IncFile.com - Business Incorporation Solutions

William A. Franke, a Stanford law professor, recently gave the annual Widener University School of Law Pileggi lecture in which he advised public corporations to institute provisions that require the advanced selection of shareholder litigation forums.

Entrepreneurs who start a corporation that eventually goes public could eventually have two options at their disposal. They can either have the option to elect or be required to hold shareholder litigation in the state of incorporation if the policy suggested by Franke is adopted, Steven Davidoff writes in the New York Times. The recommended charter would apply only to state law claims involving issues such as breaches if fiduciary duty, not federal claims.

"This would have important implications since there is at least some evidence that plaintiffs have been drifting away from bringing suit in Delaware because of fears of adverse judgments," writes Davidoff. "These provisions would be a response to claims that these shareholder plaintiffs are forum-shopping, selecting the jurisdiction most favorable to their suit."

Delaware is the state with the highest number of corporations. Davidoff thinks that one way to gauge whether or not the provision is an appropriate form of corporate governance is to allow the shareholders to vote. 

Entrepreneurs who are interested in using their 401(k) to finance their startup must file a C-corporation in order to leverage their retirement funds.

Business owners must start a corporation in order to set up a retirement plan, notes Matt Quinn of Inc. magazine.

"The first action is to establish a C-corporation that has created but not issued stock. The corporation then adopts a retirement plan. Specifically, what you want is a profit-sharing plan that allows 100 percent of the plan assets attributable to rollovers to be invested in employer stock," writes Quinn.

The entrepreneur's next step will be to rollover his or her retirement funds from a former employer of IRA into the new 401(k) plan. Multiple sources and people can contribute to the fund. After making these changes, the corporation can now receive cash in the profit sharing plan in exchange for moving all of its issued stock into the new plan, Quinn writes.

When hiring a tax attorney or CPA to handle the formation of the corporation's new retirement plan, entrepreneurs should look for someone with extensive knowledge of the Employee Retirement Income Security Act. 

When deciding whether or not to convert a company to a C-corporation, entrepreneurs should consider whether the level of paperwork and taxation structure is the right fit for the business.

Incorporation adds legal protections that can help keep personal assets secure and possibly reduce taxes. There are several options, including C-corporations.

"Among the different types of business structures available in the U.S., almost all larger corporations with more than 100 shareholders and virtually all publicly traded companies are C corporations," writes Elizabeth Wasserman for Inc. magazine.

LLCs and S-corporations are often more popular among smaller businesses because they don't mandate regular meetings and normally require less paperwork, Wasserman observes. But, if a business faces financial losses, shareholders may take the hit on their tax returns. This is because both LLCs and S-corporations pass profit and losses to individuals with a stake in the company.

Other key benefits of C-corporations include medical reimbursement plans that employees can receive tax-free, added ownership arrangement flexibility for venture capitalists who want to invest in the startup, an easier transition to becoming a public company and the opportunity to collect future expansion earnings at a lower cost. 

Entrepreneurs who have started an LLC, S-Corporation, C-Corporation or sole proprietorship can find retirement plan guidance on a website recently launched by the U.S. Department of Labor and the American Institute of Certified Public Accounts.

The website, "Choosing A Retirement Solution for Your Small Business," introduces several retirement plan options, describing their various features and advantages. The site allows business owners to list the type of corporation they own and what features they're looking for in a plan on a form that will then suggest an option for a retirement plan program.

In a small business retirement plan guide, the IRS states that having a retirement plan may help business owners attract and retain quality employees. Retirement plans also have tax advantages. The money in the program can grow tax-free, employer contributions are deductible from the employer income and employee contributions are not taxed until they are distributed.

Private-sector retirement programs tend to be either an Individual Retirement Arrangement, defined contribution plan or defined benefit plan. IRAs are established by employees and the employer can help with the setup. Defined contribution plans don't specify a specific retirement benefit and are created by the employer. Defined benefit plans do offer a specific amount to be given at retirement. 

Entrepreneurs who decided to start a corporation underneath the Bush administration's tax cuts were subject to no more than a 15 percent income tax on dividends earned from company stock. After this year, the maximum federal tax rate could increase greatly. Bill Bischoff of Entrepreneur magazine offers advice on how stockholders in successful C-corporations can make the most of their stock before the possible change.

If no further changes are made, at the end of this year, the 2001 tax cuts expire, and Congress must decide on the new tax structure. Without the tax cuts in effect, the government will be able to tax up to 39.6 percent of dividends. Investors could pay $35 billion more, according to the Christian Science Monitor.

In order to avoid a larger tax hit in the future, Bischoff recommends that company stockholders consider taking dividends in 2010, when taxes are still capped at 15 percent.

Other options include selling back some stock to the company or selling stock this year for cash. President Barack Obama wants to limit the maximum federal rate to 20 percent, a decision which is ultimately in the hands of Congress. This leaves the current 15 percent rate as a window for minimal tax deductions. 

The most recent Federal Reserve quarterly survey of banking loan officers revealed that conditions for business loans have become more flexible and credit lines are no longer being reduced, boding well for entrepreneurs forming an LLC and looking for capital.

For the first time since 2006, major U.S. banks are reporting their lending standards are being loosened, opening up loans and credit for more small businesses. With many entrepreneurs looking for startup capital, the easing of loan terms could provide new sources of financing.

According to MarketWatch, banks loosen standards for commercial and industrial loans by lowering credit score requirements, increasing lines of credit, requiring smaller down payments or charging lower interest rates.

The Federal Reserve reported that as many as 20 percent of large U.S. banks have eased lending for small businesses. For the first time since January 2009, most banks have stopped reducing credit limits for existing borrowers and customers.

President Barack Obama has been touring the country and pushing for Congress to pass the Small Business Jobs Creation Act, aimed at making more capital available to small businesses. Obama also supports a proposed bill that would allow credit unions to increase their percentage of small business loans.

There are a few easy ways to maximize success and prevent fraud after forming an LLC.

Fraud and embezzlement often hit small businesses harder than the bigger companies, the Association of Certified Fraud Examiners told the Wall Street Journal. More than 30 percent of all fraud cases occur at companies with fewer than 100 employees, and average $150,000 in losses.

However, the WSJ reports that following a few easy steps can help prevent fraud and theft.

First, using two different employees – one for accounts receivable and one for accounts payable – makes it difficult for someone to hide embezzlement.

Additionally, the ACFE recommends using independent, outside accountants once a year to review the books. The association also told the WSJ that most employees who are embezzling don’t take days off because they think someone might notice the theft while they are gone.

Lastly, embezzlers usually spend the money they steal quickly, so business owners should be aware of sudden changes in lifestyle.

Last week a Massachusetts drywall company received back a portion of the more than $1 million that a former employee embezzled after the government confiscated her three homes, six cars and $100,000 in cash, reported Boston’s FOX Channel 25.

Deciding when to undergo business incorporation and which type of entity to form is an important step for business owners looking to grow a company. Corporations and limited liability companies are two well-known forms of business. The eCommerce Times offers some insight into the origins of these business structures as well as information about why they remain solid entities.

The source quotes the late Chief Justice Marshall as defining a corporation as "an artificial being, invisible, intangible, and existing only in contemplation of the law." Corporations were originally intended to separate a business owner from the debts of a company – a purpose they still serve. Corporations have been popular since their inception.

LLCs, on the other hand, have become popular just in the past 15 years. The eCommerce Times says limited liability firms are something between sole proprietorships and corporations. The source calls LLCs "flexible" business entities. As its name suggests, an LLC limits the personal liability of founders and shareholders.

The source advises small business owners to do their homework on how these entities have developed, and the advantages they offer in the current economic climate before incorporating, but both offer a number of benefits to entrepreneurs.

Business owners can consult online incorporation service websites to learn more about the protection offered to business owners through these different business types. Whether filing an LLC or forming an S corporation, online incorporation services can lower the expense of these procedures so more money can be invested in developing a company.

As business owners get into the swing of 2010 finances, it may be worthwhile to consider the Discover Small Business Watch‘s top financing tips for the new decade. The tips are based on survey results from more than 750 small business owners who shared insight on how their companies were faring in a slowly recovering economic climate.

Many entrepreneurs recommended startup business owners start a company with a mindset to cut back on personal expenses. More than 69 percent of small business owners said they reduced the amount of money they took home from their businesses in 2009.

In light of this, many entrepreneurs also advise sticking close to family when forming a company. More than 30 percent of small business owners say they are likely to borrow money from family and friends this year to stay in business.

Still, the number one tip entrepreneurs offer is to start preparing taxes early. Finding and organizing documents necessary to prepare taxes is very or somewhat difficult for nearly half of small business owners. Additionally, 77 percent of small business owners find that the tax preparation takes them away from tending to "their bottom lines."

While the 2010 tax season has passed, it may be wise for business owners to start preparing for next tax season by keeping documents in order now. Moreover, entrepreneurs can add more funds to their "bottom lines" through business incorporation – the tax benefits that come with forming a company can really pay off.

As the economy is slowly recovering, it may be time for small business owners to start thinking about how to expand their enterprises. Suite101.com offers some tips for growth that might benefit all companies this decade.

First, entrepreneurs should remember that current customers could become brand advocates and help spark business growth. Existing clients can promote a company through a word-of-mouth campaign as they are already familiar with products and services. By boosting loyalty among current customers, business owners may benefit from free referral marketing.

The source also reminds entrepreneurs that customers could be links to profitable business partners. Potential business partners – like prospective clients – might more readily do business with companies recommended by trusted friends.

Another important way to build client bases and business partners is to consider expanding corporate offerings. Entrepreneurs can try to capitalize on holes in existing markets to develop more extensive services and gain a competitive edge. At the same time, it’s important to make sure company representatives are well-versed in any new – and longstanding – products so they can easily explain them to customers. This will boost brand reliability, says Suite101.com.

Additionally, entrepreneurs can start a company to grow their businesses in the blossoming economy. Business incorporation makes enterprises seem more legitimate, in the minds of business partners, prospective clients and lenders whose funds may be necessary for expansion. It also offers entrepreneurs tax credits, and this money can be put into developing a broader business model.

Entrepreneurs contemplating forming a company may be focused on which state is best for business incorporation, but – regardless of where they operate – they should remember that the current economy calls for catering to a global market. The Financial Chronicle suggests all business types -from Fortune 500s to home-based companies – should be ready to sell overseas if they hope to see big profits.

While the internet makes this easier then ever before, there are still a number of cultural sensitivities that should be considered when preparing business plans for markets abroad. The source warns that Western European markets can be a false friend for American entrepreneurs as many U.S. executives fail to do the proper preparation because they anticipate the cultures will be similar to their own.

Online tools available in a series called "Culture-Guides-to-Go" can help business owners with cross-cultural training and global business planning. This resource might help entrepreneurs expand their enterprises without ever leaving their desks.

"Whether a multinational [corporation] or a startup business out of a garage, everybody is global these days," international consultant firm Dean Foster Associates’ president, Dean Foster, told the source.

In order to gain respect in local and international markets, business owners might consider business incorporation as a first step to success. Adding suffixes such as Inc. or LLC to a business name can boost brand reliability and help companies develop consumer trust at home and abroad.