New York’s Irrational LLC Publication Requirements Hurt Business Owners and Benefit Special Interests

In New York, a Limited Liability Company must publish, within 120 days of its formation, a notice in two general-circulation newspapers (one daily, one weekly) in the county where the LLC was formed. The notice has to run once a week for six weeks and include a number of facts concerning the company and its formation. If an LLC doesn’t fulfill the publication requirements, the company’s authority to do business in New York can be suspended. Read more

What is an incorporator?

The Articles of Incorporation are signed by the “incorporator”. Any natural person may serve as incorporator. As a matter of convenience, our firm generally serves as the initial incorporator.

What is a Statement of Information?

A new corporation is required by California law to file a Statement of Information with the Secretary of State within 90 days after incorporation. A renewal form Statement of Information must be filed biennially thereafter.

What is “par value” stock?

California no longer recognizes the concept of “par value”, so there is no longer any distinction in California between par and no-par value stock. Cal. Corp Code Sec. 205

What is the benefit of electing to be treated as a “S” corporation?

The simple explanation is that a “S” election is made to avoid double taxation. Because a corporation is viewed as a separate taxpayer, a “C” corporation files its own tax return and is obligated to pay tax on its income. When the income is later distributed to the shareholders, the same income is taxed to the shareholder – a second time. To avoid this result, the shareholders may make an election to be taxed under Subchapter “S” of the Internal Revenue Code, such that the income of the corporation is taxed only once.

At the initial stage of the business, “S”-type tax treatment will enable start-up losses to be passed through to the shareholders, so that they may be used to offset other income (subject to certain limitations).

What is the deadline for filing a Subchapter “S” election?

The election must be filed by (a) at any time before the 16th day of the 3rd month of the tax year, if filed during the tax year the election is to take effect, or (b) at any time during the preceding tax year. An election made no later than 2 months and 15 days after the beginning of a tax year that is less than 2 months long is treated as timely made for that tax year. In the case of a newly filed corporation, the taxable year is the first to occur of:

1. the corporation beginning to do business,
2. acquiring assets, or
3. issuing shares.

A failure to timely file the election is treated as an election for the following tax year.

Five States Require S Corporations to Jump Through Additional Hoops

Although forty-five states accept a Federal S Corporation election if the corporation has filed a valid IRS Form 2553, a handful of states do not.  In Arkansas, New Jersey, New York, Ohio, and Wisconsin(sometimes), a separate state election must be made. Read more

Delaware: Jurisdiction of Choice for Mobile Generation

According to census figures, between 1995 and 2000, 120 million people over age 5—almost half the US population—moved to a new residence. Of the 120 million people who changed residences during that period, 8.4% moved to a different state. This high rate of interstate mobility has important implications when it comes to choosing the state in which to incorporate your business. Read more

Who signs the Articles of Incorporation?

The “incorporator” signs the Articles of Incorporation. If initial directors are named in the Articles, they are deemed to be “incorporators” and also must sign the Articles in the presence of a notary public. For convenience and to avoid the need for the Articles to be notarized, the attorney who forms the corporation generally acts as the sole incorporator, and later resigns as the incorporator of the company. A facsimile signature is permitted under California law, but counterpart signatures are not.

What are the powers of a corporation?

A corporation has the same rights as a person (except for the right to vote!) unless the Articles specifically prohibit the corporation from engaging in a particular activity.

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