Setting Up a Company
February 11, 2005 9:35 AM Subscribe
Is there an online service that can help me set up a new company (either as a GP or LLC) and get Federal and State Tax ID's quickly? [more inside]
I was just awarded a consulting contract, and need to set up a company fairly quickly (in 2 weeks' time). Is anyone aware of a service for helping expedite this? It will be a sole proprietership, so I don't need anything fancy, just the right paper work, tax ID's and subsequently a bank account. Thanks!
I was just awarded a consulting contract, and need to set up a company fairly quickly (in 2 weeks' time). Is anyone aware of a service for helping expedite this? It will be a sole proprietership, so I don't need anything fancy, just the right paper work, tax ID's and subsequently a bank account. Thanks!
By the way, neither a GP or LLC is a "sole proprietorship." Depending on the state you may be able to form a single member LLC.
posted by anathema at 9:56 AM on February 11, 2005
posted by anathema at 9:56 AM on February 11, 2005
Many laywers who deal with business law will have numbered companies sitting on a shelf set up and ready to go. If you've got a lawyer it might be worth a call.
posted by Mitheral at 9:59 AM on February 11, 2005
posted by Mitheral at 9:59 AM on February 11, 2005
Connecticut Office of the Secretary of the State: FAQ.
posted by anathema at 10:00 AM on February 11, 2005
posted by anathema at 10:00 AM on February 11, 2005
Getting a federal tax ID number (EIN) takes five minutes. You can do it at IRS.gov ... it's all online.
I set up an S-corporation within a week. Make sure that you follow all of the formalities for your state, which are detailed on your Secretary of State's website. I would make sure you get a lawyer that specializes in startups (If you were in Portland, I would have one to reccomend) to make sure that you do everything correctly. Doing one of the formalities incorrectly can cause you to lose certain tax priviledges, incur extra fines, or trickle liability for any problems/lawsuits down to you, personally, at some time in the future.
Don't forget to get a business license in your city, too.
posted by SpecialK at 10:01 AM on February 11, 2005
I set up an S-corporation within a week. Make sure that you follow all of the formalities for your state, which are detailed on your Secretary of State's website. I would make sure you get a lawyer that specializes in startups (If you were in Portland, I would have one to reccomend) to make sure that you do everything correctly. Doing one of the formalities incorrectly can cause you to lose certain tax priviledges, incur extra fines, or trickle liability for any problems/lawsuits down to you, personally, at some time in the future.
Don't forget to get a business license in your city, too.
posted by SpecialK at 10:01 AM on February 11, 2005
Best answer: BTW, sole proprietership is very different than an LLC.
In a sole proprietership, the company is embodied in your person. You share assets. You file taxes as the corporation personally, any liability for lawsuits or fines trickles down and your personal assets can get attached to settlements. A sole proprietership doesn't take any work to set up -- you just need to register a business name and get licenses. You do not need an employer ID number from the feds or state(in most states); you just use your SSN. If you get thrown under a bus tomorrow and die, the SP dies with you and cannot be inheritied.
An LLC is a corporation, and is a separate entity from you, has separate tax IDs from you, and as long as you follow certain formalities and legalities, your assets are separate. You, as a stockholder in the corporation, receive dividends from the corporation and there are particular tax shelters set up so that the money doesn't get taxed twice for particular types of corporations, but these also require special forms, hoops to jump through, etc. and have special restrictions.
You need to talk to a lawyer in your state because corporation law varies between states, but one of the commonalities thanks to the federal SOX act of 2002 is that you need to take special measures to shelter yourself from liability if you are the sole shareholder of the corporation. (It may be worth it to bestow non-dividend bearing stock on a favorite nephew or neice, or to use some other loophole ... a lawyer would know better than I do, since I have investors and partners and didn't need to worry about this). You also need to find out if 'programmer/consultant' is a profession in your state that requires special licensing or has other restrictions on it. In most states the answer is no, but some states regard programmer as a profession just like lawyer or accountant ... and the difference is important, legally.
Hie thee to a lawyer, or you're going to spend a lot of time reading over the next two weeks ... and you still won't understand everything at the end.
posted by SpecialK at 10:09 AM on February 11, 2005
In a sole proprietership, the company is embodied in your person. You share assets. You file taxes as the corporation personally, any liability for lawsuits or fines trickles down and your personal assets can get attached to settlements. A sole proprietership doesn't take any work to set up -- you just need to register a business name and get licenses. You do not need an employer ID number from the feds or state(in most states); you just use your SSN. If you get thrown under a bus tomorrow and die, the SP dies with you and cannot be inheritied.
An LLC is a corporation, and is a separate entity from you, has separate tax IDs from you, and as long as you follow certain formalities and legalities, your assets are separate. You, as a stockholder in the corporation, receive dividends from the corporation and there are particular tax shelters set up so that the money doesn't get taxed twice for particular types of corporations, but these also require special forms, hoops to jump through, etc. and have special restrictions.
You need to talk to a lawyer in your state because corporation law varies between states, but one of the commonalities thanks to the federal SOX act of 2002 is that you need to take special measures to shelter yourself from liability if you are the sole shareholder of the corporation. (It may be worth it to bestow non-dividend bearing stock on a favorite nephew or neice, or to use some other loophole ... a lawyer would know better than I do, since I have investors and partners and didn't need to worry about this). You also need to find out if 'programmer/consultant' is a profession in your state that requires special licensing or has other restrictions on it. In most states the answer is no, but some states regard programmer as a profession just like lawyer or accountant ... and the difference is important, legally.
Hie thee to a lawyer, or you're going to spend a lot of time reading over the next two weeks ... and you still won't understand everything at the end.
posted by SpecialK at 10:09 AM on February 11, 2005
Response by poster: Wow. Thanks anathama, SpecialK and Mitheral. This is excellent info. I had incorporated a 4 person LLC before, but that was with the help of an attorney (we actually incorporated in Delaware even though the company is based in Illinois). Maybe it's worth it to spend a little more upfront to make sure I'm doing it right.
posted by Tommy Gnosis at 10:10 AM on February 11, 2005
posted by Tommy Gnosis at 10:10 AM on February 11, 2005
in the 2nd paragraph .... s/corporation/business/
posted by SpecialK at 10:10 AM on February 11, 2005
posted by SpecialK at 10:10 AM on February 11, 2005
An LLC is a corporation, and is a separate entity from you, has separate tax IDs from you, and as long as you follow certain formalities and legalities, your assets are separate. You, as a stockholder in the corporation, receive dividends from the corporation and there are particular tax shelters set up so that the money doesn't get taxed twice for particular types of corporations, but these also require special forms, hoops to jump through, etc. and have special restrictions.
Technically, an LLC is not a corporation, it is a hybrid entity that can most often be taxed as a partnership or a corporation, depending on the state. LLCs technically do not have "stockholders," they have members. This is significant because the members can have voting rights that are not specifically pegged to their capital contributions, as laid out in an operating agreement (which you should have, you don't want to get stuck with the default statutory rules).
posted by anathema at 10:17 AM on February 11, 2005
Technically, an LLC is not a corporation, it is a hybrid entity that can most often be taxed as a partnership or a corporation, depending on the state. LLCs technically do not have "stockholders," they have members. This is significant because the members can have voting rights that are not specifically pegged to their capital contributions, as laid out in an operating agreement (which you should have, you don't want to get stuck with the default statutory rules).
posted by anathema at 10:17 AM on February 11, 2005
Maybe it's worth it to spend a little more upfront to make sure I'm doing it right.
Yes!
posted by anathema at 10:20 AM on February 11, 2005
Yes!
posted by anathema at 10:20 AM on February 11, 2005
Technically, an LLC is not a corporation, it is a hybrid entity that can most often be taxed as a partnership or a corporation, depending on the state.
Single member LLC's can also be taxed as a sole proprietership, which is probably what you'll want. For federal purposes, they are taxed in accordance with the election you make. State treatment will most often follow federal, but that will depend on the state.
posted by probablysteve at 11:57 AM on February 11, 2005
Single member LLC's can also be taxed as a sole proprietership, which is probably what you'll want. For federal purposes, they are taxed in accordance with the election you make. State treatment will most often follow federal, but that will depend on the state.
posted by probablysteve at 11:57 AM on February 11, 2005
one of the commonalities thanks to the federal SOX act of 2002 is that you need to take special measures to shelter yourself from liability if you are the sole shareholder of the corporation.
The Sarbanes-Oxley Act of 2002 (SOX) is a federal securities law. It would not apply to an LLC or even small, closely held corporations. I believe it only applies to publicly traded companies.
posted by probablysteve at 12:08 PM on February 11, 2005
The Sarbanes-Oxley Act of 2002 (SOX) is a federal securities law. It would not apply to an LLC or even small, closely held corporations. I believe it only applies to publicly traded companies.
posted by probablysteve at 12:08 PM on February 11, 2005
steve - That's true, for the most part, but it also amended some of the laws in the US code that govern corporate liability. My understanding is that while it didn't specifically state that this was the intended effect, SOX removed some of the loopholes that *all* corporate officers used to use to protect themselves from liability. In theory, that only changed things for large corporations and preventing another Enron where the officers make out like bandits, but it had the side effect of killing a lot of the case law that protected non-public corporations.
posted by SpecialK at 1:17 PM on February 11, 2005
posted by SpecialK at 1:17 PM on February 11, 2005
Tommy Gnosis - you have email at the address on your profile page.
posted by adamvasco at 5:36 PM on February 11, 2005
posted by adamvasco at 5:36 PM on February 11, 2005
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posted by anathema at 9:49 AM on February 11, 2005