Useful Post on 1099 Forms

January 8th, 2014 by Chris

Small Business Tends has a useful post up on How and When to Prepare 1099 Forms for Independent Workers.

Our page on Hiring Employees & Processing Payroll is also a great resource for small business owners.

Starting a US Company as a Non-Citizen

December 11th, 2013 by Chris

One of the most common questions that we get at MyNewCompany.com is what is involved in starting a US company as a non-US citizen.  We’ve created a Checklist page on “How to Start a Company in the USA” that can be viewed here: http://www.mynewcompany.com/international.htm that lists all of the steps and procedures for starting a new US company as a non-citizen.

How Long to Keep Business Records

August 29th, 2013 by Matt Knee

Most business owners don’t know how long they should hold on to old records. According to the IRS, here’s how long you should keep those records:

Permanently:

    • general ledgers and journals
    • payroll records, including W-2s, 940s, 941s
    • year-end financial statements
    • tax returns and supporting documents
    • articles of incorporation, bylaws, meeting minutes, etc.
    • retirement plan records
    • mortgages and deeds

10 Years:

  • bank statements and cancelled checks
  • AP & AR documents
  • invoices and billing information (customers and ventors)
  • leases
  • contracts with clients and suppliers

7 years:

  • expense reports
  • employee agreements/contracts/termination records
  • documents related to litigation
  • inventory documentation

3 years:

  • employment applications
  • employee disability and illness benefit records
  • expired insurance policies
  • general correspondence

This information is helpful but our favorite rule of thumb is to “save everything” and keep anything older than a few years in storage. Unless your business deals with mountains of paperwork, that method will be the easiest way to keep it simple and safe.

Action Plan:

  • Organize your documents by the various categories above.
  • Scan copies of the critical documents and place them in a free Dropbox account which will keep your files safe and backed-up “in the cloud” (Free up to 2GB of data)
  • If you are a Corporation or LLC, then also make sure that you are complying with record-keeping, minutes and annual reports. Click here to learn about our ComplianceLock™ service which can automate these tasks.

Founder of MyNewCompany on Forbes.com Live Tuesday

August 5th, 2013 by Matt Knee

I’ll be answering questions about startups, entrepreneurship, and whatever else comes up tomorrow, Tuesday, August 6th at noon PST (3pm EST) on Forbes.com. This is part of the Young Entrepreneur Council‘s (of which I am a member) #MyStartupLab initiative. Join me!

How to Mess Up Your LLC Formation

August 2nd, 2013 by Matt Knee

Our main business is forming LLC’s and Corporations so we’ve seen how an LLC formation can go wrong in many ways.

Here are a few we’ve encountered (and sometimes had to clean up either from people or our competitor’s clients):

  • I filed it myself! - I think the Do-It-Yourself mentality is crucial for a startup with limited resources. However, I think the legal filing that actually creates your company and potentially protects your personal assets (houses, cars, bank accounts, etc.) is an area you might consider going with a pro. Sure, it’s pretty easy to file an LLC in many states, but this is only one step, there are crucial steps you need to follow after the filing that fully form your LLC. In our experience, these after-formation tasks rarely get done.
  • No Operating Agreement! - OK so you’ve filed your LLC and you’re done right? Most people think so – until the IRS or a process server with a lawsuit shows up. The Operating Agreement is the core document of your company that details things like the ownership percentage of each owner, the operating rules, how profits are handled, how disagreements are dealt with, liability protection clauses, etc. Even worse, you might have a blank Operating Agreement sitting around in an Minute Book or on a hard drive – which is pretty much useless.
  • Didn’t Hold an Organizational Meeting – Even if you have an Operating Agreement, did you hold an Organizational Meeting to determine ownership percentage, how much cash/property you’re putting into the business? You should hold this meeting which will complete the details of your Operating Agreement, then give each member (owner) a signed copy.
  • Making the S-Corporation Election – Having your LLC taxed as an S-Corporation certainly has some advantages in the right circumstance, but filing this election (using form 8832) can change how your LLC is run and managed dramatically. For instance, you will probably have to do payroll for yourself (and other members) once the election is made which is complicated and burdensome for a small LLC with limited resources – say hello to monthly deposits, quarterly taxes (both Federal and State).
  • Selected Wrong Type of Entity on IRS Employer Identification Number Application – Related to the point above, picking the wrong entity type on your FEIN (which determines which tax forms you will use) is not an un-fixable mistake but we see this happening all the time and is something better done right the first time.

How to Prevent These Problems:

  • Use a professional LLC formation service like ours or an attorney if you feel that you need legal advice.
  • Make sure you get a personalized Operating Agreement with your LLC formation (we provide this, in editable digital format as well).
  • Make sure to hold that Organizational Meeting! We give you step-by-step instructions and personalized documents “ready for signature”.
  • Consider talking to a tax advisor before filing your S-Corporation Election.
  • Make sure after doing the above, that you select the right type of entity when applying for you EIN (1 member = disregarded entity, 2 or more members = partnership, etc.)

Any other issues we should be aware of? Let us know in the comments!