability Company (LLC). Opening a separate bank account is an important part of setting up a business as an LLC. 

Business bank accounts provide many benefits for LLCs and its Members. The primary benefit of an LLC bank account is the liability protection it offers. LLC Members need to make sure that they are not mixing personal and business finances in order to maintain their limited liability shield in the company. Opening a separate bank account for an LLC can make it easier to avoid commingling funds between a business and owners. 

Opening an LLC bank account can also assist with accounting. Having a separate business account can make it easier to track any expenses, deposits and transfers related to a business. This clarity will help during tax time, and is crucial if the company needs to complete a financial audit. 

LLC bank accounts may come with certain features that personal accounts don’t. These may include higher transaction limits, merchant services, business credit cards and more. These benefits can help give your company’s finances a boost depending on what kind of business you are in. 

Do I Need to Open a Business Bank Account for My LLC?

Yes, you should always open a separate business bank account for your LLC. An LLC does not need its own bank account to conduct business. However, keeping business finances separate from your personal bank accounts is an important part of operating an LLC the right way.

The point of forming an LLC is to legally separate yourself from your business to protect you from being personally responsible for any debts or obligations incurred by the company. These legal protections are called “limited liability protection”.

You can lose your limited liability protection if you start mixing business income and expenses into your personal finances. The best way to legally protect yourself and your business is to open separate business bank accounts for your LLC.

What Should I Use My LLC Bank Account For?

It is important to remember that an LLC bank account should only be used for depositing business income and paying business expenses. Your personal finances should be completely separated from any bank accounts associated with your LLC.

Mixing personal finances with business bank accounts is called “commingling”. If LLC owners or Managers are found to be commingling business assets or funds with personal bank accounts, the whole company could lose its legal protections. This puts the LLC Members at risk of being held personally responsible for the company’s legal liabilities and financial obligations.

A business owner can pay themselves through either a salary and bonuses with payroll deductions or through simply withdrawing LLC funds as an owner’s draw. Either way, all of these will be subject to self-employment taxes. To reduce self-employment tax in half, most LLC owners are eligible to file an IRS Form 2553 to have their LLC classified as an S-Corporation for tax purposes. Then, the owner’s income can be split 50 / 50 between salary and S-Dividend (not subject to self-employment FICA taxes like Medicaid and social security contributions).

Where Can I Find My EIN Number?

The first place to look for your company’s EIN number is the original EIN Confirmation Letter. You can also find your EIN number recorded on numerous company documents and records. These include:

• Old federal tax returns,
• Business bank account statements,
• Official IRS tax notices,
• Business license, permits, or other applications.

If you cannot find your EIN number on any relevant documents, you can call the IRS and request an EIN Verification Letter.

Keep in mind that you will need access to a fax machine in order to receive an EIN Verification Letter. The IRS can provide you with the Verification Letter right away, however, they can only send it through fax.

Do I Need a DBA to Open an LLC Bank Account?

An LLC does not need a DBA to open a business bank account. Bank representatives who are unfamiliar with LLCs may think that the company needs a DBA to open an account. This is not the case.

A DBA stands for “Doing Business As”. A DBA is an alternative name that an LLC can use for business purposes other than its official corporate name. DBAs are also referred to as “fictitious names” or “trade names”. For example, Agents and Corporations, Inc. trades under the name “IncNow”. An LLC can acquire a DBA by filing a document at the county level in its state of formation.

Can A Non-US Resident Open an LLC Bank Account?

Individuals from almost any country in the world (except restricted countries and individuals on prohibited lists) can form an LLC in the United States. Non-US residents who form LLCs likely need to visit the US in order to open a business bank account. Non-US individuals often decide to open a business bank account in the state where the LLC is formed.

Regardless of where you do business, you will find having a bank account for your LLC to be essential. Once your company is formed, you can obtain documents later that your bank requests if you do not have them at the time of formation.

What LLC Documents Do I Need to Open a Business Bank Account?

Your business will need to open a bank account to conduct business. Beyond the Certificate of Formation which is filed with the state of formation, the banks will require your operating agreement and an EIN. The Employer Identification Number (EIN) can be obtained directly from the IRS, or through IncNow’s EIN service. Under the US Patriot Act, banks also need to comply with Know Your Customers (KYC) laws. Therefore banks require a list of the LLC’s owners and managers including their driver’s license or passport. Often when your bank branch is not located in the state where your company was formed, banks may request that the LLC submit a Certificate of Authority to qualify as a foreign entity in the state where the business has its operating headquarters. One thing to be aware of is that if you open an LLC in Delaware and decide to open the bank account from a branch in Delaware, then Delaware law will govern that bank account. This can be advantageous because Delaware is the only state in the country where a business creditor cannot garnish funds in the business’s bank account to collect on a judgment. (10 Del.C. § 3502).

Do I Need to Open a Bank Account for an LLC in Person?

Typically, United States residents must open a bank account for an LLC in person to satisfy the Know Your Customer laws and Patriot Act. If you want to open a Delaware bank account without visiting Delaware, it may be possible to visit a branch of the same bank that is local to you or your business to confirm your identity. Non-U.S. residents should contact their local bank to see if it has a correspondent bank in the U.S. to assist.

What Happens After I Open a Bank Account for an LLC?

After you open a bank account for an LLC, you must implement proper accounting procedures for tracking all money coming in and going out of the business account. Keeping thorough records of all business transactions will make tax season simpler and will further separate personal assets from business liabilities. Commingling personal expenses and assets with business assets could result in loss of liability protection for disregarding formalities.

NEXT –> How To Save On Single Member LLC Taxes

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What Is A Tax ID?

A tax identification number (tax ID) is a nine-digit number issued for your business by the IRS. Think of a tax ID as a social security number for your business. Your tax ID number is often used for identification, and the IRS uses this number to administer tax laws.

What Is An EIN?

EIN stands for Employer Identification Number. While there can be some confusion about the difference between a tax ID number and an EIN, they’re actually different names used to describe the same thing.

What Is A TIN?

TIN stands for Taxpayer Identification Number, issued by the Internal Revenue Service (IRS). For noncitizens and non-permanent residents of the U.S. who are often overseas, there may arise a need for the equivalent of a SSN without the associated federal benefits. For example, those people living overseas may need to file certain documents with the U.S. Government. While many of them may do so by obtaining an Employer Identification Number “EIN” for their business, others who do not require an EIN can simply obtain an Individual Taxpayer Identification Number “ITIN”.

Taxpayer ID vs. EIN

Again, a tax ID is an EIN. The terms are often used interchangeably, although the different terms can cause confusion.

Is A Taxpayer ID The Same As An EIN?

Yes, a taxpayer ID is the same as an EIN. However, the EIN is a taxpayer ID for a company and will often be found on business forms.

What Is A Tax ID or EIN Used For?

An EIN is required to withhold taxes from your employees and to open a business bank account. You will also be asked to supply your tax ID number when you fill out any application that requires your business to validate its authenticity.

How Do I Apply For An EIN?

When you incorporate your business, a registered agent like IncNow can often secure an EIN for your Delaware LLC after the Certificate of Formation is approved by the Secretary of State.

To obtain the number, you can fill out a simple online form at IRS.gov/EIN or ask an incorporation service to assist you. You will need to have a signed and completed IRS Form SS4. Should you want help getting the EIN, you can name a third party designee on the IRS Form SS4.

Should you have a social security number, the IRS will often provide the EIN right away online to you or the third party designee. Without a SSN, the IRS will ask that a Form SS4 be faxed in to their office. Faxing in the information is a slower process. When faxed in, the EIN usually takes 3-5 weeks for the IRS to assign. In around that same amount of time, two to five weeks, you will also receive a hard copy of your tax ID from the IRS in the mail.

How Long Does It Take To Get A Taxpayer ID?

The Taxpayer ID is also known as an Employer Identification Number (EIN). IncNow’s EIN service typically takes one business day.

It is a longer process for non-U.S. citizens. For non-U.S.-citizens applying for an EIN for their new business, the IRS requires the SS4 to be faxed in and the IRS assigns with the Taxpayer ID in 4 to 6 weeks.

Most U.S. citizens can obtain up to one Taxpayer ID per day using the IRS online EIN wizard. IncNow offers a service to assist new business owners with the IRS Form SS4 to obtain a Taxpayer ID whether or not they are a U.S. citizen.

How Is A Tax ID Number and EIN Different From An ITIN?

An individual taxpayer identification number (ITIN) is a tax number given to some non-U.S. residents and resident aliens, as well as their spouses and dependents, who are not able to obtain a social security number. If you plan to incorporate in Delaware and you do not have a social security number, you should not need to obtain an ITIN. The Form SS4 does not require an ITIN to obtain an EIN.

Can You Use Your EIN For Multiple Companies?

No, you cannot. Since an EIN is a tax ID number that the IRS assigns to a company, each company must apply for its own unique EIN. Regardless if the company has the same owner, different types of entities are going to be taxed differently and require separate EINs.

One exception to the rule is a Series LLC. Technically, a Series LLC only requires a single EIN regardless of the number of protected series it has. Additionally, when a corporation or LLC has fully owned subsidiaries that single member LLCs, the “children” are known as disregarded entities for tax purposes and have the option to either obtain separate EIN numbers or use their parent entity’s EIN.

The post Tax ID vs. EIN: What’s the Difference? appeared first on IncNow.

Counterparties can rely upon the signature of a President to know that a Corporation will be bound to an agreement without being able to disavow the contract as not being authorized. This is because the President is cloaked with authority to act on behalf of a Corporation. Likewise, Vice Presidents have authority to bind the Corporation. Sometimes the VPs are limited in their titles to specific aspects of the Corporation, like Vice President of Marketing or Vice President of Operations.

Other officers set forth in Bylaws include the Treasurer and Secretary. The Treasurer keeps track of the Corporation’s finances, including its funds in bank accounts. Often times the treasurer has signing privileges for checks. The Secretary holds and maintains the Corporation’s meeting minutes. Often the Secretary must attest to contracts signed by the President to confirm the President has authority to sign the contract.

In addition to the officers of a Corporation, the corporation has two other layers that make up its structure. It is owned by shareholders who elect a board of directors to oversee the management and set the strategy and objectives of the Corporation, to be carried out by the officers. Daily operations are handled by officers, and that includes the President of the Corporation. But what does the President of a Corporation do, exactly? Here’s what you need to know.

So, What Does the President of a Corporation Do on a Regular Basis?

The President is typically the highest-ranking officer of a Corporation. In some larger businesses, the President or another person will be the Chief Executive Officer (CEO). The President’s duties may vary by Corporation. But, in general, a Corporation’s President typically has the following responsibilities:

• Executing the board’s vision and direction
• Providing general leadership for the Corporation and its officers
• Meeting with top officials in the Corporation to ensure the organization is running well
• Managing the employees
• Overseeing finances
• Strategizing areas of growth for the Corporation

It is possible for one person to hold the position of multiple officers in a Corporation. For example, in small businesses, it is possible for one person to be the Corporation’s President, Secretary, and Treasurer, as well as its sole Director and only Shareholder.

The role of the President should be clearly spelled out in the Corporation’s Bylaws.

Is the President of a Corporation a Full-Time Job?

Corporations come in all sizes, from the gargantuan multi-national trillion dollar enterprise to the micorpreneur side-hustle. Being the President of a corporation does not have to be a full-time job, if the business is your own or the directors only need your assistance a few hours per month. The President reports to the board of directors and steers the ship for the destination set by the board of directors. Typically the President manages the team, oversees finances, operations, sales and marketing. Though the responsibilities and role of a President may vary from company to company, the significant time commitment required to perform the duties are what qualifies this job to be considered full-time. The role of the President is prescribed in the bylaws. However the role of President is also cloaked in many implied authorities, such as the ability to execute contracts and hire and fire employees. The role of the President should be distinguished from the role of Chairman. For the Chairman just runs the board of directors meetings and has no executive authority to operate the corporation directly.

In some larger enterprise, you may have heard of the C-suite. For businesses that need more executive leadership, other non-bylaw roles can be created, such as Chief Executive Officer (CEO). Having two separate executive leadership positions is not common practice in smaller business structures for several reasons. For example, paying the salary of two executives may not be practical or cost effective for small business owners. In a small business, combining the two jobs is more efficient because one person can manage all major strategic initiatives and day-to-day operations to streamline decision-making. As a business grows, and the responsibility increases and becomes more complex, the owner may decide to split the roles into the two different positions of CEO and President.

How to Become the President of a Corporation?

The President is appointed by the board of directors of a corporation. The quickest way of doing this is by incorporating your own business and naming yourself President. Another way of becoming President of a company is by being designated to the position in a family business where no other family members would seem to have the interest or skillset to serve in that leadership capacity.

Climbing the corporate ladder in a large corporation is sometimes thought of as winning a golf tournament. Under this “tournament theory” dozens or even hundreds of players work very hard to earn the top title, trying to compete for a position where the top executive takes home the prize for winning. Usually this would require years of proven performance in management, a deep understanding of the product and a vision for the future. Working hard in your current role, having an education and relevant work experience, developing leadership skills, understanding office politics, networking and serendipity often lead to promotions and more responsibility.

The post What Does the President of a Corporation Do? appeared first on IncNow.

When starting a new business, registering an LLC or corporation is just the first step. To truly get up and running, there are several more steps to take, such as getting an EIN number for your business. While the process of obtaining an EIN number from the IRS is not complicated, business owners often have questions about what an EIN is and how it differs from other types of Tax ID Numbers.

In this article, we cover what an EIN number is, why your business needs one, and the steps you need to take to obtain one.

What Is an Employer Identification Number?

An Employer Identification Number, also known as an EIN, is a 9-digit tax identification number issued by the Internal Revenue Service (IRS). The EIN is the number that goes on tax forms including the 1099 non-employment income and 1065 partnership return to name a couple. You can obtain an EIN using IRD form SS4 or obtain an EIN online from IRS.gov/ein. Your business is also required to have an EIN to open a bank account and to file its Beneficial Ownership Information Report.

What is an EIN Number?

An “Employer Identification Number”, or EIN, is the type of Tax ID number assigned to businesses. The IRS assigns a unique nine-digit EIN number in order to identify a business for federal tax purposes.

Does My Business Need an EIN Number?

Having an EIN number is important for many aspects of running a business beyond just paying federal taxes.

LLCs and corporations need an EIN number in order to complete critical business functions, including:

• Hiring Employees

An LLC or corporation will need an EIN number in order to hire employees in the U.S. A company must use its EIN number to report taxes withheld from employee’s paychecks and to pay employer taxes.

• Opening Business Bank Accounts.

Most banks require LLCs and corporations to obtain an EIN number in order to open a business bank account. Separating your personal finances from your business by opening a business bank account is important to maintaining your personal liability protection.

• Applying for Business Licenses and Permits

Many state and local governments require LLCs and corporations to have an EIN number to apply for business licenses and permits.

How To Get an EIN Number in 3 Steps

Obtaining an EIN number for a business requires filling out and submitting the Form SS-4 application to the IRS. The SS-4 application can be found online at irs.gov/ein.

These are three steps that you need to follow in order to successfully complete and submit the EIN application:

Step 1.) Determine If You Are Eligible

Most businesses need an EIN number in order to pay taxes and hire employees in the U.S. However, the IRS does impose some requirements for companies to apply for an EIN number online.

You may apply for an EIN number online if you meet the following requirements:

1. Your business has a principal address located in the U.S. or U.S. Territories;
2. The person applying online has a valid Tax ID number from the IRS (Social Security Number or ITIN);
3. Only one EIN can be obtained per responsible party per day.

The responsible party is the person that completes the EIN application on behalf of the company. The responsible party is typically the business owner or a person who is authorized to act on behalf of the business, like a manager. If you have multiple businesses, you will only be able to obtain one EIN per day.

Step 2.) Complete the EIN Application

You will need to provide the following information to complete the EIN application:

• Your business’s legal name (the name on your company’s publicly filed incorporation document);
• Your business’s trade name (Doing Business As, or “DBA”) if applicable;
• Your business’s mailing address;
• Your business’s legal structure (LLC, corporation, partnership, sole proprietorship, etc. );
• The date you started doing business or hired employees;
• The type of business the company does; and,
• The name of the responsible party.

Step 3.) Submit the EIN Application to the IRS

The EIN Application can be submitted to the IRS either online, by mail, or by fax. Submitting the application online is the fastest and most convenient method; however, to apply online, the responsible party submitting the application must have a U.S. Social Security Number.

If you do not have a Social Security Number, you can still submit the EIN application by printing out the completed Form SS-4 and either mailing or faxing it to the IRS.

Many business owners find that completing the EIN application is confusing and burdensome. In addition, the IRS can reject the application if you make any mistakes on the Form SS-4, making the process even more time consuming. A registered agent, like IncNow, can often complete the Form SS-4 and submit the EIN application to the IRS for you after incorporating your business.

What Types of Businesses Do Not Need an EIN?

Most businesses need an EIN number to pay business taxes, open bank accounts and report to government agencies. This includes most LLCs, corporations or partnerships. However, sole proprietors may not need to obtain an EIN.

A sole proprietorship does not need an EIN number as long as it does not hire employees. Sole proprietors can use their personal Social Security Number (SSN) or Tax Identification Number (ITIN) to pay business taxes.

How Long Does it Take to Get an EIN?

The amount of time it takes to receive your EIN number from the IRS will depend on how you submit the EIN application.

The IRS will often provide you with your EIN right away if you submit the application online. However, the EIN may take 3 to 5 weeks if the application needs to be submitted by mail or fax.

Do I Need a Social Security Number to Get an EIN?

You do not need a Social Security Number to apply for an EIN number. The person serving as the company’s responsible party must have a Social Security Number in order to submit the EIN application online. However, if you do not have a Social Security Number, you can still submit the application by mail or fax.

Where Can I Find My EIN Number?

The easiest place to find your company’s EIN number is on the EIN confirmation letter provided by the IRS.

You can also find your EIN number on different types of documents and business records. These may include:

• Old federal tax returns;
• Business bank account statements;
• Official IRS tax notices; and,
• Business licenses, permits or other applications.

If you cannot locate any of these documents, the IRS can provide you with your EIN number over the phone if you call their Business and Specialty Tax line.

 Next –> How to Open a Bank Account for an LLC

The post What Is an EIN Number and Does My Business Need One? appeared first on IncNow.

If you have applied for a loan with your corporation as the borrower, you may have heard the term “Delaware Certificate of Incumbency”. What is a Delaware Certificate of Incumbency and when do you need one?

What Is a Delaware Certificate of Incumbency?

A Delaware Certificate of Incumbency is a document signed by an officer of a corporation that identifies the current officers and directors of the corporation. This Certificate may also list the current shareholders.

Overtime, corporations and LLC often reorganize or restructure their management. While lenders may ask for organizational documents of the company that state who was in charge at the beginning, the lender also wants to know who is in charge now. The Certificate of Incumbency explains what has changed since the entity was initially organized.

The Delaware Certificate of Incumbency differs from corporate minutes, Unanimous Actions of the Directors, and bylaws. It is an internal statement of the corporate officer representing a snapshot in time to express what individuals currently are held-out with authority of an officer to act.

A Certificate of Incumbency is not a Certificate of Status or Certificate of Good Standing. It has nothing to do with whether a company is duly incorporated or whether its franchise taxes and annual reports have been filed.

The Secretary or President of the Corporation signs the Certificate of Incumbency. Sometimes it is notarized, verifying the signature authenticity and allowing the document to be recorded in a public record.

When Do I Need a Certificate of Incumbency?

A Certificate of Incumbency is often requested when establishing a bank account, obtaining financing from a lender, selling all stock or assets, or engaging in large business transactions.

This is a private legal document not filed with the state of incorporation. It is prepared by the corporation or a lawyer. It is executed by an authorized Officer. Limited Liability Companies may also be asked to produce this document. An LLC manager or officer signs a Certificate of Incumbency. It is a snapshot in time expressing what natural persons or entities currently are the officers, managers and members of the LLC. Similarly, it is a snapshot in time of who the officers and directors of the corporation are.

The post What Is a Delaware Certificate of Incumbency? appeared first on IncNow.

The post Should I Set Up an LLC Holding Company? appeared first on IncNow.

If you have an LLC, you might wonder whether you need an EIN. An EIN, which is also known as a federal tax identification number, is a nine-digit number assigned by the IRS that’s used to identify the tax accounts of employers and companies.

Does an LLC Need an EIN?

It’s recommend that you obtain an EIN number soon after the formation of your LLC, whether you are forming a single-member or multi-member LLC. This avoids confusion between the company and the member, and minimizes potential alter-ego liability. Follow the instructions on the SS-4 Form (the application for the EIN). Here are some common questions about Form SS-4:

Box 11: What should I list as my business start date? It is completely up to you to decide when to list the business start date. If you do not know when you will start conducting business in the future, you can list your date of formation.

Box 9a: What type of entity is my LLC? If you have an LLC check the box for “other” and insert LLC.

Box 7a: Do I have to list my SSN? This only applies to US citizens or Legalized Resident Aliens. But the answer is yes, if the Responsible Party possess one, it must be listed on the application.

Box 13: How many employees do I put if I have none, but I wish to bring employees on board down the road? This is question is asking for the number of employees you expect to have within the next 12 months. This number can be an estimation if you have not hired anyone yet.

Will the information on this application become public record? No, this personal information is kept private.

Do Single Member LLC’s Need an EIN?

A single-member LLC can either use the Social Security Number (SSN) of the single member to conduct business, or it can obtain a separate Employer Identification Number (EIN) from the IRS. IncNow can obtain an EIN for your company for $99. The IRS requires a multi-member LLC to have an EIN.

Do I Obtain an EIN or Form an LLC First?

It is best to form your LLC first and then get an EIN. Although it happens infrequently, the Division of Corporations may reject an LLC name or determine that it conflicts with the name of another entity. In most cases, the IRS will issue EINs online in a matter of minutes, so this is unlikely to cause delays. However, you should apply for and obtain an EIN soon after you form your LLC, since most banks will require one to open a business bank account.

Ready to Get Your LLC Now? Click Here.

MORE: How to Apply for an EIN

The post Does My LLC Need an EIN? appeared first on IncNow.

The short answer is never. The only need for a Delaware address (a registered agent’s office) is to have a legal foothold for jurisdictional purposes if your company were to be sued. When service of process of a summons and complaint or other legal documents are made upon your company at the registered office in Delaware, that is “good service” upon your company as of the time it is received in Delaware.

What is a Principal Place of Business?

The principal place of business is the headquarters where business decisions are made. This is also called the “nerve center” where the executives are. Contrast this with the “muscle center” where activities like production take place. However, modern civil procedure deems your principal place of business to be based on the “Total Activities Test”.

Does My LLC Need a Principal Office?

A LLC does not need a traditional brick and mortar office, but you do need an address where your registered agent can reach you and where you can receive state tax notices and service of process. IncNow requires all LLCs for which it acts as Delaware Registered Agent to submit this information to us at the time an order is placed. The Company is also responsible for contacting us any time this information needs to be updated.

Your Principal Place of Business Does Not Need to Be in Delaware

If you do not run the business from Delaware, your principal place of business will be elsewhere in the United States or another part of the world. For example, if a business is incorporated in Delaware but it is operated out of a California office, the principal place of business would typically be that California office address.

Although your principal place of business may not be in Delaware, if you incorporate in Delaware, you “opt into” Delaware laws. Delaware courts will govern the “internal affairs” of your corporation or LLC. You do not need to feel compelled to have additional contacts with Delaware to create an impression that your business is operating out of Delaware. If you desire a mail forwarding service in Delaware or virtual office services, we can provide a referral to another reputable company located in our office building.

In law school, one required class is Civil Procedure. This class usually starts with a discussion of “personal jurisdiction.” Human beings only have one home state where they can be sued for anything under the sun. This is known as “general subject matter jurisdiction.” In other states, humans can only be sued if they had certain “minimum contacts” with that foreign state for acts that occurred there and can be haled into a courtroom in another state under a “long-arm statute.”

In contrast, corporations and LLCs have two home states where they are subject to general subject matter jurisdiction and in which both states have personal jurisdiction over that company. One is the principal place of jurisdiction, where the headquarters is located. The second is the “paper” home of the corporation or LLC, the state in which it filed its Certificate of Incorporation. Very often this paper home is Delaware, and the office in Delaware is what is listed as the Registered Agent’s office.

The registered agent is not a virtual office that forwards business mail and other correspondence. A registered agents forwards only mail from the Delaware Secretary of State and lawsuits. Most agents return “business mail” to the sender. Mail forwarding services cost about one thousand dollars per year. They are not part of registered agent or registered office services.

On the corporate Annual Report, Delaware asks where your principal place of business is. What it is really asking is, “Where is your headquarters?” Delaware is your home away from home.

MORE: What You Need to Know About the Delaware Franchise Tax

MORE: How to Apply for an EIN

MORE: The Types of Corporations to Know

The post Your Principal Place of Business is Not Your Delaware Registered Agent Office appeared first on IncNow.

• Why forming in Delaware instead of California is better for business.
• The only ship that doesn’t float is a partnership. Don’t put your personal assets at risk.
• What are Delaware LLC taxes?
• Will your Delaware LLC have to pay taxes to both California AND Delaware?
• What is the “Delaware Loophole” and why will it save my business money?

“Dear IncNow,

Does a Delaware LLC have to pay California taxes? I am choosing whether to register my LLC in California (where I am a resident) or Delaware. Aside from the benefit of the one-time filing fee being less in Delaware, what are other LLC tax implications? Will I need to pay tax in California? If so, how will it be structured? Can I write off losses too? Does the rate depend on the “home state” of my company? If it doesn’t, is there any advantage in forming the LLC in Delaware rather than in my state of residence?”

Dear Customer,

The choice about where to form has less to do with minimizing taxes and more to do with protecting the owner from liability. If you live in California, you will pay California taxes on the Delaware LLC’s income. No other state, not even Nevada, will relieve you of your obligation to pay taxes on company income.

Should I Form an LLC in California or Delaware?

Many people choose Delaware over California due to the favorable and consistent reputation of Delaware courts and judges. Compare this to the very unpredictable decisions that come out of California. California Courts are not known for business decisions. It would not be wise to leave the fate of your business in these hands.

There are several glaring problems in the California LLC Act, which even its drafters acknowledge. The most significant is where members have the “freedom of contract” to agree to what they want, but with major exceptions. In particular, anything “manifestly unreasonable” can be determined to be void. On the surface this seems innocuous, but it enables California Courts to consider almost anything causing a dispute or inequity among members, in hindsight, “manifestly unreasonable.” Business owners of a California LLC has no assurances that California Courts will respect your Agreement.  The Delaware LLC Act has no such exception.  In contrast, Delaware Courts will respect your Operating Agreement and not second guess you.

Forming an LLC in Delaware is Better for Business

Since the California LLC law will not be favorable to your company, you should form it in Delaware. Delaware is the “gold standard.”

Delaware has the most pro-business laws of any state. See this infographic on why you should chose Delaware as your incorporation state.

When Do You Need to File a Certificate of Authority

When you incorporate in Delaware, will you need to file a Certificate of Authority to “qualify” for authority to do business in California? This depends on your activities there. Generally, if you have a brick and mortar office, employees, licensing, or property in the state outside the formation state than you need to qualify it in your “home” state or state of operation. The types of activities which do not require qualification in another state involve simply selling products or services in a state without employees or an office there does not usually require qualification. Each state has its own laws on whether your company’s level of activity is great enough to have to go on record. You can find information about what types of activities require qualification and on that state’s official Division of Corporations website.

MORE: What You Need to Know About Delaware Foreign Qualification

The “Delaware Loophole”: No Sales Tax

Delaware has no sales tax. Unlike most states, Delaware has no intangible personal property tax, which many call the “Delaware loophole”. No Delaware income tax has to be paid or filed, and a business license is not required if the LLC does not do business in Delaware. You will still need to pay taxes where you transact business.

How Hard Is It to Pay the Delaware LLC Tax?

Staying current on your Delaware franchise tax bill is very simple. The fee is due on June 1 each year for LLCs and it is a flat $300 each year. It can be paid at the division of corporations website or through www.defrantax.com.

MORE: Here’s How to Determine Your Principal Place of Business

MORE: What Is the Delaware Franchise Tax?

The post Does a Delaware LLC Have to Pay California Taxes? appeared first on IncNow.

1. When checking the name on the Division of Corporation’s website, the corporate ending should be dropped. A name can be considered in conflict with another entity type if the root is identical; whether the conflicting name is an LLC, corporation, LP, GP, LLP, Statutory Trust or any other entity on record.

2. If the filing name is already in existence, the conflicting company may be asked for a “consent to use” letter. This letter would be signed by an officer or manager of the conflicting entity on its letterhead.

3. If there is a desired name for a future filing, a reservation of name request can be submitted to the Delaware Secretary of State. The fee is $75 and runs for a period of 120 days. If the reserved name is filed within the 120 day period, a copy of the name reservation receipt will also need to be submitted for confirmation.

4. If a desired name is not available, adding a letter, number or word should make the modified name available.

5. If the name is available but a void or dissolved company formerly used it, it may be wise to reconsider.  A unique name avoids problems created by the other business claiming ownership of the name and/or starting to use it in commerce again.

6. If the word “Bank” or “Trust” is in the name, the Delaware Division of Corporations will require the approval of the Delaware Bank Commissioner by completing a form. This will delay the filing since the Division of Corporations does not control the Bank Commissioner. The Bank Commissioner rarely grants this permission unless the company is approved as a true banking institution.

7. The following are a few of the most common corporate endings for each type of entity:

• Corporation – Inc., Corp., Limited, Ltd., Incorporated, Co., Corporation, Association
• LLC – LLC, L.L.C.,  Limited Liability Company
• LP – LP, L.P., Limited Partnership
• Non-Profit Corporation – Fund, Foundation, Club, Institute (the names for Corporations above are also common for a Non-Profit Corporation).

When Will My LLC Name Be Approved?

Filings placed by Delaware formation agents, such as IncNow, are automatically entered as a Priority 6 filing by the Division of Corporations for no additional cost by default. For Priority 6, the normal turnaround time for filing a new entity in the State of Delaware is typically 2-3 business days. If you file the name personally, it could take 10 business days or more depending on the State of Delaware backlog for routine Priority 7 filings, which is the slowest filing priority assigned to non-agent filings. To avoid the backlog, an expedited choice of filing is available (Priority 4 (24 hour), Priority 3 (same-day), Priority 2 (2-hour), and Priority 1 (1-hour)) and pay the additional expedite fees from $100 to $1,500.

Additionally, even agent filings in December tend to take about 2-3 weeks to receive approval from the State of Delaware due to the heavy volume of filings. Therefore, expedite fees should be considered in December to reduce the turnaround time to one day. This is because of the flood of formations before the year-end.

The post How to Name Your Delaware LLC appeared first on IncNow.