Business Entity Setup Service
A sole proprietorship is a one-person business that is not registered with the state as a corporation or a limited liability company(LLC).
Sole proprietorships are so simple to set up and maintain that you may already own one without knowing it. For example, if you are a freelance photographer or musician, a craftsperson who takes jobs on a contract basis, a salesperson who receives only commissions, or an independent contractor who isn't on an employer's regular payroll, you are automatically a sole proprietor.
However, though a sole proprietorship is the simplest of business entities, you still may have to comply with local registration, business license, or permit regulations to make your business legitimate. And you should appear sharp when it comes to tending your business, because you are personally responsible for paying both income taxes and business debts.
Personal Liability for Business Debts
A sole proprietor can be held personally liable for any business-related obligation. This means that if your business doesn't pay a supplier, defaults on a debt, or loses at the court, the creditor can legally come after your possessions.
Paying Taxes on Business Income
In the eyes of the law, the person who owns a sole proprietorship has the entire liability. The fact that a sole proprietorship and its owner has the entire liability means that a sole proprietor simply reports all business income or losses on his or her individual income tax return -- IRS Form 1040, with Schedule C attached.
As a sole proprietor, you'll have to take responsibility for withholding and paying all income taxes -- something an employer would normally do for an employee. This means you'll have to pay a "self-employment" tax, which consists of contributions to Social Security and Medicare, and pay estimated taxes throughout the year.Unlike an LLC or a corporation, you generally don't have to file any special forms or pay any fees to start working as a sole proprietor. All you have to do is state that your business is a sole proprietorship when you complete the general registration requirements that apply to all new businesses.
Most cities and many counties do require businesses -- even tiny home-based sole proprietorships -- to register with them and pay at least a minimum tax. In return, your business will receive a business license or tax registration certificate.
You may also have to obtain an Employer Identification Number from the IRS (if you have employees), a seller's permit, a business license from Board of Equalization and et cetera. If you do business under a name different from your own, you usually must register that name -- known as a Fictitious Business Name (FBN), or a Doing Business name As (DBA) -- with your county. For more information on filing and publishing a fictitious business name.
Fictitious Business Name
Sometimes called a Fictitious Business Name (FBN), Doing Business As (DBA), assumed business name, or trade name, these filings let the public know the true owner of a business. The DBA or Fictitious Business Name designation was created as a form of consumer protection, to prevent unprincipled business owners from operating under a different name to avoid legal trouble. When a business files a FBN or a DBA, it’s typically printed in the local newspaper, so the community can see who is behind the business.
Who needs to file a DBA?
There are two circumstances when your business needs to file a DBA registration:
If you are a sole proprietor or general partnership conducting business using a name that’s not same as your legal name. For example, if John Doe wants
to open a shoe store called Boots with John, she would need to file a DBA. In some places, you’re able to use your name plus a description of your product/service without filing a DBA. For example, if John Doe wanted to open a shoe store called John Doe’s shoes, she may not have to file a DBA. If your business name implies a group (i.e. The Doe Group) or you just use your first name (i.e. John’s shoes), you’ll have to file a DBA.
If you have incorporated or formed a limited liability company (LLC) and are operating the business under a name that is different from the name of the company or LLC. For example, let’s say that John Doe Shoe store, LLC also wants to operate under the name Johnshoestore.com, the LLC would need to file for a DBA for Johnshoestore.com. Likewise, if John Doe wanted to expand into clothes, then Boots with John, LLC would need to file a DBA to do business as John Doe Fashion, Inc.
The benefits of a DBA
The main benefit of filing a DBA registration is it will keep you in compliance with the law. For sole proprietors, a DBA lets them use a typical business name without creating a formal legal entity (i.e. corporation or LLC). This is typically the least expensive way to legally conduct business under a different business name.
Filing a DBA gives the sole proprietor the freedom to use a business name what helps market their products or services, as well as create a separate professional business identity. However, be advised that a DBA doesn’t protect your business name from being used by others. For that, you will need to seek trademark protection.
For sole proprietors, filing a DBA is required to open a bank account and receive payment in the name of your business. Most banks will not allow you to open an account without receiving a copy of your filed DBA (for this reason, it’s best to file your DBA from the start!).
For an LLC or corporation, a DBA lets the company operate multiple businesses without having to create separate legal entities for each business. For example, if you plan on opening a series of websites, boutique shops, or restaurants, you might want to set up one corporation with a relatively generic name and then file a DBA for each website, shop, or restaurant. This will help you control costs and paperwork, while still expanding your business.
How to file a DBA
Specific requirements for filing a DBA vary from state to state, county to county. In some states, you register your DBA with the State Secretary of State or other state agency. In some states, registration is handled at the county level and each county may have different forms and fees for the process.
** Important Due date to file
DBAs should be filed before any business is conducted using the fictitious business name. Some jurisdictions will allow you to file within a short time period of first using the name. However, since a DBA is usually a prerequisite to opening a bank account for the business or using the name in contracts, it is best to get it done upfront. It’s an affordable process and will keep your business in good legal standing from the start.
Business License Compliance is Mandatory.
Every company is required to possess a business permit. - either federal, state, county, or local business license, permit, and tax registration - or all of the above. Requirements are determined by business activity and location.
Why Should I Incorporate?
The Benefits of Incorporating Your Business
There are several benefits to incorporating your business, regardless of its size.
Benefits of forming a corporation or Limited Liability Company (LLC) include:
Personal asset protection. Forming either a corporation or an LLC is similar to a partnership, except the need for excessive paperwork and fees. It allows the business owner to separate and protect their personal liability in case of a lawsuit or claims against a business entity. In an effectively managed and structured company, owners should have limited liability for outstanding business debts and obligations. This remains as one of the leading benefits to incorporating compare to sole proprietorship.
Tax flexibility and incorporation tax benefits. There are several tax advantages and benefits of incorporating a small business. While profit and loss typically "pass-through" a LLC and get reported on the personal income tax returns of owners, a LLC can also elect to be taxed as a corporation. Likewise, a corporation may be able to avoid double taxation of corporate profits and dividends by electing Subchapter S tax status.
Enhanced credibility. A close second to personal asset protection, a major benefit of incorporating your business is the stamp of approval adding an "Inc." or "LLC" after your business name gives. This distinction affords your business with the instant credibility and authority associated with owning an incorporated company. Consumers, vendors and partners as well as potential investors may prefer to do business with an incorporated company and will look overlook those who are not.
Brand protection. In most states, other businesses may not be allowed to file your exact corporate or LLC name in the same state. From a branding standpoint, this not only helps protect your company's reputation from being diminished by or confused with another company bearing a similar sounding name, but also strengthens your businesses in terms of brand identity and marketing efforts.
Perpetual existence. Corporations and LLCs continue to exist throughout ownership or management changes within your business. Sole proprietorships and partnerships simply end if an owner dies or leaves the business. Forming a corporation ensures that your company's legacy can be preserved, as well as continue to provide employment and services for clients should any changes in ownership take place.
Deductible expenses. Corporations and LLCs may deduct normal business expenses, including salaries, before they allocate income to owners. This means that the money you put towards growing your business can be deducted from your business income in determining your actual taxable income.
The decision to incorporate is a very important step in the life of a business. Carefully consider your options, weigh the advantages and disadvantages of incorporating a small business, and further explore some of the added benefits of incorporation.
Register the Business with the State
Before you can do anything else, you’ve got to create a legal business entity in the state. How? By registering your business as either a corporation, LLC (Limited Liability Company), partnership, or DBA/Sole Proprietorship. Think of it this way: by registering your business with the state, you’ve now created a legal foundation for your business and can move on to the next steps of determining if you even need a business license or permit to operate the business!
After you’ve registered your business with the state, you need to research and determine if your particular business needs to apply for any permits/licenses you might need to operate the business in the state.
A business license gives the business owner a legal right, to operate your business. The type of permits you need may be various based on where you’re located and what type of business you’re starting. Obviously, a restaurant or hospital is going to require more permits than a copywriter.
Once you know what you are required to file, Woori Accounting, Inc. can prepare and file all the necessary applications for any licenses or permits on your behalf for a reasonable fee.
Employer Identification Number (EIN)
Corporations, most LLCs, and all businesses with employees must have this IRS-issued identifier.
Much like an individual’s Social Security Number, an Employer Identification Number (EIN) is a federal nine-digit number that identifies a business entity. The Internal Revenue Service (IRS) issues EINs and requires their use on all tax filings during the entire life of a business.
The IRS generally requires the following types of businesses to obtain an EIN:
All Limited Liability Companies (LLCs) with more than one member
Any business that hires employees, including sole proprietorships and single-member LLCs
Many nonprofit organizations, as well as trusts and certain co-ops, must also have an EIN.
For many business owners, obtaining an EIN is one of the first things they do after incorporating or forming an LLC. Along with tax filings, businesses often require an EIN in order to:
open business checking accounts
establish accounts with certain vendors
Sometimes you'll see the Employer Identification Number referred to as a Tax Identification Number (TIN) or Federal Employer Identification Number (FEIN). As a general rule, it's good for all businesses, with the exception of sole proprietorships without employees, to have an EIN.
What is a Seller's Permit?
A Seller's Permit is a permit to sell or lease physical (tangible) goods. You will need one to sell goods at the wholesale or retail level and to collect sales tax. It is illegal to sell or lease sales taxable goods without a Seller's Permit.
Do I need a Sellers Permit?
If your business sells or leases tangible goods or participates in the creation of tangible goods, you need a Seller's Permit. For example, if you make a watch for a specific customer, you are creating tangible personal property. Therefore, the total amount you charge for the watch (including the charge for labor) would be taxable. However, labor costs for making repairs are not taxable since they do not result in the creation of tangible personal property (however any sale on new parts required for the repairs would be taxable).
LLC, Business License, Incorporation
California remains one of our most popular states for incorporation and LLC formation. With the largest population in the United States, California has a thriving business community. This state also services many small businesses, particularly in major industries like entertainment, agriculture, and technology. Most business types require a California business license or permit to operate legally in the state of California. Businesses in California range across a wide range of industries, including entertainment, technology, medical and agricultural. If you are thinking about starting your own business, you will want to understand California business license requirements and attain a state of California business license application form. California is the most populated state in the country and offers many opportunities for success to business owners.
S Corporation: Benefits and Requirements
A federal business entity with several advantages.
Corporations that meet certain requirements can elect an s corporation status with the IRS. This federal tax status enables companies to "pass through" their taxable income or losses to owners/share holders in the business, according to their ownership stake in the business.
By default, companies that do not specify a tax status with the IRS are considered to be C corporations , which means that they will be taxed as a C corporation. On the other hand, by electing s corporation status, a corporation can eliminate a part of the disadvantage of "double taxation" of corporate income tax and shareholder dividends associated with the c corporation tax status.
The cost of a S corp. can vary. Say a corporation makes $300,000 in a given year – if it is an s corporation, the business itself will not be taxed for that amount; instead, the company's shareholders will be required to pay taxes according to their share of the company. In this scenario, if the company has two shareholders, each with an equal share of company stock, each shareholder will pay taxes on $150,000.
If the c corporation makes $300,000 in a year, then the company would pay taxes at the current federal corporate tax rate of about 34%. If the remaining profits of $198,000 are distributed to the three shareholders as dividends, each shareholder will pay taxes on $66,000 in dividend income at the current federal dividend tax rate of 15%.
S corporations, like other types of corporate entities, also keep owners' personal assets safe from company debt and judgments against the business.
In short, the S corporation status offers the following advantages:
Limited liability: Company directors, officers, shareholders, and employees enjoy limited liability protection
Pass-through taxation: Owners report their share of profit and loss on their individual tax returns
Elimination of double taxation of income: Income is not taxed twice; once as corporate income and again as dividend income
Investment opportunities: The company can attract investors through the sale of shares of stock
Perpetual existence: The business continues to exist even if the owner leaves or dies
Once-a-year tax filing requirement (vs. quarterly for a c corporation)
Advantages of Starting a C Corporation
Protect your personal assets with this popular corporate structure.
The most common type of corporation in the U.S. is the C Corporation.
By forming a C Corporation, business owners create a separate legal structure that helps shield their personal assets from judgments against the company. C Corporations have a specific structure that includes shareholders, directors, and officers.
The C Corporation is a time-tested business formation. It has many advantages, including:
Limited liability for directors, officers, shareholders, and employees
Perpetual existence, even if the owner leaves the company
Enhanced credibility among suppliers and lenders
Unlimited growth potential through the sale of stock
No limit on the number of shareholders
Certain tax advantages, including tax-deductible business expenses
The C Corporation structure does have its drawbacks. For instance, a C Corporation's profits are taxed when earned and taxed again when distributed as shareholders' dividends, what's known as "double taxation." Shareholders in a C Corporation also can't deduct any corporate losses. To avoid these concerns, many small business owners choose to form an S Corporation instead.
Start Protecting Your Assets by Forming a C Corporation
Now that you are aware of the advantages and disadvantages of a C Corporation and if you wish to start one, Woori Accounting, Inc. can help you incorporate your new C Corporation in the District of California. We'll help you complete Articles of Incorporation for your business and file them with the state.
Remember, once you're incorporated, your C Corporation must adopt bylaws, hold directors' and shareholders' meetings, and issue stock to owners. Woori Accounting, Inc. can help you with these and many other business requirements.
Registered Agent Service and Solutions
What is a Registered Agent?
Corporations and Limited Liability Companies (LLCs) are required, by law, to maintain a registered office in the state where they were formed or conduct business where there is a live person to receive legal documents called "service of process", (e.g. court summons, subpoenas, employee wage garnishments, etc.) during normal business hours. To best mitigate their risk and avoid any inconvenience, most companies hire a reliable third-party Registered Agent, such as Woori Accounting, Inc., who will receive and forward service of process on their behalf.
Aside from executing all statutory requirements, our Registered Agent service provides additional benefits to help you manage your business.
Scope: Woori Accounting, Inc. is qualified to serve as a Registered Agent in state of California.
Experience: Our Registered Agent service is backed by more than a century's worth of Registered Agent know-how.
Privacy: By using Woori Accounting, Inc.'s Registered Agent service, our information will become public on state records and online records instead of yours, to better protect your privacy.
Speed: We offer a variety of Service of Process delivery methods based on your business needs.
Service: Unlimited phone support for your business needs.
Savings: Registered Agent customers receive discounted offers on business compliance services such as business licenses, compliance coaching,
employee identification numbers (EIN), amendments, and many more services.
Compliance and Financial Management for Non-Profits
Woori Accounting, Inc. is pleased to serve a variety of nonprofit entities from educational, charitable and scientific organizations to private foundations and more. Services provided include:
• Budget Preparation and Cash Flow Management
• Review of Internal Controls, Policies and Procedures
• Grantor Reporting Requirements
• Financial Oversight Reporting
• Organizational Growth Services
• Tax Preparation
• IRS and State Audit Representation
Founding a non-profit is a different process than starting a normal business. There are very specific guidelines for filing as a tax-exempt organization, which can be daunting, especially while addressing all of the issues involved with the startup process.
Woori Accounting, Inc. helps nonprofit organizations understand the often quite complex tax code with regard to nonprofits and maintaining compliance with the regulations governing them. Our extensive experience with nonprofit organizations will help guide you through all of the forms and registrations necessary. We can also determine whether your non-profit qualifies for Federal tax exempt status as a charitable organization.
Transitioning from an all-volunteer staff to paid employees is also an aspect of starting a non-profit organization. Cash flow considerations change significantly when workers need to be paid and provided benefits. The new complexities require a more carefully monitored financial structure and attention to complying with appropriate tax codes.
Smaller non-profits organizations, those with revenue less than $250k/year, may be subject to a financial review, but not the more intensive audit process. An accountant analyzes the procedures of the organization and makes inquiries of the management. By signing off on a report, the accountant lends credence to the non-profit’s financial dealings, which is a vital part of maintaining a successful, compliant structure.
It is essential for nonprofit organizations to create a clear list of internal managements, policies and procedures necessary for continued compliance and efficiency. Woori Accounting, Inc. can advise you on best practices for your organization and create an environment conducive to success.
Maintaining a high standard of bookkeeping during the year can ensure a simpler and more efficient tax preparation process. Woori Accounting, Inc. is pleased to provides complete bookkeeping services for nonprofit organizations and offers monthly or quarterly reporting to keep you well informed of your financial status.
Non-profit maturity means addressing more complex issues with your organization. Depending on its size, your non-profit may require an exhaustive audit, which needs to be performed by an accountant. A larger organization also means bigger budgets and a greater attention to all of the components of budgeting and cash flow management.
A Certified Public Accountant (CPA) completes a full evaluation and issues an opinion on the soundness of the nonprofit’s records and whether they comply with the essential accounting principles. Additionally, nonprofits may submit to voluntary audits to assure interested parties about the quality of their financial management. Woori Accounting, Inc. provides these auditing services for nonprofit organizations.
Woori Accounting, Inc. will evaluate your nonprofit organization and determine the best approach according to your unique needs. Woori Accounting, Inc. can assist you prepare an annual budget and forecast cash flow to avoid insolvency. The particular nature of your organization, including cash sources, can be different than a standard business. Our experience working with nonprofits gives us the ability to understand these varied considerations and come up with a plan tailored for you.