Knowledge Base

If you’re just starting out with your small business, you’ll probably be satisfied with the services of a regular bookkeeper. They’ll be in charge of getting your finances organized, keeping track of sales, income and expenses, and executing payrolls. However, as your business appetites grow and your company scales, you might ask yourself whether this role should be taken to a higher level as well. In this article, we’ll answer the “What is full charge bookkeeping?” question and explain the job’s duties, responsibilities, educational requirements, and more. Who Are Full Charge Bookkeepers? FC bookkeeping is a term that refers to professionals who are fully responsible for a small or medium-sized business's full-cycle accounting and bookkeeping needs. They usually have more responsibilities than regular bookkeepers and are often in touch with the company’s CEO and upper management.  Larger companies sometimes have the assistance of an outside certified public accountant to review and audit more complicated financial statements and tax returns. If the company grows to the size of a corporation, the full charge bookkeepers’ duties are shifted to a controller. The full-charge bookkeeper job description goes beyond the usual responsibilities that typical bookkeepers have. Like regular bookkeepers, they keep records of finances, bank transactions, income and expenses, create monthly or weekly statements, and run payroll and timesheets. However, on top of all that, they have certain accounting duties: gathering insights from all the tracked financial data and preparing financial records and budget forecasts. They also ensure that business practices comply with laws, compute taxes, and prepare tax returns.  No matter how much bookkeeping and accounting duties might differ, a full service bookkeeping job combines some features of both. Full Charge Bookkeepers vs. Accountants  Even though we’ve gone through the main full charge bookkeeping responsibilities, let’s delve deeper into how an FC bookkeeper’s career differs from that of an accountant. Full charge bookkeeper duties include many accountant duties, also adding bookkeeping to the bundle. While a regular bookkeeper mostly deals with maintaining the ledger, an accountant is engaged with managing day-to-day financial activities, such as: Financial accounting Preparing financial statements Auditing Tax preparation Consulting services on financial matters When we compare a full charge bookkeeper vs. an accountant, we can clearly see that the main difference between the two jobs is that an accountant deals with financial analysis and has to be familiar with tax laws. They usually have a bachelor’s degree in accounting or a related field and often pass an exam to get a certification and become certified public accountants. Certified public accountants, on the other hand, have greater powers, and are entitled to prepare audited financial statements, represent taxpayers and companies before the Internal Revenue Service, and conduct external company audits.  What is the full charge bookkeeper’s role in comparison to an accountant’s, then? Although FC bookkeepers do provide accounting services, they usually don’t act as financial advisors or deal with auditing and tax reports. Full charge bookkeepers usually seek external assistance from a certified public accountant or a controller.  Full Charge Bookkeepers vs. In-House Bookkeepers As we’ve seen earlier, the duties of an in-house bookkeeper frequently overlap with those of an FC bookkeeper. However, a regular bookkeeper often works in a company where there is a fully staffed accounting team that deals with business accounting tasks. The role of a bookkeeper is to perform basic tasks such as: Tracking bank transactions Recording cash receipts Creating financial statements Data entry Limited accounts payable Accounts receivable work Now, let’s take a look at full charge bookkeeper vs. bookkeeper job descriptions and compare them.  While regular in-house bookkeepers deal exclusively with bookkeeping services and should possess basic data-entry and math skills and be familiar with the use of online bookkeeping and accounting software, the duties and responsibilities of full charge bookkeepers are much broader. They should also prepare financial statements, maintain the ledger, and perform all the other bookkeeping services.  However, they are also in charge of some accounting services, too. They will perform tax-related and payroll tasks, coordinate tasks with certified public accountants, and prepare information for auditing purposes. Full Charge Bookkeeping Educational Requirements We’ve already mentioned some of the skills that full charge bookkeepers should possess, but we’d like to focus more on their educational background.  First of all, bookkeeping doesn’t require obtaining a college diploma, unlike accounting. To become a bookkeeper, a high school diploma or equivalent and some basic bookkeeping knowledge are enough. However, knowing that there are various types of bookkeeping methods and lots of math and calculation involved, a bookkeeper should have math, data entry, and computer skills. If you wish to work your way up and earn a full charge bookkeeper salary, you’ll need to get formal qualifications and obtain an associate’s or bachelor’s degree in accounting, business administration, or a related field. Some of the courses you might enroll in are tax procedures, business law, payroll accounting, economics, and business math. Some professionals who’d like to work in larger companies with more complicated accounting-related tasks would often go the extra mile and acquire the Certified Bookkeeper (CB) designation from the American Institute of Professional Bookkeepers or the National Association of Certified Public Bookkeepers. To get one, you’ll have to have at least two years of professional experience in the field and pass the exam. Knowing what is included in full charge bookkeeping services makes you aware that a degree, skills, and certifications sometimes aren’t enough. Due to the higher level of responsibilities that FC bookkeepers have, some employers insist that candidates have prior bookkeeping and accounting experience. Those who decide to hire applicants without prior experience would require them to undergo at least six months of on-the-job training to learn about handling payroll, using accounting and bookkeeping software, and the bookkeeping practices the company prefers.  Salary Prospects Even though they are not as well-paid as accountants, full charge bookkeepers definitely earn more than regular bookkeepers. Depending on the level of education, years of experience, certifications, and additional skills, the full charge bookkeeping salary in the United States ranges from $37,770 to $47,250. The average base salary per hour is $24.11 as of December 2022. Final Thoughts Depending on your company’s size, the way it’s structured, and the level of expertise required, you might decide whether you need to hire a regular or full charge bookkeeper. Your business would benefit from a full charge bookkeeper if it’s scaling and you can’t handle managing the books and performing full-cycle accounting tasks.  A full charge bookkeeper with certification can help you with recording transactions, processing accounts payable, managing payroll, and doing taxes. When needed, you can hire a certified public accountant to coordinate with an FC bookkeeper and help with audits and tax returns.

By Danica Jovic

With invoices and bills, being on the giving end is undoubtedly the better of the two options. However, issuing invoices means being responsible for ensuring they are professional, contain all the necessary information, and have proper invoice payment terms included.Everybody knows that providing the service or selling the goods isn’t the trickiest part of running a business - it’s getting paid for it, especially for companies that have just started with their operations. No business can thrive on a bunch of “I owe you one,” so it’s vital to get those unpaid invoices paid on time and be liquid enough to at least keep the company afloat.  The first step in that direction would be to send invoices with payment terms. These terms are an essential part of every invoice, as it is crucial to establish upfront when the payment would be due and even to incorporate late fees. There are several terms for you to consider and adopt when issuing invoices. Considering that these terms should be set up together with a contract, let’s discuss them in more detail so that you know what they are, how to use them, and how to pick the right ones for your business.What Are Payment Terms?Just like the name suggests, payment terms clearly define the terms under which you wish to get paid. The terms include the means and the time of payment, and they should be specified during the negotiations with potential customers, included in the contract, and clearly outlined in each invoice you send. Here is what you should include in every invoice to ensure your payment terms are coming through to your customers.Payment Timeframe When do you expect to be paid? Here are some common types of payments terms to use for defining the payment timeframe:PIA Payment - expected in advance for a full amountUpon Receipt Payment - expected immediately upon invoice receiptNet 7/21/30 Payment - expected in installments seven, 21, and 30 days from the invoice dateEOM Payment - expected at the end of the same monthEOMPayment expected at the end of the same month2/10 Net 30 Payment - expected in 30 days, with 2% discount if paid within 10 days15 MFI Payment - expected on 15th of the month following invoiceNet 30 is among the most common standard invoice payment terms you can specify. However, you can also use other types if they suit your business better. Sometimes, immediate payment is the best solution. PIA (Payment in Advance) is better for companies with upfront payments to make even before they start working on a project, and 2/10 Net 30 is handy as an incentive for companies to pay up in a short timeframe. Adding invoice due date to ensure that the accounts payable clerk from the invoiced company knows when to make the payment is also good practice.Preferred CurrencyIf your company is working internationally, it must include the section defining preferred currency. Payment MethodPayment method is one of the essential terms on an invoice, as you need to let your clients know how they can pay you. It could be a bank transfer, debit or credit card, or mobile payment. Including account details necessary to perform a transaction and the money landing in your checking account is a must. Additional ConditionsIf you have any additional conditions that you have agreed on with your customers, such as discounts for early payment or late fees, these should also be included in the terms, contract, and invoices.Why Are Invoice Payment Terms Important?Setting invoice terms upfront and including them in your invoices is crucial for your business’s optimal performance. If you have provided goods or services, you should know when you can expect to get paid to plan how to go forward with your business and your budget. According to Atradius’s 2020 report, 43% of invoices issued in the US, Canada, and Mexico, were unpaid by their due date, while the digital advertising industry report for 2013, conducted by FastPay, showed that only 6% of invoices were paid in under 30 days. Now, for small businesses, that’s a lot of money that can’t be put to further use. Any late invoice payment can hinder your company’s growth and profitability. Clearly defining when you want your customers to pay you during negotiations, including the terms in the contract and each consequent invoice, is the first step to ensure that you’ll be paid on time. You can also give discounts for prompt payments or use late fees to emphasize the importance of timely payments to your customers.What Are the Best Practices?For those starting their business or experiencing problems with late payments from their customers, there are some practices you can adopt to help solve these issues by implementing the right invoice terms and conditions. New businesses often underestimate the time and effort it takes to create quality invoices and chase payments. This can be a time-consuming and error-prone process. Ensuring that you dedicate enough time or assign the right person to the task of establishing a foolproof invoicing system is fundamental. Ultimately, you can also outsource these and other bookkeeping tasks to an online bookkeeping service. From there on, establishing your terms early on is crucial. You know the dynamics of your business and how fast the payments should be. Approximately 75% of invoices ask for payment within two weeks, so don’t hesitate to set short payment terms and conditions for an invoice.Send your invoices as early as possible, though, so that you can expect prompt payments. Have reminders set in place, even before the due date, as not everyone will be quick with their payments without being reminded about it first. Late fees are not uncommon either or picking up the phone to ask for late payments. It’s a dull and tedious process, but you can’t live on promises. Unfortunately, in extreme circumstances, you might also need to take legal action to get those invoices paid in time. It is an excellent idea to have an online legal counsel to contact for legal advice. There are always some incentives you could offer, too. Setting up discounts for prompt payment within the terms of payment is always a good idea, and while you might receive less, the money will be in your account faster so you can put it to good use. Could Invoicing Software Help?An impressive amount of invoicing software is available on the internet. It can effectively automate a significant part of handling invoices and payment terms as it enables you to create invoices with a click, set automatic reminders, and much more.Overall, some of the best software you could use to help you handle your books and invoices are Quickbooks, Safebooks, Zoho Books, among others. Each of these will save you a ton of time and, on some occasions, money, too. What Are Payment Terms on an Invoice?If you haven’t handled invoices before, you’ll likely struggle to find or add a particular piece of  information in one. While there is software that can generate invoices for you, assistant services if you prefer it handled by an experienced personnel, and plenty of readily available templates, it can be stressful if you don’t know what you are looking for in the first place.The safe bet is usually to check for the due date. This is always included in all the templates under invoice details, together with an invoice number and invoice date. Here, you will usually find payment terms on an invoice.

By Vladana Donevski

Whether you’re the owner of a local shop or you’re doing your business online, accounting and bookkeeping are equally important for your business. Both have the same goal: to manage your financial help and make your business stronger. Still, while the boundaries may be blurred, there’s a significant difference between bookkeeping and accounting. Bookkeeping is the process of gathering data associated with your business activities, while accounting analyzes that data, helping you make better decisions for your business. If you’re not a financial expert, there are good chances that you didn’t understand a word from that definition, which means you need to be better informed about bookkeeping and accounting responsibilities. Luckily, our guide will help you figure out the similarities and discrepancies between these two positions, as well as when and why you should hire someone to fill either role. What Is the Difference Between Bookkeeping and Accounting? Bookkeeping is where it all starts: It’s the first step in taking care of your business’s financial health. It involves recording and collecting your business’s daily financial transactions, including bank transactions and receipts for sales or purchases. Bookkeeping refers to the technical process of organizing and preparing your profits and expenses for further analysis. Once that’s done, the financial data you get is subjected to the accounting process. Accounting formulates the big picture of your business by dissecting and interpreting financial information. Accurate accounting is crucial for business owners, as it provides insight into their business’s financial condition. Basically, you shouldn’t pit bookkeeping vs. accounting. Bookkeeping is more about record keeping and classification, while accounting requires more knowledge to “read” the financial information. Both are essential for a successful venture. Many people do some sort of bookkeeping, i.e., they record receipts and categorize their expenses every month to make budgeting decisions. However, business bookkeeping is more stressful, as reconstructing your business’s financial history is no small feat. The accounting process goes a step further, helping business owners run their business better and, more importantly, in accordance with the law. Accountants are responsible for payrolls and taxes, too, so they need to stay up to date with the state laws. The Bookkeeper vs. the Accountant What Does a Bookkeeper Do? A bookkeeper is responsible for taking care of your daily finances. They track your bank transactions, record your sales and purchases, and maintain your general ledger and payroll. The bookkeeper must record your financial transactions regularly and organize them in a way that’s understandable to you. Depending on your needs, bookkeepers can create monthly or weekly financial statements displaying your company’s income and all its expenses. A bookkeeper’s job doesn’t require any formal education, but they need to know how to use bookkeeping software, like QuickBooks or FreshBooks. A bookkeeper has to be a responsible person, since one of the most important bookkeeper duties is to take care of a general ledger - a book that contains records of all your sales and purchases. Although there’s no bookkeeping school, they can get licenses from the American Institute of Professional Bookkeepers (AIPB) and the National Association of Certified Public Bookkeepers (NACPB) to prove that they passed the necessary tests and have the required experience. It’s always good to know that your bookkeeper is certifiably ready to handle your daily finances. Moreover, both agencies require yearly educational courses for license holders to learn new skills. Now when you know what the role of a bookkeeper is, you can think about how much money you’re ready to pay for this service. A bookkeeper’s salary depends on several factors: Your business needs, the state your business operates in, and the level of expertise you’re looking for. Before looking for a professional bookkeeping service, figure out what bookkeeping skills you need and how often you’ll need them. Some business owners learn to use bookkeeping software and only pay for accounting services. However, if your business documentation is too complicated to manage, an experienced bookkeeper is what you need. Once you know the tasks you need one for, you’ll know whether to hire a part-time or a full-time bookkeeper and whether they need to be certified. What Is the Role of an Accountant? An accountant interprets financial data recorded by a bookkeeper and gives business owners detailed insights into their business to help them make financial decisions. Accounting is a practice that has strict requirements and standards each accountant must follow. During financial accounting, an accountant first verifies and analyzes the data provided by a bookkeeper. Then, the accountant creates financial statements and reports that showcase your business performance. These documents include balance sheets, and income and cash flow statements. One of the most important accountant responsibilities is tax preparation and filing tax returns. Unlike bookkeepers, accountants must be familiar with tax laws, know how to calculate deductions, and prepare your returns for the IRS. An accountant also reviews your general ledger to see whether all transactions are correctly recorded. The other part of accounting is advisory: Providing financial advice to business owners based on their financial reports. An accountant with knowledge about your business’s financial health and market opportunities can greatly help your business growth. Although there is a significant difference between bookkeeping and accounting, a bookkeeper and accountant work in tandem. We can think about an accountant as someone who gives directions to a bookkeeper when needed. For example, an accountant keeps track of law changes related to tax returns and helps bookkeepers manage payrolls. Unlike a bookkeeper managing daily transactions, an accountant uses this data to offer an all-encompassing overview of financial health, and helps you plan for the future. Even if you can do bookkeeping on your own, you must hire a professional to do your accounting. After all, the primary difference between an accountant and a bookkeeper is schooling. To be an accountant, you have to get at least a bachelor’s degree from an accredited university, and further your expertise with additional certificates and licenses. The distinction between a regular accountant and a certificated public accountant is also essential. A CPA has at least 150 hours of specialized education and a four-part exam under their belt, and meets the American Institute of CPA’s experience requirements. CPAs win every time in a CPA vs. an accountant comparison, especially if your business has complex tax returns. CPAs specialize in doing taxes, and they can communicate with the IRS on your behalf. However, CPAs are also more expensive to hire. Bookkeeping Versus Accounting – An Overview  If bookkeeping and accounting looked like the same job to you, now you know that these are two different roles with different responsibilities and education. They are both parts of the same process - taking care of a business’s financial health - but a bookkeeper and an accountant have different responsibilities. By now, you probably have a clear vision of what services you need for your business, but just in case, we’ll outline the critical tasks professionals from both branches perform. That way, you’ll always know what the difference between accounting and bookkeeping is: Bookkeepers Perform day-to-day financial tasks Record bank transactions, purchases, sales, receipts Take care of all your income Manage your general ledger Organize and categorize business expenses Manage the payroll Use bookkeeping and accounting software to produce weekly or monthly statements for business owners Work closely with accountants and send them statements quarterly for the purpose of tax payments Accountants Analyze and interpret financial data Advise bookkeepers on how to manage transactions and prepare the payroll Prepare financial statements for business owners (balance sheets, income statements, and cash flow statement) Review the general ledger and other documents Prepare taxes, calculate deductions, and work with the IRS Advise managers and business owners Further Reading Understanding the Types of Accounts in Accounting What Does an Accounts Payable Clerk Do? What is Petty Cash in Accounting? Conclusion Our guide answers the question: is bookkeeping and accounting the same? Financial bookkeeping is more of a technical position, while accounting requires detailed knowledge about finances and taxes. Bookkeepers and accountants work closely to create a clear financial picture for business owners, but they provide completely different services. While it’s possible to do your own bookkeeping with the right software, an accountant’s job can only be done by a professional with a degree. All businesses need both accounting and bookkeeping services to manage their financial records and successfully grow their business; it’s just a matter of who you can afford to hire.

By Danica Jovic

Combining the benefits of partnerships, corporations, and even sole proprietorships, LLCs have become a prevalent choice among entrepreneurs. However, focusing only on the upsides of any business type is a sure-fire way to get yourself in trouble. That’s why our guide will tell you all about the disadvantages of an LLC, along with many other pieces of information that will help you make a decision that’s best for you. Background  It may come as a surprise to some, but LLCs haven’t been around for that long. In fact, it wasn’t until 1977 that Wyoming enacted a law authorizing the creation of limited liability companies.  At first, LLCs weren’t as favored as they are today. As the IRS went back and forth on how to tax them, other states were hesitant to adopt this new kind of business entity. After 11 years, the IRS finally ruled that LLCs would be taxed as partnerships, and by 1996 all 50 states had LLC statutes. What is an LLC? To understand the advantages and disadvantages of an LLC, you must first know what exactly an LLC is. A limited liability company, or LLC, is a US business structure whereby the owners aren’t legally accountable for the company’s debts or liabilities. As mentioned, it’s a hybrid legal entity that integrates characteristics of a corporation and a partnership (or sole proprietorship). An LLC shares the limited liability traits with corporations and the pass-through taxation with partnerships. However, in certain situations, an LLC may choose to use corporate tax rules and act as a nonprofit. Disadvantages of an LLC Although forming an LLC brings many perks, the disadvantages are not to be overlooked, as they aren’t as minor as some might think. LLC Costs Depending on the state, fees for starting an LLC can range from $50 to $500. That means that, in some cases, a corporation is the cheaper option. Also, compared to a partnership or sole proprietorship, operating an LLC is slightly more expensive because you have to take care of both filing and annual state fees. LLC Taxation We should mention two quite significant LLC disadvantages pertaining to taxation that are often passed over. First, if you’re an LLC member, you have to pay income taxes on your share of the company’s profits even if you are not included in their distribution. On top of that, most LLC owners must pay self-employment taxes, which currently amount to 15.3% – 12.4% for Social Security and 2.9% for Medicare. LLC Banking Checks made out to an LLC have to be deposited into a business account, meaning it can be difficult or even impossible to cash them. This may not seem like a significant issue to some, but it's an LLC disadvantage nevertheless. LLC Member Turnover You must make sure to include a withdrawal provision in your LLC’s operating agreement. If you neglect to do so, your company might end up being dissolved in the event that a member leaves, goes bankrupt, or dies.  LLC Paperwork As an LLC owner, you’ll have to deal with quite a bit of additional paperwork since your personal finances must be kept separate from the company’s activities. The business will require a separate accounting ledger and bank accounts. LLC Funding One of the main disadvantages of an LLC is funding. Although you may find this business entity’s flexibility to be a huge plus, your potential investors will probably not share your opinion. They will often see LLCs as far too complicated and not worth the likely additional taxes. This a hurdle that many new business owners face and have difficulties overcoming without at least some professional legal assistance. Disadvantages of an LLC  Although forming an LLC brings many perks, the disadvantages are not to be overlooked, as they aren’t as minor as some might think. Costs Depending on the state, fees for starting an LLC can range from $50 to $500. That means that, in some cases, a corporation is the cheaper option. Also, compared to a partnership or sole proprietorship, operating an LLC is slightly more expensive because you have to take care of both filing and annual state fees. Taxation We should mention two quite significant LLC disadvantages pertaining to taxation that are often passed over. First, if you’re an LLC member, you have to pay income taxes on your share of the company’s profits even if you are not included in their distribution. On top of that, most LLC owners must pay self-employment taxes, which currently amount to 15.3% – 12.4% for Social Security and 2.9% for Medicare. Banking Checks made out to an LLC have to be deposited into a business account, meaning it can be difficult or even impossible to cash them. This may not seem like a significant issue to some, but it's an LLC disadvantage nevertheless. Member Turnover You must make sure to include a withdrawal provision in your LLC’s operating agreement. If you neglect to do so, your company might end up being dissolved in the event that a member leaves, goes bankrupt, or dies.  Paperwork As an LLC owner, you’ll have to deal with quite a bit of additional paperwork since your personal finances must be kept separate from the company’s activities. The business will require a separate accounting ledger and bank accounts. Funding One of the main disadvantages of an LLC is funding. Although you may find this business entity’s flexibility to be a huge plus, your potential investors will probably not share your opinion. They will often see LLCs as far too complicated and not worth the likely additional taxes. This a hurdle that many new business owners face and have difficulties overcoming without at least some professional legal assistance. Should You Create an LLC? It isn’t our intention to deter you from forming an LLC. Despite our list of LLC pitfalls, they can be a perfect fit for some entrepreneurs. To give you a better idea of what might be your best course of action, we’ll quickly compare your other options with LLCs. Sole Proprietorship vs. LLC A sole proprietorship is the simplest business structure of all. It costs nothing to form one, and you’re entitled to all the profits. However, you’re responsible for all the losses as well, and that’s not the only issue. The biggest drawback of being a sole proprietor is that you have no liability protection whatsoever. Unsatisfied customers can sue you directly, and if they win, they’ll have access to your personal assets. The most substantial LLC benefit is that, as an LLC member, you would be sheltered from such lawsuits. Any potential plaintiff would only be able to go after the LLC and its assets. On the other hand, creating an LLC does entail a bit more filling, so you might want to consider hiring an LLC formation service. Corporations vs. LLC Large investors prefer corporations because they are predictable, often have a long lifespan, and, most significantly, because it’s very simple to transfer shares. Almost the exact opposite can be said for LLCs – they are unpredictable, often short-breathed, and there is no such thing as LLC shares. Interestingly, these aspects are by many considered to be the main LLC advantages. LLCs allow you to choose who your business partners are. Also, they don’t have a rigid management structure, which gives you the freedom to organize your company however you like. Lastly, many people find LLCs to be the ideal choice for side businesses or short-term ventures.

By Isidora Alimpic

A limited liability company (LLC) is a corporate structure that can give you liability protection and shelter you from financial risk in case your business incurs debt or a lawsuit is filed against it. There are numerous types of LLCs, as many businesses can be structured in this way. The one we’ll be discussing in more detail in this article is a real estate LLC - what it is, how you can set up one, and what the key benefits and disadvantages of this business structure are. What Does LLC Mean in Real Estate?  Forming a Real Estate LLC An LLC can be established for a particular real estate asset or own multiple real estate properties. What’s important is that your LLC, being a separate legal entity, can purchase, own, or manage real estate. That’s thanks to the fact it has its own bank account, it files taxes on its own, and it acts as an independent real estate company. Several factors should be taken into consideration if you are thinking of setting up an LLC for your real estate business. We’ll now go over each so you can decide if this is the right option for you. Advantages of an LLC for Rental Property Here are some of the main reasons in favor of forming an LLC if you run a real estate business. Asset and Liability Protection First and foremost, you should make sure that your personal and business assets are separated. This is why most investors choose to form separate LLCs for each of their properties. By separating your properties, you are protecting them in case of bankruptcy or a lawsuit. Should one of your LLCs fall into debt, the creditors can only come after its assets, while your other real estate LLCs or your personal assets will remain out of reach. Tax Benefits One of the major advantages of an LLC structure certainly is the tax benefits. The Internal Revenue Service doesn’t tax LLCs directly, and there is a certain amount of flexibility in the process. And since single-member LLCs are eligible for pass-through income taxation, LLC members can tax any business income under their own personal tax rate. However, when it comes to employment tax, single-member LLCs are still counted as separate entities. If you are starting an LLC for real estate, you should know that the IRS can treat your LLC in three different ways, depending on the option you choose when filing Form 8832: Corporation - The IRS considers your business as an individual taxpayer. If classified this way, your LLC would need to report all of its income and deductions and pay the appropriate taxes. Partnership - All LLCs with at least two members are automatically classified as partnerships unless you specifically choose to be treated as a corporation. This setup of your real estate LLC would make you responsible for putting together the annual partnership tax returns. Disregarded entity - All single-member LLCs are eligible to be classified as disregarded entities, unless you specifically choose to be treated as a corporation. In this case, all the taxes owed by your LLC would be paid as part of your income tax return. Prior to deciding on the option you want to go with, note that you won’t be able to alter that decision for five years. Reliability and Ease of Transferring Interests Creating an LLC for real estate will give more professional appeal to your business, especially if you are trying to lease a particular property. A business or an individual will probably be far more confident renting real estate from an LLC than from an individual. And if you are considering selling your LLC, you’ll be happy to know that transferring membership interests is a relatively straightforward process. The LLC will remain the owner of its real estate assets; the only thing that will change is the ownership, which makes it easier to complete the transfer and preserve the business’s continuity. How To Set Up a Real Estate LLC A few steps need to be completed to set up an LLC for your real estate property. You can do it on your own by following our list of steps provided below or get help from an LLC service agency. Step 1: Research your state’s regulations Most investors decide to form their LLC in the same state they are doing business or where the property is physically located. This is generally the best course of action since you’ll have to pay a tax return in that state; however, some states do have more flexible tax policies. Either way, we advise you to get thoroughly acquainted with the laws of the state where you plan to form your LLC for real estate. If you are not sure where to begin, you can get help from a professional legal service.  Step 2: Choose a business name  When picking out a name for your LLC, you primarily need to make sure it doesn’t already exist. Of course, you should also focus on coming up with a name that has the potential to  attract new clients. So, make a list of a few catchy names and check their availability. Along with this, you’ll need to find a registered agent to sign a consent to accept any legal paperwork on behalf of your LLC. Step 3: File the Articles of Organization If you wish to create an LLC for rental property, you are obliged to file the Articles of Organization. It’s a document that states the company name, start date, address, business owners, and it contains a description of the business itself. This is the single most important step, so make sure to double-check you’ve included all the required info before you submit the document. There is also a filing fee you’ll need to pay. Its cost varies from state to state and can be as low as $50 or as high as $500. Step 4: Compose an operating agreement This agreement should be a part of your business plan, even if it’s not obligatory in your state. Real estate LLC operating agreement is a handy tool which will help you specify how decisions will be made inside the company and how you’ll distribute tasks among members. The agreement’s main purpose is to protect the business owners and predict scenarios that can potentially damage the business and its structure. Step 5: Step Publish your intent to file This step is only required in three states: Arizona, Nebraska, and New York, and it practically means that, if you are starting an LLC in one of them, you need to publish an ad in the local newspapers saying that you wish to create an LLC.  Step 5: Get the necessary licenses and permits When registering a real estate LLC, you usually need to gather various permits and licenses. The list varies by state, but it usually consists of a general business license, professional license, and a sales tax permit. Along with that, you should apply for a tax identification number with the IRS. You can find all of this information on your area’s Secretary of State website. Downsides of Starting an LLC in Real Estate While there are many benefits to structuring your real estate business as an LLC, there are some disadvantages of an LLC for rental property. So, before deciding whether to take a step in that direction, we advise you to consider the following cons: Franchise Tax Certain states charge a franchise tax on LLCs treated as corporations by the IRS. These taxes vary depending on the state; therefore, it’s advisable to check this with your local authorities. No Board of Directors The fact that an LLC doesn’t have a board of directors as a standard corporation does might impact your business. If your rental company wants to form a joint partnership with another corporation, they might see it as an issue. FICA Tax Also called a self-employment tax, this is something you should take into consideration if you wish to set up a real estate LLC. All members of an LLC are obliged to pay the self-employment tax. The rate is usually about 15% of the taxpayer’s overall income. Final Thoughts Nowadays, most real estate investors structure their businesses as LLCs. The most significant advantage of this business structure is that it offers protection from liability claims in cases such as construction accidents or issues with tenants. Tax benefits and the fact that LLCs can be filed with the IRS as disregarded entities are also reasons in favor of starting a real estate investment LLC, but before you go ahead, check your local LLC regulations.

By Nikolina Cveticanin

So, you operate a small business in these unprecedented times of pandemics. And it’s risky, of course. Would it be less risky if you opened another limited liability company? Can an LLC own another LLC? Is it even legal? In a nutshell: Yes. Not only that it’s possible and legal, but it’s an excellent idea, especially if you own several business lines. If you have multiple business ventures, and these come with various levels of risk, forming a subsidiary LLC for each of the ventures will minimize risk: If one of them fails, the assets of the others will be protected.But let’s start with the basics: What is a subsidiary? What do the terms parent LLC and subsidiary LLCs even mean? If you’re not familiar with these expressions, let alone with regulations and requirements, worry not; We’ll walk you through all the steps and explain all the pros and cons of this business umbrella structure. Also, we advise you to take a look at this list of LLC service choices.Types of LLCsA limited liability company or an LLC is a business entity that offers flexibility and simplicity. It can be owned by individuals, corporations, other LLCs, or foreign entities. The number of owners (called LLC members) is not limited, and most states allow single-member LLCs. But, how many LLCs can you have? And what are the benefits of having more than one?The number of LLCs one person can register is not limited. Similarly, an LLC can own multiple businesses, run as separate LLCs, where the holding LLC is the master entity.There are several types of LLC companies you can have: A single-member LLC (Sole Proprietorship) - has a single owner; A domestic LLC - operates in the country in which it was opened; A foreign LLC - does business outside of the country of origin; A professional LLC - for licensed professionals (usually doctors and lawyers) A series LLC - designates rights, obligations, and debts to smaller cells called series.How Can an LLC Own Another LLC?If you wish to register an LLC, you can do it on your own, or choose a cost-effective legal service to help you with the registration process. Essentially, there are three ways you can structure your business. First of all, you can create individual companies for as many businesses as you wish, as there is no limit. Pick a suitable name that hasn’t been registered, choose a registered agent, and file the Articles of Organization. Each business will count as a stand-alone entity. This option can be an excellent choice for real estate businesses. Secondly, you can create multiple DBAs under one LLC. In this case, the original LLC will not count as the LLC parent company. DBA stands for Doing Business As. It’s a kind of pseudonym for your business. Companies usually register additional business names because they want to operate under a shorter and more memorable name. Note that, by registering a DBA, you don’t create a new legal entity. If any DBA under your LLC is sued, the LLC is liable.The third option is to form an LLC holding company by putting multiple businesses under one LLC; Creating a subsidiary of an LLC, or multiple ones, instead of opening new LLCs is a good idea because each individual LLC, including the holding LLC, will be protected from the others’ liabilities. If you transfer your assets to the holding LLC, they will be out of reach of the subsidiary LLC’s creditors, while a lease agreement can be signed so that the subsidiary LLC can still use them.Once you go through all the possibilities and make a plan, we would advise you to find a bank to help your small business get on track.  Benefits of an LLC Owning Another LLCThe most significant advantage of this business structure would be minimizing the potential financial risk if one of your companies stumbles upon some bumps in the road. Once your subsidiaries are owned by a business entity that protects them, if any of them loses their value, it won’t jeopardize the master entity. And if one of the companies gets sued, others are safe from liability, which is a significant benefit.On top of this, opting for an umbrella structure benefits your reputation, too. Your LLC owned by another LLC is more likely to get a loan from a bank, especially if it’s a startup. Being a part of a larger company gives you access to better rates and terms for bank loans. By the way, if you have a bad credit score but want to start a small or medium-sized business, check this list of banks that offer bad credit business loans. Last but not least, each subsidiary has its own management, meaning that the holding company’s managers don’t need to manage them too. In fact, they don’t have to know anything about the subsidiaries’ day-to-day operation.Benefits of an LLC Owning Another LLCAs always, there are downsides to the parent-subsidiary LLC structure as well. Owning multiple small businesses means much more paperwork when launching the LLCs, filing forms, opening and maintaining bank accounts, tax documents, payrolls… It also means higher costs, because you need to pay filing fees for each LLC you open. Besides, creating a holding company and having subsidiaries won’t protect the subsidiaries from liability in case the parent company gets in legal trouble. Creditors might tap into the subsidiaries’ insurance coverage if the judgment exceeds the parent company’s insurance.  To sum it all up: An LLC owning another LLC represents a legal way of structuring your business but you should always consider all the possible benefits and disadvantages before restructuring your company in this way.

By Danica Djokic

Your business name plays a monumental role in how your company is perceived. It’s the first thing your clients interact with, and getting it right is essential for branding success. As such, there are a number of good reasons that can prompt you to change your LLC name.  Sometimes a business name just needs to be modified to become more unique. Other times, the departure of a business partner or changes in the branding strategy may require adjustments. Every business evolves, and if you start experiencing an identity crisis, it’s only logical to consider a business name change. How to change the name of your LLC? Changing a business name can be frustrating, especially if you aren’t familiar with the procedure. For starters, bear in mind that if you have partners, you’ll need their written consent to make any name changes.  Each state has its own rules and regulations when it comes to LLC names. The process of changing your business name can be a little more complicated if your business operates in more than one state. Naturally, changing an LLC name will cost more if you do business in multiple states.  We created a step-by-step guide that thoroughly explains everything you need to know to complete your business name change. Of course, if this is something that you aren’t ready to do on your own yet, there is no shortage of legal services that can help you change your business name. Check available LLC names If you’re trying to figure out how to change your LLC name, the first step involves checking whether your new name is available in the state where your business operates. Business filing agencies allow you to conduct a search on their websites for free, but you can get the same information from the secretary of the state’s website.  It’s important to complete this step correctly and select a name that the state will approve. You cannot choose names that are similar to other LLCs. It’s also important to remember that your requested name can still be claimed by third parties until it’s officially approved and filed with the state. Approve a resolution to change the name of your LLC The next step is to get a written resolution that shows that all owners and members of your LLC agree with the name change. Each business should have an LLC operating agreement, a document that outlines how important decisions are made in the company. In some companies that process only involves two people, while others require all members to vote. Either way, having a proper operating agreement can speed up the entire process. This is also one of the main downsides of an LLC, as it requires strict rules on who makes decisions. In case you don’t have an operating agreement, you can draw up an informal one with other LLC members. Just make sure that you meet the LLC name requirements that vary from one state to another. Amend the name in your articles of organization After you get written approval to change your business name, you’ll need to amend your articles of organization. This is the longest step of the entire process, and you usually need to wait up to 30 days for the state to make the changes. It’s also referred to as articles of amendment or certificate of change. Each state has its own forms on how to change the name of an LLC.  You can easily download the forms on your computer and file them. The filing fees depend on your state of incorporation. Change your business name in your operating agreement The state will inform you about your approved name change by mail. Your registered agent can receive this document on your behalf and inform you when the mail arrives. You’ll then need to make updates to your operating agreement to reflect the name change. IRS LLC name change One of the most important things you need to do after you change your business name is inform the IRS about it. It’s a standard procedure requiring you to file a proper form. There are several options for paying taxes depending on whether you’re a single member, co-owner, or pay taxes as a corporation. You can read our guide on how to pay taxes with an LLC and find out everything you need to know. Inform Licensing agencies If you operate a business that requires state or federal licenses, you’ll need to inform the relevant agencies about the name change. Some of these agencies may require you to produce a certified document from the state authorizing the name change.   Change the name of an LLC on your business accounts Once the name change is finalized, you’ll need to update all your accounts, contracts, invoices, and leases. You’ll also need to contact your bank and order new credit cards and checks if your company uses them.  The business name must be updated on all your official documents. For instance, you need to change it on all the contracts with your clients and suppliers. Update the name on all other documents The formal part of the LLC name change is completed once you inform your bank and vendors, but then you need to change the name everywhere else. First off, make sure that your website is updated with the latest information. Perhaps you’ll need to change your email address if it contains the old name. You’ll also need to print new business cards, brochures, and any other promotional material you show to your clients.  How can you change the name of your LLC without changing the entity’s legal name? If changing the entity’s legal name seems too complicated or isn’t necessarily the right fit for your business, you can always choose the easier option of filing for a DBA or “doing business as.” This allows you to run your business under any name you want while keeping your legal name unchanged. A DBA is also known as a fictitious name. In some states, business owners are required to have a fictitious name so the state can protect consumers from illegal businesses. Aside from that, a DBA is commonly used for marketing purposes, allowing LLC owners to use another name for promoting their business. How much does it cost to change the LLC name? The costs of changing your business name vary from state to state. Most charge a filing fee to process your application, which typically ranges between $20 and $150. The costs can be higher for those who have LLCs that operate in several states. Bottom line It’s perfectly legal to change the name of your business, and if you follow our short guide, the entire process is straightforward and entirely manageable. But sometimes, changing the name of an LLC is not the best option for business owners. If you aren’t absolutely sure that a name change is necessary, you can file for a DBA instead. This will allow you to operate under a fictitious name while keeping your original LLC name. The DBA filing process generally involves nothing more than a small fee and a simple form.

By Danica Jovic

“LLC” is a term you may often see as part of a company’s official name. But have you ever wondered what exactly it stands for? The abbreviation LLC, along with its synonyms such as L.L.C., LC, L.C., limited company, limited liability co., and Ltd. liability company, indicates that a business is formed as a limited liability company rather than a sole proprietorship, partnership, corporation, or any other type of company. If you’re on the hunt for the most suitable business structure for your newly established company or growing sole proprietorship and need answers to questions like what does LLC mean for a business and how does it work, keep reading this article.Understanding the Concept of Limited Liability CompaniesAn LLC is a type of business entity you can form by filing the necessary paperwork in the state where you intend to conduct your business. The regulations surrounding limited liability companies may vary slightly from state to state. Owners of an LLC are generally called members. An LLC can have just one owner (a single-member LLC) or many owners (a multiple-member LLC). While there are no differences in how single-member and multiple-member limited liability companies run their business, there is a difference in how these two LLC types are taxed. States impose few restrictions when it comes to LLC ownership. Members can be individuals, corporations, other LLCs, and even foreign individuals and business entities, making it an extremely flexible option regardless of your circumstances.However, depending on the nature of your business, you may not be able to start an LLC. For example, an entity such as a bank or an insurance firm generally cannot be structured as a limited liability company. Despite these restrictions, though, the LLC is America’s fastest-growing business designation type, with more than 2.4 million US businesses identifying themselves as limited liability companies nowadays.So, what is it that makes the concept of an LLC so appealing to American entrepreneurs? Not only is this business structure easy to set up, but also it provides a high level of flexibility and protection to its owners (members). In many cases, opting for an LCC represents the best of both worlds.A limited liability company, by definition, protects its owners from being held personally liable for the company’s debts. In other words, if a creditor goes after the LLC’s assets, members may lose the money they invested in the company, but their personal assets - such as real estate, vehicles, bank accounts, heirlooms, and investments - won’t be at risk. However, if the company fails to meet legal and reporting requirements or fraud is detected, the corporate veil protecting the members may be lifted, allowing the creditors to go after them. Another reason why many entrepreneurs opt for setting up an LLC is that this business type can choose not to pay federal taxes. Thanks to flow-through or pass-through taxation benefits, the profits and losses of an LLC can be passed through to members and listed on their individual tax returns. Alternatively, an LLC can choose a different classification and be taxed as a corporation. Let’s take a look at some of the most apparent differences and similarities LLCs share with corporations and partnerships, the two business structure types limited liability companies are often confused with.LLC vs. CorporationThe main difference between a limited liability company and a corporation is that corporations are owned by their shareholders, while an LLC is owned by one or more individuals or business entities. An LLC structure is governed by a written or oral operating agreement that identifies the way the company will be run, the way profits will be shared, and the roles of the members. However, limited liability companies are very flexible when it comes to the specifics of these agreements. On the contrary, corporations have a much more rigid structure of directors, officers, and shareholders.As far as maintenance goes, corporations need to organize annual shareholder meetings to maintain their status. On the other hand, LLCs aren’t required to hold annual meetings, keep minutes, or even have a board of directors.Taxation flexibility is among the main reasons why entrepreneurs choose to set up an LLC. Corporations pay corporate income tax on profits and their shareholders also pay income taxes on the profits they receive as dividends (C corps). In some cases, corporations may qualify to avoid double taxation by passing through the profits to shareholders’ personal tax returns (S corps). In contrast, limited liability companies are pass-through entities by default. However, their full range of taxation options includes the models of a sole proprietorship, partnership, S corporation, or C corporation.Creating an LLC or a corporation lets you make the most of liability protection from the company’s obligations. While both business entity types offer the limited liability feature, corporations are favored by businesses that intend to seek outside investment, while an LLC is a smart choice for startups and small, owner-managed companies that need flexibility and want to avoid excessive corporate formality. LLC vs. PartnershipWhen two or more people decide to go into business together, they don’t need to file any paperwork to officially form a business entity - the partnership is created automatically. On the contrary, forming an LLC requires filing articles of organization with the state the company plans to do business in and complying with any additional state filing rules. In addition to these formation disparities, partnerships and LLCs also differ when it comes to personal liability. While corporations and limited liability companies offer liability protection from the business’s creditors to their shareholders/members, partnerships and sole proprietorships do not. In other words, partners can lose their personal assets if their company gets sued or falls into debt. So, is an LLC similar to a partnership in any way? Yes, it is. Both limited liability companies and partnerships offer the benefits of pass-through taxation, which means that there are no corporate taxes to worry about, as business owners report the company’s profits and losses on their individual tax returns. Moreover, as far as tax benefits go, both LLCs and partnerships qualify for the 20% pass-through deduction according to the Tax Cuts and Jobs Act.Forming an LLCShould you decide to form an LLC after comparing this business structure with corporations and partnerships, note that you’ll be presented with two options; you can either form an LLC yourself or hire an LLC service company to help you with the procedure. Additionally, you can also consult with a lawyer or an online legal service company if you need help with any legal matters. No matter which approach you decide to opt for, you’ll need to take a few simple steps: Choose your state of formation. This can be the state you live, but it must be the state you intend to conduct the business in.  Pick a name for your business. Your LLC’s name must be unique in your state. We’ve already answered the question “what does LLC mean?” However, now we need to add that this abbreviation or any of its variations must form a part of your company’s formal name.  Appoint a registered agent. A registered agent or an agent for service of process is a person or company that deals with all official correspondence such as legal summons and document filings for your company. File your LLC with the state. To officially create your limited liability company, you’ll need to file your formation document (usually referred to as articles of organization) with your Secretary of State’s office. Create an LLC operating agreement. Although this step isn’t officially required by most states, we still suggest you create an operating agreement for your LLC. This document can either be written or oral, and its main purpose is to outline the member roles and ownership structure of your company. Get an EIN. After completing your formal LLC creation, you’ll need to apply for an Employer Identification Number if you want to open a business bank account and hire employees.

By Milica Milenkovic

Not all businesses are built to last, and, occasionally, the time comes to close your LLC. If you were excited about starting it, this could be a stressful moment, but there are also those looking forward to ending things, as it can be the lesser of two evils. Whatever the case may be, terminating a company requires some know-how. Luckily, if you were worried about how to dissolve an LLC, we’re here to go through the process with you and discuss the steps you need to take. Several factors affect this process, including the laws of the state your company was registered and operated in, the number of LLC members, and whether there is an LLC Operating Agreement in place. Ultimately, there are different kinds of dissolutions for different kinds of LLCs, so you need to discern which category yours is in and what is required to complete the process. Why Would You Need To Dissolve an LLC? “Forgetting” to do so is, unfortunately, a common solution, especially for small businesses without employees or companies that were never actually used. This is certainly the path of least resistance in the short-term, but ending things properly has its benefits. For one, you won’t be surprised by a fine from a government agency or, even worse, a lawsuit for unpaid debt. As an LLC owner, you are legally required to file annual reports, pay yearly fees, and minimum taxes. These will stack up, along with their late fees, until you take the necessary steps to dissolve an LLC. Step 1: Voting on Dissolution If you are the sole member of your LLC, then you skip this altogether. However, if you’re not the only founder, all LLC members must vote on dissolution before any action is taken. This is also where an LLC Operating Agreement could come in handy - provided you created one when establishing your LLC - as it usually sets the rules for voting on dissolution. Step 2: Filing for Dissolution This step could either come second or last, depending on your state’s rules. Nevertheless, you need to file the necessary papers, usually the Articles of Dissolution, with the relevant authority. It is usually the same place where you filed the papers to open your LLC in the first place, most likely the Secretary of State. Keep in mind that these procedures and their accompanying fees vary between states, particularly if your LLC operated in more than one. While checking everything might sound troublesome, it’s a lot less so than the potential tax issues you might be ending up with otherwise. Step 3: Filing for a Final Tax Return Wondering how to dissolve an LLC with the IRS? Closing your company means you have to check in with the Internal Revenue Service (IRS), and your first order of business is filing a final tax return for your LLC. For example, if you have employees, you must pay out their final wages and compensations, if any are owed. In addition, you have to make final federal tax deposits, report employment taxes, and all payments to contract owners exceeding $600. Once you pay the taxes you owe, the last step is to cancel your EIN business number and close your IRS business account. To avoid any confusion, you can always check the IRS’s business closing checklist. Step 4: Notify Your Creditors Some guides on how to dissolve an LLC suggest this as the first step, simply because it is good business practice. In truth, it is entirely up to you when you’ll do it, so long as you get it done. Notifying your creditors will help you keep all your finances in check. However, the rules here also differ according to state: You might be eligible for claims from companies you’ve never worked with. Some states require you to put up a notice within your local newspaper, too. Still, whatever the state-specific rules, you must notify your creditors when dissolving an LLC. The memo you send should contain: A notice that your LLC has been dissolved or is in the process of dissolution The deadline for submitting their claims, the information they should include in them, as well as the mailing address to send them to A statement barring claims not received by the deadline Step 5: Dividing the Assets The last step on our list does not apply to all LLCs, but it’s crucial when there are two or more LLC members. LLC assets are typically distributed depending on the percentage of ownership.  

By Vladana Donevski

Whether you’re starting a new business or looking to reconstruct an existing company, it’s crucial to determine which business type best suits your current needs. For most entrepreneurs, the choice comes down to maintenance costs and the level of liability protection they need. While an LLC offers liability protection and other superior benefits, a DBA is generally less costly to maintain. Still, the DBA vs. LLC comparison is a complex matter, and these two differences are just the tip of the iceberg. We’ve created this guide to help you understand how these two ways of conducting your business are different but also how they’re alike. Before we dive into discussing comparable features, here are in-depth definitions of both concepts:What is a DBA?A DBA or Doing Business As is also referred to as a fictitious business name, trade name, or assumed business name. It enables a business to operate under a name that differs from its legal name. For example, if a person called Alison Baker wants to operate her photography business as AB Photography, she’ll need to register a DBA. Of course, if she decides to use her legal name and go into business as “Alison Baker,” she won't have to obtain a DBA certificate. It’s a common misconception among first-time business owners that registering a DBA means formally creating a business structure with liability protection. The truth is that DBAs cannot be described as legal entities and don’t protect your personal assets against creditors and lawsuits.Essentially, a DBA is an official registration of your business name that you can use to run the company. Partnerships and sole proprietorships commonly use fictitious business names as these company structures are not separate legal entities from their owners. Entrepreneurs who run these types of businesses usually register a DBA name for branding and banking purposes. In other words, a “doing business as” registration lets you change the name of your business with minimum formality while also allowing you to open a business bank account and collect payments under the assumed name.Note that you can also register a DBA if you’ve previously formed an LLC and want your limited liability company to operate under a different name.Most states let you apply for a DBA license in the county or city where the business is located. While registration requirements may vary based on your specific location, there are some general rules and restrictions that apply nationwide. For example, sole proprietors and partnerships aren’t allowed to use designations such as “LLC,” “Corporation,” “Inc.,” or any other labels that would imply the business is anything other than a DBA.What is an LLC?An LLC or a limited liability company is a business structure type that lets a company operate as a separate and distinct legal entity from its owners. In other words, an LLC can enter into agreements and own property, ensuring that the company’s dealings are kept separate from those of its owners. While LLCs come with fewer restrictions than corporations, they require more formalities than DBAs. To form an LLC, business owners must file articles of organization with the secretary of state’s office, create an operating agreement, and appoint a registered agent. An LLC must be member-managed or manager-managed. A limited liability company’s members are the owners of the business, while a manager isn’t required to be a member.In addition to personal liability protection, another feature that made it to the top of the list of LLC advantages is tax flexibility. Unlike C corporations, an LLC is not a separate tax entity. Instead, it’s known as a “passed-through entity” where all profits and losses go through its members, who simply include this information on their personal tax returns.If you decide to form this type of business structure, you’ll be required to use your LLC’s legal name in all your affairs. These include filing government forms, dealing with customers and suppliers, and banking.DBA vs. LLC: What’s Right for Your New Business?Both DBAs and LLCs have several unique features that different business owners can interpret as advantages or disadvantages based on their individual needs. To help you decide whether to set up an LLC or a DBA, we’ve made a list of the most important factors each entrepreneur needs to take into account:Formation and MaintenanceBoth DBAs and LLCs are relatively simple to create. No matter which option you decide to go for, the steps include filing paperwork with the state and a filing fee. While formation procedures and fees for LLCs and DBAs may differ slightly from state to state, the costs of registering a DBA are generally lower than the ones facing business owners who are forming an LLC. Also, keep in mind that the most apparent bureaucratic difference between a DBA and an LLC is that the former requires filing renewal paperwork on an annual or biannual basis.After filing for a DBA, you’ll be able to carry on with business as usual. On the other hand, after forming an LLC, you’ll be required to treat the company as a separate entity by following corporate formalities and drawing a clear line between your personal and business assets; otherwise, you could lose your liability protection. Personal LiabilityUnlike a DBA, an LLC provides liability protection, which means that if someone sues a limited liability company, its owner cannot be held personally liable. In other words, operating an LLC, a separate legal entity, means that your personal assets such as your bank account, car, and home are protected from creditors. On the other hand, if you register a DBA, you’ll remain personally responsible for the obligations of your business, and your personal assets can be confiscated to cover any outstanding debts.Tax ConsiderationsWhen making the DBA vs. LLC comparison, tax advantages are of the utmost importance. If you choose to register a fictitious name, your business taxes and filing requirements won’t change. Here’s an example - if you owned a sole proprietorship before registering the DBA, the way you report your income and losses on your personal tax return remains the same. Should you decide to form an LLC, you’ll have new tax considerations to keep in mind. These include filings with your state tax agency and the IRS and an opportunity to opt for corporate tax treatment. Additionally, some states limited liability companies must pay franchise taxes.Trademark ProtectionIf you are still unsure whether you should choose a DBA or an LLC for your online business or any other company type, we suggest you evaluate both options by taking trademark protection into account.  Considering that you don’t have to choose a unique name when registering for a DBA, it means that someone else could be using your business to sell goods or offer services. On the other hand, by forming an LLC, you can legally prohibit anyone operating in your state from using your company’s unique name. However, neither an LLC nor a DBA can protect your business’s name on the national level. To do so, you’ll have to file for registration with the US Trademark and Patent Office.BankingAs far as banking goes, both structures let owners make financial transactions under the names of their companies instead of their personal names.DBAs enable partnerships and sole proprietorships to deposit checks and accept payments made out in the business's name to any bank account associated with the DBA. Also, creating an LLC and opening a bank account under the same name enables you to accept checks made out to your company’s name.

By Milica Milenkovic

Say you have a new company producing cellulite cream for arms. It’s generating buzz and getting great reviews from cosmetic sites and magazines. The only thing missing is a catchphrase that consumers immediately connect with the product.  Finally, after many sleepless nights, it dawns on you. The perfect catchphrase: “Dimply arms begone!” You call your commercial agency to launch the campaign, and word of mouth will do the rest. But in order to grow your business, you need to protect your intellectual property. That said, if you’re trying to figure out how to copyright a phrase, you’re wasting your time. Phrases cannot be copyrighted; they need to be trademarked. Coin a Phrase Most of today’s products and creative works are protected by law. So if you’re in the process of opening an LLC, for instance, consider employing some of the top LLC services, which check whether the name you choose for your company is being used by anyone else.   The next step is coining that perfect catchphrase. These short phrases are immediately distinctive and often live in the present. Many companies use similar catchphrases as a tool for brand recognition. They are easy to remember and serve as an effective advertising method. As such, these valuable taglines are protected under intellectual property laws, which brings us to the difference between trademark and copyright. Should I Trademark It or Copyright It? A trademark is a word, phrase, symbol, or design that distinguishes one company's goods from its competitors.  A service mark is similar, except it distinguishes the company’s service from others. For the sake of simplicity, they are often bundled together under trademark.  Trademarks don’t expire. Similarly, trademark registration can also last forever as long as you file specific papers and pay the required fees.  So, what does a copyright mean then? You use copyright to protect creative content that’s either been written down or recorded. However, copyright laws do not protect ideas, titles, slogans, or phrases. So don’t waste any more time trying to understand how to copyright a phrase. Simply trademark it.  Here, it’s also important to make the slogan vs. tagline comparison. While slogans focus on the company or a particular product, taglines capture the spirit of the brand.  For example, Joe McEnroe trademarked the famous phrase “You cannot be serious” after a heated disagreement with the umpire at Wimbledon in 1981. In 2002, he used the phrase as the title for his autobiography. Meanwhile, Adidas International Marketing trademarked “Impossible is Nothing” for the company’s line of sports clothes and shoes. Saving the Trademark There are many ways to protect a trademark. If your company uses a trademark in commerce, it falls under the “common law” trademark. The great thing about it is it’s easy to obtain this form of trademark protection along with the ™ symbol. But you have to keep in mind that the “common law” trademark is only valid in a specific geographic location, usually local. Another drawback is that you have to prove you are the original owner of the trademark who regularly uses it. This may be a nightmare if a trademark dispute reaches the courts. The other way of protecting a trademark is with trademark registrations through a state agency or, on a federal level, with the United States Patent and Trademark Office. We recommend the latter. When it comes to the trademark vs. registered comparison, it’s really a no-brainer - the best thing is to have both. There are many benefits to having USPTO protection. This way, your trademark is protected on a national level, with an ® symbol. Your trademark is stored in the USPTO list, so others may be made aware of it. But the most important benefit is that you have the ability to sue for possible infringement. Infringing on someone else's trademark is a serious issue, be it a phrase or a logo design. Just keep in mind you can’t copyright a logo either; you can only trademark it. Recently Fintech startup Current accused Facebook of stealing its logo for the new cryptocurrency project. In order to avoid these unpleasantries, make sure you use the best logo makers. How To Trademark a Slogan or Phrase Once you’ve decided to trademark your phrase with the USPTO, check the agency’s database to see if anyone else is using the same phrase.  Then make sure you’re following the USPTO trademark rules (and catchphrase rules). Check if your phrase is different and unique enough from other trademarked phrases. Make sure you use your phrase in conjunction with the sale of goods or services. That way, you may trademark phrases for usage in commercial purposes. Next, do a trademark definition. Your trademark shouldn’t sound generic and explanatory or use familiar business or industry-specific terms. An additional but beneficial step would be to contact the trademark attorney. That way, you can make sure the phrase you want to use can be trademarked and if it follows all USPTO trademark rules.  Another important legal requirement for setting up a business involves hiring a registered agent. This can be either a company or an individual who will receive service of process if you’re ever part of a legal action. Here are some of the very best registered agent service options in 2021. After you define a trademark, you’ll have to apply through the USPTO’s Trademark Electronic Application System. The application fee is between $250 and $350, depending on the type of goods or services. These fees have to be paid individually for all types of goods and services, even when using the same phrase. This can become a costly affair for some businesses, especially since you can’t get a refund if your trademark application is refused.  The process of validating your application may take six to eight months. The agency’s lawyers will contact you with their decision or request additional information.  If your application ends up abandoned during this period, you may have to pay a $100 petition fee to proceed with the application process. Keep these costs in mind when you decide to trademark a phrase. If your application is accepted, you’ll have to file Section 8 documents on the fifth and tenth year of using the trademark. In these renewal documents, you’ll specify if you’re using the trademark in commerce for the filled goods or services. After your phrase is trademarked, keep an eye on the USPTO’s Trademark Electronic Search System to see if anyone is using your trademark and then take appropriate legal action. Is It Worth the Trouble? Trademark slogans have become a powerful and proven ally in the advertising business. Application fees can be costly for small businesses trying to trademark a company slogan. But those that have the financial muscle can benefit a great deal from trademarking their intellectual property. Of course, you’ll never have to ask the question: how much does it cost to copyright a phrase as copyright laws don’t cover short phrases.

By Nemanja Vasiljevic

If you’re looking to purchase a property for your business or newly formed LLC, you probably already know that you need a pile of legal documents. An essential part of the deed is the legal description of the property.  Defining Legal Description The legal dictionary defines it as a “formal, detailed, and sufficient property/asset description that definitively identifies and locates a specific property.” The legal description is an essential component of a deed that describes and defines the property that’s bought or sold. It may sound simple, but there cannot be any inconsistencies in this description or imprecise language used. If the description is left open to interpretation, it may result in legal complications and you not owning the exact property you’ve purchased.  To analyze why a legal description is a significant part of the deed, we need a more thorough definition. Deed Definition The deed is a document that establishes ownership over a property. In this case, we are interested in a deed that transfers real estate ownership between the seller and the buyer. Components that make the deed valid, legal, and contractual are:  Grantor and grantee identification Expression of conveyance by the grantor Legal description Signature of grantor or grantors  Simply put, the deed is a legal document that transfers ownership of the property from the grantor to the grantee. Keep in mind that there are other types of deeds, but the property’s legal description is the key element of transferring ownership of the real estate.  Types of Legal Descriptions The legal description of real estate has to cover the parcel of land with accuracy and precision to be easily identified and located. There are several types of legal descriptions used to identify and thoroughly describe the property in question:  The US Public Land Survey System  The lot and block survey system (Subdivision)  Metes and Bounds The State Plane Coordinate System Depending on the circumstances, multiple legal property descriptions may be used to describe the real estate listed on the deed. Using more than one method to define the property nullifies the chance of misinterpretation or error.   The USPLS is a grid system set up by the federal government to describe large parcels of public land. Any property or piece of land can be precisely located using township, section, and subsection labels in a county defined by the Principal Meridians and Baselines. This system was established in 1785 and is used in 30 states.  A legal description of the property primarily used in urban and suburban areas is known as the lot and block survey system. Also known as the recorded plat survey system, this legal description starts with a more extensive section of land that’s already described by the metes and bounds method or by another description. This parcel is then divided into smaller lots that are recorded in county records. Each block has an alphabetical and numerical value assigned for easier identification.  The system of legal description that uses natural landmarks and geographical features is called metes and bounds. This system is commonly used in situations when survey areas have an irregular outline. The method describes the boundaries of the property by using direction and distance between each point and monument (geodetic markers).  The State Plane Coordinate System uses a coordinate system with north-south and east-west axis to divide each state into smaller zones. SPCS was created to assist with surveying, mapping, and engineering throughout the US. It consists of 124 zones that are adjusted to the geographical features of each state. It uses a simple Cartesian coordinate system to identify locations.  Each individual legal property description has some essential elements:  County, town, and subdivision  Border defining description Parcel’s name where the property is located The professional land surveyor will use a combination of these elements to describe the property. The best practice is to hire a land surveyor to verify or correct any legal descriptions before signing the deed to ensure it’s up to date. Legal Description Compared to Other Forms Other forms of describing real estate are usually not sufficient enough to qualify as a legal description of the property. The most common ones that are used for other purposes but aren’t adequate for deeds are:  Property tax records may use a brief summary of the property, which will differ depending on the state.  While seemingly a good way to locate and identify the property, the street address is not reliable. The address may change, and it’s not precise in defining property lines, so it can’t be used in a legal document.  Landowners will sometimes confuse these with the appropriate property legal descriptions. When preparing the deed for the property, the standard practice is to use the exact one found on the latest deed. Legal Description and Title Insurance Reading the legal description can leave landowners confused as to what they are purchasing. Luckily, title insurance protects buyers from any form of ambiguous legal descriptions and forgeries. The best steps you can take are:  Making sure you have title insurance coverage  Requesting a new survey from your title company Survey and Legal Description Conclusion Conducting a new metes and bounds survey helps you avoid any legal pitfalls with the real estate that you are signing the deed for. This way, any inherent troubles with the legal description can be nipped in the bud.   The critical thing to remember is to check the documentation received by your registered agent and review it with a professional before signing the deed.

By Dusan Vasic