QUESTION.
I started a C Corp with someone else a few years back. The company has not moved along as hoped, and we would like to dissolve our company. We both have different interests now and want to move forward with own endeavors. My business parnter would like to keep the company name to further along her endeavor. And I have no problem with this, but I want my name off of the company documents. How would I as an incorporator, officer and 50% shareholder, effectively "resign" from the company?
ANSWER.
When you filed your corporate application with the State you listed either an "incorporator" or proposed list of officers of the corporation. You can file a form with the applicable filing office establishing a new slate of officers. If you do this, then your name will be off the official filing records. You should also "sell" your stock shares to the other owner of the corporation. You should sign your shares over to the other owner and the other owner should record this transaction in the stock register the two of you were supposed to maintain. You will want a receipt of sale for the transaction. One way to do this would be for the other owner to write you a check for $1 and then you hang on to the cancelled check as evidence of when you sold out. I think I have answered your question. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Tuesday, December 11, 2007
Monday, December 10, 2007
If you are an employee, then get paid like one. If you are an independent contractor, then get paid like one.
QUESTION.
I've just been hired as a "1099" employee who provides a variety of "business services" (customer support, graphics design, running sales reports, entering data into expense reports, etc) to a company based in Asia with USA division in the United States. I'll be helping their East Coast USA customers and sales team. I have never been a 1099 employee before and am not sure how to manage the finances. I work out of my home office. I do not have a business plan, and no business background. Would it be beneficial for me---as far as taxes go---to incorporate as a Sole-proprietor, or LLC? My immediate concern is that I need to know how much to withhold for Federal and State taxes, how much to withhold for Social Security taxes, and what other items I should be deducting from the check I receive every two weeks. I will be paid $51,500 per year. I'll need to pay for my own health, medical, dental, an vision insurance. Haven't picked out a provider for that yet. currently I'm covered under COBRA. Do I need a business checking account? I've already set up another free checking account that can be linked to my personal free checking account. And I've already set up an ING account where I can deposit money held for tax payments. It is also linked to my personal checking account so I can transfer money easily. I just don't know how much to withhold and what to do with it after I've set it aside. Is there some kind of coupon book I need to get for the taxes? Also: I 'm fairly certain I'll need to hire an accountant but how do I decide who to hire to manage my accounting?
ANSWER.
Let's get one thing straight right up front: There's no such thing as a 1099 employee. You are either an employee or a 1099 independent contractor. And if this foreign company treats you like an employee, then you are an employee in the eyes of the IRS. And if you are an employee in the eyes of the IRS, then the company has to withhold your taxes and pay unemployment insurance and Social Security for you. If you are an independent contractor, then you can have other clients, too. And I would advise that you do that if you are going to be an independent contractor. And if you are an independent contractor, then your hourly billable rate should be about 3 times what you would expect to get paid as an employee. If you are accepting a pay rate similar to a mere employee, then you are cheating yourself out of fair compensation. As an independent contractor you will have business expenses and you seem to know this since you have asked me some questions about them. You don't incorporate to be a sole proprietorship or an LLC. You can be a sole proprietorship, an LLC or a corporation. You incorporate to be a corporation. I recommend you contact your local SCORE chapter and sit down with two SCORE volunteer counselors to discuss what you are getting involved in. See www.score.org/findscore/chapter_maps.html. Type your home zip code to find the chapter nearest to you. The sessions are free and I expect one will help you tremendously. Take a look at my Web site. On the home page you will see links to booklists and guides I have created at Amazon. A few of them might prove helpful to look at. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
http://www.scoreprinceton.org/
http://www.jlippin.com/
I've just been hired as a "1099" employee who provides a variety of "business services" (customer support, graphics design, running sales reports, entering data into expense reports, etc) to a company based in Asia with USA division in the United States. I'll be helping their East Coast USA customers and sales team. I have never been a 1099 employee before and am not sure how to manage the finances. I work out of my home office. I do not have a business plan, and no business background. Would it be beneficial for me---as far as taxes go---to incorporate as a Sole-proprietor, or LLC? My immediate concern is that I need to know how much to withhold for Federal and State taxes, how much to withhold for Social Security taxes, and what other items I should be deducting from the check I receive every two weeks. I will be paid $51,500 per year. I'll need to pay for my own health, medical, dental, an vision insurance. Haven't picked out a provider for that yet. currently I'm covered under COBRA. Do I need a business checking account? I've already set up another free checking account that can be linked to my personal free checking account. And I've already set up an ING account where I can deposit money held for tax payments. It is also linked to my personal checking account so I can transfer money easily. I just don't know how much to withhold and what to do with it after I've set it aside. Is there some kind of coupon book I need to get for the taxes? Also: I 'm fairly certain I'll need to hire an accountant but how do I decide who to hire to manage my accounting?
ANSWER.
Let's get one thing straight right up front: There's no such thing as a 1099 employee. You are either an employee or a 1099 independent contractor. And if this foreign company treats you like an employee, then you are an employee in the eyes of the IRS. And if you are an employee in the eyes of the IRS, then the company has to withhold your taxes and pay unemployment insurance and Social Security for you. If you are an independent contractor, then you can have other clients, too. And I would advise that you do that if you are going to be an independent contractor. And if you are an independent contractor, then your hourly billable rate should be about 3 times what you would expect to get paid as an employee. If you are accepting a pay rate similar to a mere employee, then you are cheating yourself out of fair compensation. As an independent contractor you will have business expenses and you seem to know this since you have asked me some questions about them. You don't incorporate to be a sole proprietorship or an LLC. You can be a sole proprietorship, an LLC or a corporation. You incorporate to be a corporation. I recommend you contact your local SCORE chapter and sit down with two SCORE volunteer counselors to discuss what you are getting involved in. See www.score.org/findscore/chapter_maps.html. Type your home zip code to find the chapter nearest to you. The sessions are free and I expect one will help you tremendously. Take a look at my Web site. On the home page you will see links to booklists and guides I have created at Amazon. A few of them might prove helpful to look at. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
http://www.scoreprinceton.org/
http://www.jlippin.com/
Sunday, December 9, 2007
Start a new business with expectation to bring in co-owners soon, then the C Corp is the way to go!
QUESTION.
I am looking to start a new service on the Web offering a free community builder package. I am on the verge of creating a business entity and I have been reading those books from Nolo about LLCs and corporations. I was wondering if you would kindly give me some "practical" tips on choosing the correct structure. My situation is I have been doing this project as a solo. Eventually, if I get some traction, I'd like to have a few people join me to develop new features and operate this service. At the same time, like many people who are starting a new venture, I am low on cash and time and would like to do something economical (i.e., being able to fully leverage tax breaks), time efficient, as well as being able to offer a share of the business (e.g., stocks) to my future "partners." So far what I gather is a C-corp is the only way to go for offering stock. But I am concerned about the complexity of running a C-corp. And LLCs seems to be the darling structure in the books I've read, but they are hard to spin off ownership. I was also wondering if it would be advisable to first form an LLC and convert to C-corp later. Does make sense and how disruptive is such conversion to the business?
ANSWER.
After reading your email it seems you already know which choice of legal entity to choose - a C Corporation. In many respects a C Corporation is easier to create than an LLC. This is because to form an LLC correctly you would need an operating agreement which is similar in structure and content to a partnership agreement. While it is true that your LLC would be a single-member one initially, you say you would be growing and it would ultimately become multi-member. Single member LLCs don't have much need for an Operating Agreement. But the only way you can offer ownership interests to employees to motivate them to build your business for you is to offer stock and stock options. Thus, you MUST form a C Corporation. And there is no reason to wait to do so. Forming a corporation is really pretty easy. Just fill out the online application in your state to do so. Depending on your state the registration fees can be low or kind of high. And depending on your state there may be a special tax for being incorporated. But that is a cost of doing business. Build that cost into your business plan and move on. If you were a multi-member LLC you'd have to file a Form 1065 (Partnership Tax Return) with the IRS each year. Filling those out is no more complicated than filling out a Form 1120 (Corporate Tax Return). So filling out tax returns should not keep you from forming a C Corporation. And you'll get a few more tax write-offs as a corporation. This is because EVERY expense of the corporation is a tax deduction. Make sure you pay yourself a salary and issue weekly or biweekly checks and a W-2 at yearend. And make sure you zero-out the corporation's net income by giving yourself a bonus at year-end. That way you will avoid double taxation of corporate earnings. Those earnings are supposed to go to you anyway - so make sure they get to you without being taxed twice. Do NOT form an S Corporation. They are a joke. Well, I think I have answered your question. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
http://www.scoreprinceton.org/
http://www.jlippin.com/
I am looking to start a new service on the Web offering a free community builder package. I am on the verge of creating a business entity and I have been reading those books from Nolo about LLCs and corporations. I was wondering if you would kindly give me some "practical" tips on choosing the correct structure. My situation is I have been doing this project as a solo. Eventually, if I get some traction, I'd like to have a few people join me to develop new features and operate this service. At the same time, like many people who are starting a new venture, I am low on cash and time and would like to do something economical (i.e., being able to fully leverage tax breaks), time efficient, as well as being able to offer a share of the business (e.g., stocks) to my future "partners." So far what I gather is a C-corp is the only way to go for offering stock. But I am concerned about the complexity of running a C-corp. And LLCs seems to be the darling structure in the books I've read, but they are hard to spin off ownership. I was also wondering if it would be advisable to first form an LLC and convert to C-corp later. Does make sense and how disruptive is such conversion to the business?
ANSWER.
After reading your email it seems you already know which choice of legal entity to choose - a C Corporation. In many respects a C Corporation is easier to create than an LLC. This is because to form an LLC correctly you would need an operating agreement which is similar in structure and content to a partnership agreement. While it is true that your LLC would be a single-member one initially, you say you would be growing and it would ultimately become multi-member. Single member LLCs don't have much need for an Operating Agreement. But the only way you can offer ownership interests to employees to motivate them to build your business for you is to offer stock and stock options. Thus, you MUST form a C Corporation. And there is no reason to wait to do so. Forming a corporation is really pretty easy. Just fill out the online application in your state to do so. Depending on your state the registration fees can be low or kind of high. And depending on your state there may be a special tax for being incorporated. But that is a cost of doing business. Build that cost into your business plan and move on. If you were a multi-member LLC you'd have to file a Form 1065 (Partnership Tax Return) with the IRS each year. Filling those out is no more complicated than filling out a Form 1120 (Corporate Tax Return). So filling out tax returns should not keep you from forming a C Corporation. And you'll get a few more tax write-offs as a corporation. This is because EVERY expense of the corporation is a tax deduction. Make sure you pay yourself a salary and issue weekly or biweekly checks and a W-2 at yearend. And make sure you zero-out the corporation's net income by giving yourself a bonus at year-end. That way you will avoid double taxation of corporate earnings. Those earnings are supposed to go to you anyway - so make sure they get to you without being taxed twice. Do NOT form an S Corporation. They are a joke. Well, I think I have answered your question. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
http://www.scoreprinceton.org/
http://www.jlippin.com/
Saturday, December 8, 2007
So you want to start a charity? You have to do some reading how to do it before you try.
QUESTION.
I am interesting in starting a charity in the name of my deceased brother. The charity would benefit the families of those effected by leukemia. I am in need of some assistance in getting it up and running.
ANSWER.
That is a pretty general question you posed. Please take a look at Guide #3 at www.jlippin.com/guidemania.html.
You may also be intererested in looking at some of the booklists toward the bottom of the following link? See www.jlippin.com/listmania.html
I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I am interesting in starting a charity in the name of my deceased brother. The charity would benefit the families of those effected by leukemia. I am in need of some assistance in getting it up and running.
ANSWER.
That is a pretty general question you posed. Please take a look at Guide #3 at www.jlippin.com/guidemania.html.
You may also be intererested in looking at some of the booklists toward the bottom of the following link? See www.jlippin.com/listmania.html
I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Wednesday, December 5, 2007
Federal and state accounts receivable funding programs? What are they?
QUESTION.
What can you tell me about federal or state accounts receivable funding programs?
ANSWER.
I have never been asked that question before. And unfortunately I don't have an answer for you. I'm simply not familiar with the subject matter. Sorry. I recommend you you contact another SCORE email counselor. I regret to tell you I don't even know who to refer you to a contact. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
PS. I've been doing this email counseling for well over a year now and you are the first client I have not had an answer for. Ouch!
What can you tell me about federal or state accounts receivable funding programs?
ANSWER.
I have never been asked that question before. And unfortunately I don't have an answer for you. I'm simply not familiar with the subject matter. Sorry. I recommend you you contact another SCORE email counselor. I regret to tell you I don't even know who to refer you to a contact. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
PS. I've been doing this email counseling for well over a year now and you are the first client I have not had an answer for. Ouch!
Tuesday, December 4, 2007
When planning how to start your business choice of entity considerations are very important.
QUESTION.
I am starting a financial counseling / financial planning small business. I want to get some advice on business structures and small business formation. In particular, I want to see if an L.L.C. is the best form for my business. If an L.L.C. is the best option, do I need to form a Professional L.L.C. (PLLC)? I'll be registering with the state of Texas as an Investment Advisor, but investment advice will only be one aspect of my services (i.e., I also plan to perform credit counseling and other non-investment related aspects of financial planning). I currently plan to own / operate the business alone, but I was wondering from a legal liability and accounting standpoint if it would make more sense to form the L.L.C. (if that form is the best option) with my wife as a second member. Are there any advantages with adding her and being treated as a partnership instead of a sole proprietorship for liability protection / tax reasons? If I form an L.L.C., should I set it up to be "member-managed" or "manager-managed?"
ANSWER.
You ask a lot of questions. I certainly can answer them all, but that's more trouble than I'm willing to go to in my capacity as a SCORE email counselor. Your questions merit a 1-hour face-to-face session with two SCORE volunteers in a SCORE chapter close to your home. The session would be free - and the counselor should be competent to advise you appropriately. Typically a profession that requires licensing is not allowed limit liability for the professional counseling they do under their license. This applies to doctors, lawyers, cpa's, architects, and engineers. CFPs are kind of a hybrid professional. I'm not aware of a license requirement - but there often times is a registration requirement. As such, I'm not sure you can't limit your liability regarding your services. You do the research and find out. If you can't limit your liability, then either the Prof'l LLC or Prof'l Corporation would be the ideal for you to form. Otherwise, I recommend you form an LLC and have it taxed as a C Corporation for tax purposes. It doesn't matter if you make your wife a shareholder since Texas is a community property state and she has half of what you have in any regard. Make yourself the sole owner and put both you and your wife on the payroll. Make sure to give yourselves bonuses at the end of the year so no income stays in the corporation. You want to be taxed as a corporation so you can write EVERYTHING off. That includes ALL healthcare expenses. You also want to be taxed as a corporation so you will be less likely to get audited. Consider getting a copy of "Structuring Your Business" by Michele Cagan (ISBN: 1593371772). And make sure to read the book review I wrote for it at Amazon. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I am starting a financial counseling / financial planning small business. I want to get some advice on business structures and small business formation. In particular, I want to see if an L.L.C. is the best form for my business. If an L.L.C. is the best option, do I need to form a Professional L.L.C. (PLLC)? I'll be registering with the state of Texas as an Investment Advisor, but investment advice will only be one aspect of my services (i.e., I also plan to perform credit counseling and other non-investment related aspects of financial planning). I currently plan to own / operate the business alone, but I was wondering from a legal liability and accounting standpoint if it would make more sense to form the L.L.C. (if that form is the best option) with my wife as a second member. Are there any advantages with adding her and being treated as a partnership instead of a sole proprietorship for liability protection / tax reasons? If I form an L.L.C., should I set it up to be "member-managed" or "manager-managed?"
ANSWER.
You ask a lot of questions. I certainly can answer them all, but that's more trouble than I'm willing to go to in my capacity as a SCORE email counselor. Your questions merit a 1-hour face-to-face session with two SCORE volunteers in a SCORE chapter close to your home. The session would be free - and the counselor should be competent to advise you appropriately. Typically a profession that requires licensing is not allowed limit liability for the professional counseling they do under their license. This applies to doctors, lawyers, cpa's, architects, and engineers. CFPs are kind of a hybrid professional. I'm not aware of a license requirement - but there often times is a registration requirement. As such, I'm not sure you can't limit your liability regarding your services. You do the research and find out. If you can't limit your liability, then either the Prof'l LLC or Prof'l Corporation would be the ideal for you to form. Otherwise, I recommend you form an LLC and have it taxed as a C Corporation for tax purposes. It doesn't matter if you make your wife a shareholder since Texas is a community property state and she has half of what you have in any regard. Make yourself the sole owner and put both you and your wife on the payroll. Make sure to give yourselves bonuses at the end of the year so no income stays in the corporation. You want to be taxed as a corporation so you can write EVERYTHING off. That includes ALL healthcare expenses. You also want to be taxed as a corporation so you will be less likely to get audited. Consider getting a copy of "Structuring Your Business" by Michele Cagan (ISBN: 1593371772). And make sure to read the book review I wrote for it at Amazon. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Monday, December 3, 2007
If you start a business, then NEVER let it go under. Always sell a business even if it is a loser!
QUESTION.
We own a Quizno's Sub Franchise. Unfortunately, the business was not thriving at all and we had to close the doors yesterday. Do to lack of business and funds we owe almost everyone - especially the landlord. The lease was signed by my husband personally as that was the only way the landlord would allow us to sign. Do you have any recommendations as to our next step? We are in touch with Quiznos Franchise but to be quite honest - they have not been helpful at all since we've owned the place. My husband was going to try to settle terms for the lease with the landlord in hopes that they would take something over nothing - but we don't have anything to give really! I am so afraid that we are going to be financially destroyed personally - including our house. (We have a home equity loan on our home for the business as well.) Should we get a lawyer to help us or can you give us some advice? We sure could use your assistance.
ANSWER.
Before I try to answer your question(s) I need more facts. What is your net worth (you and your husband, you, and your husband)? How much equity is in you house? Who owns the house? Is the house titled in you and your husband's name as tenants by the entireties or as joint tenants? And has your husband filed for bankruptcy within the last 6 years?
If you can answer the above questions I can provide you some of my thoughts. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
We own a Quizno's Sub Franchise. Unfortunately, the business was not thriving at all and we had to close the doors yesterday. Do to lack of business and funds we owe almost everyone - especially the landlord. The lease was signed by my husband personally as that was the only way the landlord would allow us to sign. Do you have any recommendations as to our next step? We are in touch with Quiznos Franchise but to be quite honest - they have not been helpful at all since we've owned the place. My husband was going to try to settle terms for the lease with the landlord in hopes that they would take something over nothing - but we don't have anything to give really! I am so afraid that we are going to be financially destroyed personally - including our house. (We have a home equity loan on our home for the business as well.) Should we get a lawyer to help us or can you give us some advice? We sure could use your assistance.
ANSWER.
Before I try to answer your question(s) I need more facts. What is your net worth (you and your husband, you, and your husband)? How much equity is in you house? Who owns the house? Is the house titled in you and your husband's name as tenants by the entireties or as joint tenants? And has your husband filed for bankruptcy within the last 6 years?
If you can answer the above questions I can provide you some of my thoughts. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Sunday, December 2, 2007
When you own two or more businesses it often isa good idea to form a management company as a C Corp and then create LLC shells for each of the "subs."
QUESTION.
I have recently formed an S Corp for a bricks and mortor company. I am considering starting an unrelated online business. I will be the only owner of each. How do I go about seting up two companies? Yummies inc. owns Taco Bell, Pizza Hut, and a few others. Would do you think about having a parent company. Basically how do I own more than one company?
ANSWER.
I don't recommend anybody form S Corps today. Either you form a C Corp or you form a limited liability company (LLC). But you've already got an S corp. Oops! You may want to stack your businesses and have a parent company. I recommend you convert your S corp to a C corp which would be a management company with you collecting a W-2 from it. All your healthcare expenses would be fully deductible from the C corp and you would generate revenues for the corp by charging management fees to your two businesses (clothing line and online catering service). You would need to form two LLCs - one for each of the businesses. The LLCs would be owned by the corporation - not by you directly. That way all revenues and expenses of your business ventures would be run through your corporation's tax return at year end. That will help insulate you from getting picked by the IRS for an audit. If your salary from the corporation is not high enough to zero out the corporation's income, then you will need to give yourself a bonus at year-end so the corporation has no taxable income. Consider taking a look at Structuring Your Business (ISBN: 1593371772) by Michelle Cagan. See my book review for it at Amazon. I think I have answered your question. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
http://www.scoreprinceton.org/
http://www.jlippin.com/
I have recently formed an S Corp for a bricks and mortor company. I am considering starting an unrelated online business. I will be the only owner of each. How do I go about seting up two companies? Yummies inc. owns Taco Bell, Pizza Hut, and a few others. Would do you think about having a parent company. Basically how do I own more than one company?
ANSWER.
I don't recommend anybody form S Corps today. Either you form a C Corp or you form a limited liability company (LLC). But you've already got an S corp. Oops! You may want to stack your businesses and have a parent company. I recommend you convert your S corp to a C corp which would be a management company with you collecting a W-2 from it. All your healthcare expenses would be fully deductible from the C corp and you would generate revenues for the corp by charging management fees to your two businesses (clothing line and online catering service). You would need to form two LLCs - one for each of the businesses. The LLCs would be owned by the corporation - not by you directly. That way all revenues and expenses of your business ventures would be run through your corporation's tax return at year end. That will help insulate you from getting picked by the IRS for an audit. If your salary from the corporation is not high enough to zero out the corporation's income, then you will need to give yourself a bonus at year-end so the corporation has no taxable income. Consider taking a look at Structuring Your Business (ISBN: 1593371772) by Michelle Cagan. See my book review for it at Amazon. I think I have answered your question. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
http://www.scoreprinceton.org/
http://www.jlippin.com/
Saturday, December 1, 2007
Owners of S Corp are on the outs and they now are bickering over who gets to use what name.
QUESTION.
I have a question about the rights to a corporation name and a dba name. This question is regarding an S-Corporation formed by 3 equal partners five years ago. The partners are currently in disagreement. The active corporation "1234x56, Inc." was created in 2002. In 2004, we filed dba papers under that coropration for the name "123grooves." In 2007, two of the partners formed an LLC called "1234grooves, LLC." The question is: Can I still do business under the name 123grooves fictitious name? Are they allowed to form this LLC using the same name filed as a dba? Are either of us infringing on the others' rights to use the name 123grooves? Or are we both entitled to use that name?
ANSWER.
Your email is asking legal questions. As a SCORE counselor I am not supposed to provide advice that is typically purchased from a law office. SCORE counselors are business coaches - not substitutes for attorneys or CPAs. But I step over the line from time to time. When you file a fictitious name, LLC, or corporation there typically is a requirement that a name search be performed to see if the name is available. The fact pattern you provided me indicated that the fictitious name was filed first in the same state. I would have expected the application for the LLC with that same name to have been returned and not registerable since the name was already taken. Something does not sound right here. But even if the LLC is duly registered, the rule is that the first to file is the first to have rights. The LLC I don't think has a valid claim to the name and you should be able to contact your Secretary of State's office and have her pull the plug on the LLC registration. Technically speaking your S Corp has three equal shareholders - not partners. And if you are not getting along then the unhappy shareholder can force the other two to buy her shares or she can sell them to someone else if they won't buy her shares for a reasonable price. A lawsuit might be necessary. There can only be ONE owner of a business name. Someone gets it and someone doesn't! I recommend you consult a local attorney on this matter. Probably the guy that formed your corporation would be a good place to start. By the way, I don't like S Corps. I recommend to my clients to form either an LLC or a C Corp. Anyone who recommends creating an S Corp is living way back in time. I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I have a question about the rights to a corporation name and a dba name. This question is regarding an S-Corporation formed by 3 equal partners five years ago. The partners are currently in disagreement. The active corporation "1234x56, Inc." was created in 2002. In 2004, we filed dba papers under that coropration for the name "123grooves." In 2007, two of the partners formed an LLC called "1234grooves, LLC." The question is: Can I still do business under the name 123grooves fictitious name? Are they allowed to form this LLC using the same name filed as a dba? Are either of us infringing on the others' rights to use the name 123grooves? Or are we both entitled to use that name?
ANSWER.
Your email is asking legal questions. As a SCORE counselor I am not supposed to provide advice that is typically purchased from a law office. SCORE counselors are business coaches - not substitutes for attorneys or CPAs. But I step over the line from time to time. When you file a fictitious name, LLC, or corporation there typically is a requirement that a name search be performed to see if the name is available. The fact pattern you provided me indicated that the fictitious name was filed first in the same state. I would have expected the application for the LLC with that same name to have been returned and not registerable since the name was already taken. Something does not sound right here. But even if the LLC is duly registered, the rule is that the first to file is the first to have rights. The LLC I don't think has a valid claim to the name and you should be able to contact your Secretary of State's office and have her pull the plug on the LLC registration. Technically speaking your S Corp has three equal shareholders - not partners. And if you are not getting along then the unhappy shareholder can force the other two to buy her shares or she can sell them to someone else if they won't buy her shares for a reasonable price. A lawsuit might be necessary. There can only be ONE owner of a business name. Someone gets it and someone doesn't! I recommend you consult a local attorney on this matter. Probably the guy that formed your corporation would be a good place to start. By the way, I don't like S Corps. I recommend to my clients to form either an LLC or a C Corp. Anyone who recommends creating an S Corp is living way back in time. I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Subscribe to:
Posts (Atom)