How to Determine if You Have a Valid and Legal Business
Recently I received an inquiry from a taxpayer who acknowledged that on prior tax returns they had traded stocks for their own account and claimed business expenses on their Schedule C as part of their Form 1040. Claiming business expenses for a personal activity are not allowed as tax law defines items such as hobbies or similar like activities as personal in nature. To qualify as a legitimate business the purpose of the enterprise must be for the production of income, to serve other clients with the ultimate goal of making a reasonable profit and likelihood.
Incorporating 101: Georgia Incorporations
If you have started a new business and now need tax advice to take your business to the next level and to ensure that you set up as the correct/best legal entity type for your new Georgia business. Setting up your business as a corporation will do much to protect your personal assets from legal liability issues while potentially shrinking your overall year-end tax obligation while also providing benefits for yourself, as well as your employees. We are here to serve you as you make this important decision. For decades we have helped thousands pursue the dream of owning their own business and helping them understand and utilize the entity choice that is best-suited for their business.
Incorporating in Georgia: Incorporating in Georgia requires that you file for the company Articles of Incorporation with the Georgia Secretary of State’s Office. Corporations should also be sure to prepare a legal posting/announcement for the legally authorized newspaper in the county’s paper, establishing bylaws, election a Board of Directors, Officers and the issuance of stock.
Georgia Entity Requirements: Georgia law requires that you essentially disclose that entity type your business is as part of the name of the business such as adding to the end of your business name one of the below entity types. These names acknowledge to the public what entity type you have selected and for identification purposes with the Georgia Secretary of State. Types including Incorporated, Company, Inc., LLC, LLP.
Selecting a Name for your Georgia Business: Georgia law requires you to select a corporate/business name that is easily distinguishable from other names so that the public will be able to readily identify and recognize businesses from other companies.
Establishment of an Incorporator: Georgia law requires that as a business legally registering to transact business in the state have a named incorporator who is responsible for all of the initial incorporating paperwork. A company’s Articles of Incorporation should be included in the initial paperwork filed with the Secretary of State’s Office with the initial filing fees.
Corporate Directives/Setting up Your Corporate Bylaws: Over the years of serving Georgia business owners have often struggled with “what’s next” in the establishment and setting up of their new business. To help clarify and assist owners in addressing these issues, we work with taxpayers by providing the below Incorporating Checklist:
As a business owner it is prudent to have an annual Board of Directors, Officers, and Shareholder’s Minutes meetings and that each year you should pay the annual fee with the Georgia Secretary of State’s Office to renew your corporations annual registration. Please be aware that you need to get a business license and always list your corporate title when signing any agreement and conduct all corporate business in the corporate name.
Employee forms – W-4, G-4, and I-9 and independent contractor forms W-9. After they complete these forms, you should keep these in their permanent files. Employers should also be aware of the Georgia New Hire Reporting Act and forms relative to that information. Tax law requires all active employee owners to pay a fair and reasonable salary and it is prudent to retain a payroll service for your entire payroll and 1099 needs. Please be reminded that as long as you pay yourself a reasonable salary, you may also pay yourself shareholder distributions, which are devoid of FICA and Medicaid taxes. Per your advice you will not be required to file sales tax reports.
The following are recommendations to better manage your business including turning in a monthly expense report to the business and keep a daily log to track and support business miles. I suggest all business owners tax plan twice every year. Your U.S./IRS and Georgia corporate returns if you are a C or an S Corporation are due March 15th of each year. I suggest that all business owners consider a trademark to ensure that the name will always be yours.
There are many reasons a taxpayer may look to incorporate their business ranging from legitimacy, liability limitation and tax mitigation. Understanding these many nuances is your best first step in ensuring that you chose an entity type is best achieving success given your business model and operations. Entity selection is determinant on many issues ranging from citizenship, number of shareholders, ease of operation, tax obligations and year-end filings and even who your shareholders will be. Though many of these issues will conflict, working with a professional who is well versed in these issues will help you make the best election available for your new Georgia Business.
Choosing an Entity Type for Your New Business
Your initial choice of entity is perhaps the most important tax, financial and legal decision you might ever reach. Being well versed in these areas is essential to a wise and prudent decision. Visit http://www.hiscpa.com/article2.html
A Christian CPA Firm: Never Underestimate the Long Term Benefits www.HisCPA.com Incorporating in Georgia, Setting up an LLC in Georgia, Setting up an S Corporation in Georgia, Georgia Entity Selection, Converting Your GA LLC to an S Corporation, Converting Your GA C Corporation to an S Corporation, GA LLC, GA S Corporation and Converting Your Georgia Business to an S Corporation