Unlevered Free Cash Flow: What Is it and Why Is it Important?

Every business owner hopes that their business is sustainable and can grow. While expansion from an LLC to a corporation isn’t the end goal of most owners, it’s a sign that the company is growing. For one thing, incorporation gives businesses access to more funding from external sources. Incorporating an LLC is no small task, but not to worry; we’ve got all you’ll need to know covered in this guide.  LLC vs. Corporation First, let’s make a distinction between limited liability companies and corporations. Limited Liability Company A limited liability company is one of the most common options for small business owners. That’s because it offers protection from liability, is flexible to manage, and also gives great tax advantages. Such a company exists as a legal business entity, separate from the affairs of its owner, hence the name - limited liability company. This means that LLC owners cannot be held liable for any debts or liabilities related to the business. Personal properties are unaffected in the event of bankruptcy, which is a pretty substantial advantage, especially with how volatile going into business can be. LLCs are straightforward with their structuring, which can make business operations smoother. Another simple-structured option is a DBA, also known as Doing Business As. It’s a side conversation, but be careful not to mix them up. As similar as they may be, DBA vs. LLC comparisons will show you just how different they can be. Let’s talk about taxes for a moment. Operating an LLC means you get pass-through taxation, which means that tax is not levied at the entity level. Income or losses made by the LLC are passed through to the owner. The owners must then report these on their personal tax returns and make any necessary tax payments.  If there is more than one person running the business, a tax return must be completed.  LLC tax benefits are just one reason to open this type of company. Other advantages of an LLC are raising credibility (an LLC is more likely to be considered trustworthy than a partnership or sole proprietorship) and having limited compliance requirements.  Putting LLCs one up in the sole proprietorship vs. LLC debates, limited liability companies do not have to endure the strict compliance requirements that sole proprietorships and other business types (general partnerships and even corporations) face.  On the flip side, however, the disadvantages of an LLC cannot be ignored, either. For one, this type of company generally costs more to establish and run. In some states, you will have to pay an initial formation fee, and many others charge annual report fees, franchise tax fees, or other levies. Additionally, transferring ownership of a limited liability company is tough work. It is usually seamless only when all the members agree to add new members or alter how much each owner has. LLCs also have a hard time getting credit facilities from banks and other financial institutions, and when they do, they are usually secured with personal wealth as a guarantee. Corporation Creating an LLC might be simpler, but corporations also have their advantages. You can choose to form either of the two corporation types; a C corporation or an S corporation.  S corporations are pass-through entities, so establishing them isn’t that much different from forming an LLC. S corporation owners are taxed on the corporation’s profits and losses. On the other hand, C corporations are taxed at the corporate level, meaning the tax accrued is corporate income tax, separate from the business’s owners.  Advantages of Running a Corporation C corporations are the most popular corporation types. This is because they have the distinct advantage of profits remaining within the business, eventually being paid out as dividends to the shareholders. Raising capital under a C corporation is also somewhat easier, as they can issue shares to public buyers. Another advantage of corporations has to do with excess profits. There is more flexibility with the extra profit made by corporations, as opposed to the LLC business model. All the income earned in a limited liability company goes back to the owners but in S corporations, income (and losses) are passed on to shareholders, who will then report it in their individual tax returns. This means that S corporations do not pay corporate tax, meaning they have fewer expenses and can save more money (for context, corporate taxes are usually higher than ordinary taxes). As a bonus, if the corporation can meet some regulations, dividends paid are also tax-free. Disadvantages Corporations are not without their disadvantages. C corps face double taxation, as they are also required by law to remit a portion of their income as federal corporate tax annually. That’s another deduction from shareholders' earnings.  While having a good structure is great, it also comes with many formalities. To run a corporation legally, you must have an appointed board of directors, and schedule and hold board and shareholders’ meetings, among other structural and managerial requirements. In a nutshell, incorporating means spending more on expenses. Steps to Incorporating an LLC Before we dive in, if being taxed as a corporation is what you seek for your limited liability company, then there is a way to go about that without needing to incorporate. Incorporating LLCs can be tricky, and there is no reason to do it if all you seek are tax benefits.  Just file an IRS Form 8832 or IRS Form 2553, and your business will receive tax status as a C corporation or S corporation, respectively. If incorporation is truly your end goal, however, then there are two ways to achieve this conversion: Statutory merger Statutory conversion Incorporating an LLC through a Statutory Merger Statutory mergers are especially useful when an LLC operates in a state like Arizona, which prohibits the other method of incorporation; statutory conversion. To convert by statutory merger, your LLC would need to: 1. Form a New Corporation Becoming an LLC with full incorporation status would require the creation of a new corporation. You would have to file a Certificate of Incorporation to the Secretary of State. 2. Merge the New Corporation and the LLC Together Next, you should begin a merger process between this new corporation and the LLC. As the LLC is absorbed into the company, ownership percentages are converted into shares in the new corporation. Incorporating an LLC through Statutory Conversion Using statutory conversion to make your business an LLC with corporation status is the easiest incorporation method. However, as mentioned earlier, some state laws do not allow it. In the states where it is not prohibited (say, California), the process isn’t always the same but does follow a similar pattern. To incorporate an LLC using statutory conversion, the owners must: 1. Unanimously Agree To Incorporate There has to be a mutually agreed-upon plan for the incorporation. All members should typically be on board with the decision to incorporate the LLC, or it will not be a smooth conversion. 2. File a Certificate of Conversion to the State Next, you must file a certificate of conversion to the state and other documentation such as the articles of organization of the LLC. 3. Issue out Shares to the Public Issuing shares is the next step. As mentioned earlier, all ownership percentages will be converted into shares. This enables the business to issue shares to investors and the general public. Once the conversion is completed, the limited liability company is dissolved and is now a corporation. Incorporating an LLC is challenging, but it can be made easier by getting a company that can help you with your LLC. Besides setting up an LLC and helping save you resources, LLC services can help you avoid mistakes while preparing and submitting your paperwork. What Happens if I Can’t Incorporate My LLC? It is a very rare occurrence, but if you fall under the category of LLCs that can’t be incorporated either by statutory conversion or merger, you may have to use a different tactic. This alternative method is called a non-statutory conversion. Being the last resort, though, it is a very complex process. You should contact the services of an experienced tax lawyer. What Will Happen After an LLC Is Incorporated? Now that your LLC is incorporated, what changes? Here’s what you should expect with the incorporation: A board of directors will be appointed. A certificate of incorporation will be submitted to the state. Business operations will adopt corporate bylaws. Annual board meetings and annual shareholders’ meetings will be held to make resolutions to key decisions. Meeting minutes will also be taken. Stock certificates will be issued to shareholders. The business will start paying corporate tax. Annual reports will be filed with the Secretary of State. Reports vary by state, but you can expect to include the company’s name and address, details of directors and officers, tax identification, business purpose, number of issued shares, and all authorized signatories or registered agents. Again, enlisting the help of a capable LLC service makes all these new processes and changes easier to get through, so unless you know what you’re doing, it’s highly advised to get one.

You may have heard that locking down a good business credit card is one of the crucial ingredients for running a successful business. But is that really true, or is your personal card sufficient? And if it turns out you need one, how do you pinpoint the benefits and figure out which type of card to pick? If you need answers to these questions, keep reading to learn more about the difference between a business and a personal credit card. Key Differences & Similarities  Business and personal credit cards share a few common characteristics. Just like with personal cards, most business credit card applicants are personally responsible for the debt if their business fails. Also, in both cases, annual fees are tax-deductible as long as the cards are used to cover business expenses.  In fact, business credit cards designed for freelancers, side hustles, and part-time gigs function a lot like personal ones. In some instances, a personal credit card is a better fit, as there is no law preventing you from using personal credit cards for business purchases.  However, by going with a personal credit card, you are missing out on the opportunity to build your business credit scores. Most business credit cards report your activity to both consumer and commercial credit bureaus. However, some report exclusively to the latter and, as such, only affect business credit scores. Building your business' credit is as important as maintaining your personal one as it represents your company’s creditworthiness. Another reason to separate ​​business and personal spending is to make bookkeeping for your business as easy as possible, especially come tax season. If you use the personal credit card for both, you may find it difficult to discern which purchases were made for business and are thus tax-deductible.  The IRS doesn’t allow tax deductions on personal, living, or family expenses on your tax return. In short, by mixing the two, you could be missing out on tax deductions or risk getting audited by the IRS. There is another key distinction between these two types of cards that’s especially relevant for companies with high operating costs. Most business credit cards have higher credit limits, which can serve as a lifeline to small businesses. We’ll delve deeper into some of these perks in the sections below.     Benefits of Using Personal Credit Card for Business Purchases Personal credit cards can be used to cover business expenses, especially if you are a one-man show or in the process of building your business from the ground up. Here is why you might consider using a personal card instead of a business one. Personal Credit Cards Typically Have Lower Fees If you have a good credit score, you’ll likely get better rates with a personal credit card rather than a business one. Personal credit cards typically come with lower annual fees and, on average, lower interest rates. Considering how every penny counts when you’re just starting your business, using personal credit cards for business makes sense in some cases. Personal credit cards also offer better protection thanks to the Credit Card Act of 2009. Under this law, credit card issuers are obligated to give advanced notices about limit penalties and APR increases. But some of these protections don’t extend to businesses, which means you run the risk of not being notified about significant changes in fees. Some Personal Credit Card Rewards Might Be a Better Fit Many personal credit cards come with useful rewards. Some of these might be a better fit for your business than those offered through business credit cards.  For example, one of the benefits of business credit cards may come in the form of excellent cashback for purchasing office supplies. However, if you buy two pens per month, you might benefit more from regular cashback rewards that cover multiple categories. That said, there are a range of benefits to separating your business and personal purchases.  The Benefits of Having a Business Credit Card  Now that we’ve covered why you might decide to go with a personal credit card, let’s check why going with a business credit may be a better option. Higher Spending Limits Businesses typically spend more than your average consumer. That’s why business credit cards tend to offer higher spending limits. With a higher spending limit, you can cover more significant costs than when using a personal credit card for business, especially when trying to manage inventory costs. When speaking of operating costs and transactions, you'll find that many business credit card issuers often add tools for tracking business expenses. These features will come in handy, especially when you are just starting your business and you’re not used to handling business expenses. Free Employee Cards Once your business does start growing, you can utilize other benefits of business credit cards, including free cards for employees.  Keeping Your Credit Utilization Ratio Low The credit utilization ratio is used to describe the percentage of the card’s credit limit that the holder is using. The ratio has a significant effect on your credit score.  Those who use personal cards for business purchases drive up the credit utilization ratio and, by extension, lower their credit scores. On the other hand, those who separate their business and personal finances drive up their scores by using less of their available credit.        To maintain a good credit score, you need to keep your credit utilization ratio below 30%. In other words, to prevent business purchases from making a dent in your personal credit score, you should have separate business cards from personal cards.  Building Your Business Credit Score Using personal credit cards for business doesn’t just harm your personal credit score, but you’re not doing your business any favors, either. By making business purchases with a business credit card, you are building your business’ credit score.  This credit score can make it easier to find the right office space and secure business loans. Furthermore, your customers, potential investors, and partners use this metric to determine whether your business is worth their time and money. Additional Perks of Using a Business Credit Card  In addition to boosting your financial standing, a business credit card will often have excellent rewards designed to help you save some of the profits that would otherwise go toward business expenses. Let's check them out. Save on Interest With Introductory APR Business credit cards with 0% APR are a great way for businesses of all sizes to manage their finances and grow their operations. Since both types of cards can offer this introductory APR, if you don’t have large expenses, it won’t exactly settle the business credit card vs. personal credit card debate.  However, if you do make larger investments, these introductory promotions where the interest is waived for a set period of time, typically between six and 18 months, can make all the difference. This makes it easier for new businesses to handle startup costs and make purchases without worrying about paying interest or accruing debt on their accounts. Save on Expenses Using Rewards Programs Many business credit cards offer rewards programs that can save you money on business expenses. Some of the rewards you can rely on are travel points, cashback, or points you can exchange for other perks. There are also a few saving programs that serve as generous benefits of business credit cards. The first step is figuring out what type of rewards you are looking for. Some programs offer cashback or points that can be redeemed for merchandise or travel. Others may offer discounts on business expenses such as office supplies or fuel. There are also some programs that offer a combination of rewards. Ultimately, you can always rely on a cash-back rewards program if you don't consistently spend enough to make use of other types of rewards. Finally, make sure to compare the different options to identify the program that offers the best value for your business. By taking the time to research your options with a business credit card or a personal one, you can reduce your expenses and pinpoint the most relevant benefits. Things to Look Out for When Choosing a Business Credit Card Aside from the potential benefits, there are a number of important aspects that require your attention when choosing the right credit card. Annual and Interest Fees Most business and personal credit cards come with annual fees. The fact that these fees can range anywhere from $50 to $500 is a critical part of the business vs. personal credit card showdown. Also, the annual fee is often offset by the rewards and perks that come with the card. In addition, business credit cards usually have higher interest rates than personal credit cards. This is because businesses are considered to be a higher risk than individuals when it comes to credit. However, you can avoid paying interest on your business credit card by paying your balance in full each month. This will help you save money and keep your business finances in order. Consumer Protection Consumer protections for personal and business cards may vary greatly but can be a crucial component in managing a company’s finances.  These protections help to ensure that businesses are able to access the funds they need when they need them without being subject to hidden fees or invasive account monitoring. They also help prevent unauthorized use of credit card accounts and provide limits on spending and borrowing. For small businesses, these protections can provide much-needed financial stability. Summing it Up So, should you get a business credit card or use a personal one to cover business-related expenses? While some freelancers and part-timers can get away with using a personal credit card for business expenses, a business credit card offers perks and protections to small businesses that simply aren’t available with a personal credit card. It can also help you build your business credit score and improve your personal one, which is important for accessing funding and other opportunities down the road.

It is not uncommon for people to have questions or concerns about the ownership of a particular business. Whether you are a potential customer of a business, an investor, or simply curious, there are several ways you can go about finding out who runs the show.  If you’re wondering how to find the owner of a business, here are some of the best methods to try. Check the Company Website Most companies list their ownership information on their website, either on the “About Us” or “Contact Us” page, so start there. This is the quickest and most efficient way to identify the owner of any business, anywhere in the world.  If the company is a large corporation or publicly traded, you may find an executive team page with contact information for the board of directors. It’s also helpful to research whether the business is a sole proprietorship, partnership, limited liability company, or a corporation.   Check Social Media Accounts When you’re pondering how to find out the owner information of a business, and the business owner’s name isn’t listed on the website, you can try social media. Many registered businesses list their ownership information in the “About” section of their social media accounts. Check the business’s Facebook, Twitter, and LinkedIn accounts to see if this information is available. Many business owners list LinkedIn as their social media of choice as it generates 277% more leads than Facebook and Twitter. So it’s also worth checking if the owner has a personal social media account. This can give you insights into their background, interests, and goals for the business. Contact the Business Directly If all else fails and you can’t find the owner’s name through their social media company page, you can try contacting the business’s Facebook page administrator. But how do you find the owner of a Facebook business page? The task is not complicated, as it only requires you to find the business’s page, click on Settings, and then on Page Roles.  Regardless of whether the actual owner of a business is listed among the page administrators, you’ll be able to find a name there that you can contact for further information. You may even find a listed phone number and ask to speak with the owner, or you can send an email to the provided contact email address. Keep in mind that the business may not be willing to disclose this information, but it is worth a try. Look Up the Business’s Legal Documents Depending on the type of business and its location, the owner’s information may be publicly available through legal documents such as articles of incorporation or business licenses, as all businesses should be registered by state. You can typically find these documents if you browse registered business databases, search registered business databases, or the portal of local government. If you need to find a business owner due to a legal issue or dispute, you can always hire a law firm or online legal services to handle this for you. Use a Business Search Service Here’s a potentially unpopular opinion on how to find the owner of a business at a given address without fail: pay for a business search service. While these private search companies often require a subscription or a fee before allowing access to their business records, they are a useful resource. Look for Press Releases or News Articles If the business has received any media attention, your job should be easier, as you’ll likely be able to find the owner’s name in a press release or news article. Search online for the business name and see what information has been shared.  From there, you can peruse articles in search of a CEO’s name or other clues that may lead you closer to finding the person you’re looking for.  Final Thoughts Searching for information on who owns a business may seem complicated at first, but it is entirely up to how you go about it. By using the strategies we’ve presented in this article, you should be able to do a thorough search and hopefully find the owner of a business with ease.  Once you find the owner or someone who works for this business, be polite and professional when you talk to them. And be prepared to explain why you are looking for this information. Now that you know how to find the name of a business owner, it’s time to give it a try. With a little bit of effort and persistence, you should be able to find the information you need in no time.