Incorporate Your Business When To Do It And How

by Cooke, Robert A.

• ISBN13: 9780471669524
• ISBN10: 0471669520
• Edition: 1st
• Format: Paperback
• Copyright: 2004-10-28
• Publisher: Wiley

Summary

With real-world examples, charts, and tables, this handy guide will help you calculate the benefits of incorporation for your business-before you decide to take the leap. For small business owners, with Incorporate Your Business you'll master all the fundamentals, including: Overall benefits of incorporation Tax changes under incorporation Various types of corporations Completing all the paperwork correctly Setting up a corporate structure Electing officers and setting up the board Holding important organizational meetings

Author Biography

ROBERT A. COOKE, CPA, has owned or co-owned three successful small businesses and is the author of six books, including Doing Business Tax-Free and How to Start Your Own S Corporation, Second Edition, both from Wiley.

Table of Contents

CHAPTER 1 Why Should I Incorporate My Business?	1	(14)
What a Corporation Is, and What It Is Not	3	(2)
Who Starts and Who Owns a Corporation?	4	(1)
Reasons to Incorporate Your Business	5	(6)
Limiting Your Liability for Business Debts	5	(4)
Liability of Stockholders Who Are Also Employees of Small Corporations	7	(2)
Save Payroll Cash by Incorporating	9	(1)
Tax Savings	10	(1)
Prestige of a Corporation	10	(1)
Ease of Transferring Ownership	10	(1)
Reasons Not to Incorporate Your Business	11	(4)
Corporations and Other Business Forms Are Too Complicated	11	(1)
Corporations Cost Too Much to Set Up and Operate	12	(1)
My Business Is Too Small to Incorporate	13	(1)
A Corporate Form Does Not Entirely Protect Professionals	13	(2)
CHAPTER 2 How Incorporating Can Result In Tax Savings	15	(26)
Tax Savings In a Corporation? Maybe	15	(2)
The Organization of this Chapter	16	(1)
An Example of Tax Saving from a Corporation	16	(1)
Some Background, Concepts, and Explanations	17	(1)
How Your Business Tax Picture Changes When You Incorporate	18	(11)
How a Sole Proprietorship Is Taxed	18	(3)
How a Corporation Is Taxed	21	(2)
Double Taxation of Corporate Profits	23	(1)
How to Cope with Double Taxation of Your Corporation	24	(1)
Pay Dividends Between May 6, 2003 and December 31, 2008	24	(1)
Keep Earnings in the Corporation	24	(1)
Pay Salaries to Stockholders/Employees	25	(1)
The IRS Position on Salary Levels for Stockholder/Employees	26	(2)
Pay Interest to Stockholders	28	(1)
Alternative Minimum Tax on Corporations	29	(1)
What If the Corporation Has a Net Loss Instead of Net Taxable Income?	30	(1)
S Corporations	31	(6)
How Stockholders Take Profits out of an S Corporation	32	(1)
The Disadvantages of an S Corporation	33	(19)
Type of Stockholders	33	(1)
Number of Stockholders	34	(1)
Use of the Corporation's Loss, If It Has a Bad Year	34	(1)
Flow-through of Certain Tax Attributes to the Stockholder	35	(1)
S Corporations Are Limited to One Class of Stock	36	(1)
When to Use an S Corporation	37	(4)
CHAPTER 3 The Alternatives to Forming a Corporation	41	(10)
Sole Proprietorship	41	(1)
General Partnership	42	(1)
Limited Partnership	43	(1)
Limited Liability Company (LLC)	43	(2)
Other Entities With Limited Liability of the Owners	45	(1)
Passive Losses	46	(1)
Which Business Form Best Attracts Investors to Your Enterprise?	47	(4)
CHAPTER 4 How to Structure a Corporation	51	(14)
The Basic Corporation	52	(2)
Assets, Liabilities, and Equity	52	(2)
How to Invest In Your Corporation	54	(7)
Debt versus Equity	58	(2)
The IRS Position on Debt versus Equity	60	(1)
How to Invest In Your S Corporation	61	(1)
Keep Control of Your Corporation If Possible	62	(3)
CHAPTER 5 Planning Your Corporation	65	(28)
Do-It-Yourself Incorporation	65	(1)
Using Professionals	66	(2)
Choosing an Attorney	67	(1)
Choosing an Accountant	67	(1)
Planning the Specifics of Your Corporation	68	(21)
Decide on the Size of the Initial Investment in the Corporation	68	(2)
Size Your Investment to Qualify for Treatment as a Small-business Corporation	70	(1)
Who Will Be the Owners (Stockholders) of Your New Corporation?	71	(1)
Determine How Many Shares of Stock Will Be Authorized and Issued	72	(2)
Determine What the Price per Share of Stock Will Be	74	(3)
Determine Who Will Be the Directors and Officers, and Assign Duties	77	(2)
Prepare a Pre-incorporation Agreement	79	(1)
Determine Who Will Be the Incorporator(s)	79	(1)
Select a Resident Agent for Your Corporation	80	(1)
Have All Prospective Stockholders Sign a Stock Subscription	81	(1)
Determine the State in Which You Will Incorporate	82	(3)
Choose a Name for Your Corporation	85	(3)
Determine If You Can Use a Simplified Procedure	88	(1)
Prepare a Pre-incorporation Agreement	89	(1)
Prepare a Stockholders' Agreement	90	(3)
CHAPTER 6 Steps to Create and Run Your Corporation	93	(14)
Steps to Forming Your Corporation	93	(10)
Initial Action the Incorporator(s) Should Take	93	(6)
Hold Organizational Meetings	99	(1)
Organizational Meeting of the Stockholders	100	(1)
Organizational Meeting of the Board of Directors	100	(1)
Register Your Corporation with the Internal Revenue Service (IRS)	100	(1)
Register Your Corporation with Your State's (and Any Foreign State's) Tax Authorities	101	(1)
Elect S Status for Your Corporation If That Is Your Decision	102	(1)
Pay Particular Attention to the Initial Corporate Income Tax Return	102	(1)
Steps to Keep Your Corporation Alive	103	(3)
Hold the Annual Stockholders Meeting Every Year	104	(1)
Hold an Annual Board of Directors Meeting Every Year	104	(1)
Special Meetings of the Board of Directors (or of Stockholders If There Is No Board of Directors)	105	(1)
Live Your Corporate Life as If You Meant It	105	(1)
Nonprofit Charitable Organizations	106	(1)
APPENDIX A Useful Forms	107	(106)
APPENDIX B Useful Addresses	213	(14)
APPENDIX C Short Course in Corporate Finance Terms	227	(4)
APPENDIX D Glossary	231	(8)
INDEX	239