Incorporating and Forming an LLC
1.Are there any states in which it is NOT good to Incorporate within?
According to Forbes July 2023:
Starting a business is easiest in Wyoming, Florida, and South Dakota (low fees, taxes). California, New York, and Delaware are the hardest (high costs, regulations). These states' policies may discourage entrepreneurship and growth.
Key points:
Top states: Wyoming, Florida, South Dakota.
Bottom states: California, New York, Delaware.
Wyoming has the lowest year-one costs ($160) and annual fee ($60).
California has the highest year-one costs ($1,985) and annual fee ($820).
Wyoming, South Dakota, and Florida have favorable business tax climates.
California, New York, New Jersey consistently rank poorly in business-friendliness rankings.
2.Is forming a company outside my hometown legal?
Yes.
3.Why is a Registered Agent Necessary?
Business entities like corporations, LLCs, and others are required to have a registered agent, a legal obligation in many cases.
Various business structures, such as limited liability companies (LLCs), S corporations, C corporations, and some other types, must appoint a registered agent. This individual or business entity is designated to receive legal communications and other documents on behalf of the business.
4. What exactly is a registered agent?
A registered agent is a person or business responsible for receiving legal documents on behalf of your business. These documents may include subpoenas, regulatory and tax notices, and correspondence.
In numerous states, lawsuits must be personally served, and having a registered agent streamlines this process, ensuring clarity and orderliness.
The name and address of your registered agent are publicly accessible, providing outsiders with information on who should receive legal and business documents. This also establishes a single point of contact for any legal notices your business may encounter.
5. Who requires a registered agent?
All formal business entities, such as LLCs or Corporations, must have a registered agent. Common law business entities like sole proprietorships and general partnerships, which don't require formal paperwork filing with the state, are exempt from this requirement.
When filing business formation paperwork with your state, you must designate a registered agent. Any changes to the agent's name or address necessitate filing an additional form to update state records. A registered agent is required in every state where your company is registered to conduct business
6.What are the responsibilities of a registered agent?
A registered agent has a singular responsibility: receiving documents on behalf of the business and forwarding them to the appropriate person within the business. Once a registered agent is selected, you can specify who should be notified in case of lawsuits or other document deliveries.
Although the role may seem straightforward, legal documents like lawsuits, subpoenas, and notices often come with strict deadlines. Missing these deadlines can have both legal and financial consequences, highlighting the importance of a responsible and trustworthy agent.
7.Who can act as a registered agent for an LLC or corporation?
The criteria for a registered agent are generally lenient, with some variations between states. In essence, the agent must be at least 18 years old, have a street address within the state, and be physically present at that address during business hours. Alternatively, a company registered with the state to provide such services can also serve as a registered agent. Your business itself cannot act as its own agent.
You have the flexibility to name yourself, your spouse, or an employee as the registered agent, provided they meet the criteria mentioned.
8.When is it advisable to use a registered agent service?
While many small business owners choose to act as their own registered agent or designate someone they know, there are compelling reasons to opt for a registered agent service:
A. Privacy: Using an individual or employee as the agent may risk legal actions being served in front of customers, clients, or co-workers. Also, the agent's address is publicly accessible, which can be concerning for home-based businesses or if naming a spouse as the agent.
B. Consistency: If an individual is the registered agent, any changes to their identity or address require updating the registered agent information.
Reliability: Registered agent services are experienced and professional, increasing the likelihood of important documents reaching the right hands promptly.
Multiple states: Dealing with multiple registered agents can be cumbersome if your business operates in more than one state, whereas a service can serve as your agent in multiple locations.
Choosing a registered agent may seem like a minor decision when starting a new business, but it plays a crucial role. Ensure your agent aligns with your needs and can handle the responsibilities promptly and professionally.
9.Why do businesses submit amendments?
If your company needs to modify information in its incorporation or foreign qualification document (if registered to transact business in states other than the state of incorporation), you would file an amendment.
10.What is a business amendment filing?
A filing of Articles of Amendment occurs when your business requires additions, changes, or updates to the information provided in its Articles of Incorporation or Articles of Organization.
11.What does it mean to file an amendment?
Filing an amendment involves making changes or additions to the terms of a contract, law, government regulatory filing, or other documents.
12.Why would you amend Articles of Incorporation?
Common reasons for submitting a Certificate of Amendment include changes to the corporation's name, statement of purpose, or the number of shares of stock issued.
13.What is the distinction between amending and revising bylaws?
Unlike a single amendment, a revision involves substituting a new document. Notice of such revision serves as notice that a new document will be presented for consideration, open to amendment as if adopting bylaws for the first time.
14.Are bylaws and amendments the same thing?
Bylaws are a legal document outlining rules and procedures for a nonprofit. When these rules need to change, the board must make and approve amendments to the bylaws.
15.Why do we need to change bylaws?
Organizations should regularly review their bylaws to ensure they meet current needs. Rapid changes, either through growth or decline, may necessitate amending the bylaws yearly.
16.How do you propose an amendment to bylaws?
Call a meeting.
Distribute a copy of the proposed amendments.
Call a second meeting.
Amend the bylaws.
17.Is an amendment a revision?
A revision is a change in something that exists, while an amendment adds something new, such as a person obtaining informed consent.
18.Why are bylaws so important?
Bylaws govern how a group functions, outlining roles and responsibilities of officers. They are crucial for mapping out an organization's purpose and day-to-day details.
19.What is the difference between a resolution and a written consent?
A written consent is a document adopted by governing bodies in companies to take action, while a resolution is a statement describing action taken by a governing body within a company.
20.Do all companies need resolutions?
Corporate resolutions are essential for recording significant decisions by the board of directors. Incorrect creation could result in a loss of liability protection.
21.Do all companies have a corporate resolution?
Resolutions are optional for LLCs. When used, they are often employed to keep a record of company decisions.
22.Does an LLC need a resolution to open a bank account?
During the initial meeting of members (LLC) or Board of Directors (Corporation), a business may establish a board resolution to open a bank account, especially crucial for an LLC.
23.Does a single-member LLC need resolutions?
Most business decisions, including day-to-day ones, are made without resolutions. For a single-member LLC, resolutions are typically used to document significant matters like buying or selling real estate.
24.What are the disadvantages of a single-member LLC?
The primary drawback of a single-member LLC is the risk of leaving personal assets vulnerable to lawsuits. Properly managing LLC funds in a business bank account is crucial to avoid issues.