Starting a US Company as a Non-Citizen

Wednesday, December 11th, 2013

One of the most common questions that we get at MyNewCompany.com is what is involved in starting a US company as a non-US citizen.  We’ve created a Checklist page on “How to Start a Company in the USA” that can be viewed here: http://www.mynewcompany.com/international.htm that lists all of the steps and procedures for starting a new US company as a non-citizen.

How Long to Keep Business Records

Thursday, August 29th, 2013

Most business owners don’t know how long they should hold on to old records. According to the IRS, here’s how long you should keep those records:

Permanently:

    • general ledgers and journals
    • payroll records, including W-2s, 940s, 941s
    • year-end financial statements
    • tax returns and supporting documents
    • articles of incorporation, bylaws, meeting minutes, etc.
    • retirement plan records
    • mortgages and deeds

10 Years:

  • bank statements and cancelled checks
  • AP & AR documents
  • invoices and billing information (customers and ventors)
  • leases
  • contracts with clients and suppliers

7 years:

  • expense reports
  • employee agreements/contracts/termination records
  • documents related to litigation
  • inventory documentation

3 years:

  • employment applications
  • employee disability and illness benefit records
  • expired insurance policies
  • general correspondence

This information is helpful but our favorite rule of thumb is to “save everything” and keep anything older than a few years in storage. Unless your business deals with mountains of paperwork, that method will be the easiest way to keep it simple and safe.

Action Plan:

  • Organize your documents by the various categories above.
  • Scan copies of the critical documents and place them in a free Dropbox account which will keep your files safe and backed-up “in the cloud” (Free up to 2GB of data)
  • If you are a Corporation or LLC, then also make sure that you are complying with record-keeping, minutes and annual reports. Click here to learn about our ComplianceLock™ service which can automate these tasks.

Founder of MyNewCompany on Forbes.com Live Tuesday

Monday, August 5th, 2013

I’ll be answering questions about startups, entrepreneurship, and whatever else comes up tomorrow, Tuesday, August 6th at noon PST (3pm EST) on Forbes.com. This is part of the Young Entrepreneur Council‘s (of which I am a member) #MyStartupLab initiative. Join me!

How to Mess Up Your LLC Formation

Friday, August 2nd, 2013

Our main business is forming LLC’s and Corporations so we’ve seen how an LLC formation can go wrong in many ways.

Here are a few we’ve encountered (and sometimes had to clean up either from people or our competitor’s clients):

  • I filed it myself! – I think the Do-It-Yourself mentality is crucial for a startup with limited resources. However, I think the legal filing that actually creates your company and potentially protects your personal assets (houses, cars, bank accounts, etc.) is an area you might consider going with a pro. Sure, it’s pretty easy to file an LLC in many states, but this is only one step, there are crucial steps you need to follow after the filing that fully form your LLC. In our experience, these after-formation tasks rarely get done.
  • No Operating Agreement! – OK so you’ve filed your LLC and you’re done right? Most people think so – until the IRS or a process server with a lawsuit shows up. The Operating Agreement is the core document of your company that details things like the ownership percentage of each owner, the operating rules, how profits are handled, how disagreements are dealt with, liability protection clauses, etc. Even worse, you might have a blank Operating Agreement sitting around in an Minute Book or on a hard drive – which is pretty much useless.
  • Didn’t Hold an Organizational Meeting – Even if you have an Operating Agreement, did you hold an Organizational Meeting to determine ownership percentage, how much cash/property you’re putting into the business? You should hold this meeting which will complete the details of your Operating Agreement, then give each member (owner) a signed copy.
  • Making the S-Corporation Election – Having your LLC taxed as an S-Corporation certainly has some advantages in the right circumstance, but filing this election (using form 8832) can change how your LLC is run and managed dramatically. For instance, you will probably have to do payroll for yourself (and other members) once the election is made which is complicated and burdensome for a small LLC with limited resources – say hello to monthly deposits, quarterly taxes (both Federal and State).
  • Selected Wrong Type of Entity on IRS Employer Identification Number Application – Related to the point above, picking the wrong entity type on your FEIN (which determines which tax forms you will use) is not an un-fixable mistake but we see this happening all the time and is something better done right the first time.

How to Prevent These Problems:

  • Use a professional LLC formation service like ours or an attorney if you feel that you need legal advice.
  • Make sure you get a personalized Operating Agreement with your LLC formation (we provide this, in editable digital format as well).
  • Make sure to hold that Organizational Meeting! We give you step-by-step instructions and personalized documents “ready for signature”.
  • Consider talking to a tax advisor before filing your S-Corporation Election.
  • Make sure after doing the above, that you select the right type of entity when applying for you EIN (1 member = disregarded entity, 2 or more members = partnership, etc.)

Any other issues we should be aware of? Let us know in the comments!

Incorporation Service Scams and Lies

Friday, July 26th, 2013

I will be the first to admit that the incorporation industry does not always have the best business practices or clarity. We’re based in Nevada and frankly, some of the other firms that operate here should be shut down or have their owners put in jail (and some have!).

Here’s a list of common scams, lies, deceptions and falsehoods to avoid if you’re looking to incorporate or form an LLC using a service in our industry:

  • Hidden State Fees: massively inflated state fees. So a company claims to be only charging “$49” to file your company and then hides another $20-50 in the “State Fees” – compare the TOTAL price! The real state fee can be easily verified on each state’s website. 
  • We’ll do it for FREE! Come on you’re smarter than that. This scam typically involves tying you into a “Legal Service Plan” or other type of monthly billed service whereby you will exceed the cost of incorporation by many times. Don’t fall for it.
  • Lower Service Fees by adding higher shipping fees: Add in $39 in shipping fees and suddenly you’re paying much more for that $49 service. Some companies charge that to the state, back from the state and then finally to you!
  • Exploding Fees: you’re enticed with 6 months or a year of  “Free” or “Discounted” registered agent fees then POW! Those fees explode in the next year or so. We’ve seen “Free” go to as high as $289/year!
  • “Professional” Registered Agent Service: many services are simply using a mailbox at the UPS Store or a friend’s house! Beside’s not complying with law, if your company is sued or misses an important notice – whoops! You’ve now lost a lawsuit by default judgment and the company is late or in administratively dissolved status because the person wasn’t home that day or the UPS Store doesn’t know how to handle official legal mail.
  • Incorporate in Delaware, Nevada and Wyoming to save on taxes! Why this may be true for some companies, for the vast majority it is not and actually might involve higher fees for smaller businesses. Read more about this in our article “Which State to Incorporate?“. Again, there are some great reasons to choose those states, but some act like you need to choose those states and in many cases you do not.
  • Free Bylaws or Operating Agreement! This sounds great, until you find out they are blank. Do you know how long it takes to customize one of those? The chances of somebody involved in a busy startup actually doing that is close to zero. The forms should be personalized from the start.
  • Free Stuff: Wow, you’re giving out free stuff that’s already free (software, forms, etc.) – amazing!
  • Encouraging Multiple Entity Strategies: They’ll tell you you need to have a C-Corporation owned by 2 LLC’s, the LLC’s are then owned by each other and then you start another LLC to lease services and supplies back to your Corporation. While this may be a good asset protection strategy for a high-risk or high-growth company  – it may not be appropriate for a small startup that doesn’t have any revenue yet – perhaps start with one simple LLC and go from there. Each of those entities will cost money to maintain, pay taxes, etc. and can get expensive quickly.
  • Outrageously Priced Corporate Kits and Seals: $100 for a minute book? $40 extra for the seal? $40 for 10 Stock/Member certificates? This is madness.
  • Upsell, Upsell, Upsell: So you’ve ordered your company and suddenly the phone rings off the hook, your email inbox and mailbox are exploding.

Here’s what MyNewCompany.com, Inc. does to bring some sanity back to this industry (and hope others follow our lead!): 

  • We don’t hide state fees. Verify our fees against the state. 
  • Regular Shipping is free, FedEx is reasonable and priced at about our cost.
  • Pricing is upfront for any recurring service, guaranteed not to change.
  • We only use real offices for Registered Agent Services staffed by real people that know how to handle this important mail. This includes scanning, uploading, emailing, phone notification and FedEx of important documents.
  • We tell the truth about Delaware, Nevada and Wyoming as shown in the article linked above.
  • We personalize your Bylaws and Operating Agreements and give you a digital copy to easily edit.
  • You know how to find the Free Stuff – this isn’t rocket science, do a google search for “free accounting software” for example.
  • We’re “Startups Made Simple”, not “Multiple Entity Strategies for your One Person Business that will cost 10 times an LLC”. You can order multiple entities from us of course, but we don’t encourage or advise our clients on this one way or the other. Simple is usually best when starting out.
  • Our Corporate Kits are $69 or $79. This includes the Minute Book, the Seal, 20 Stock Certificates and shipping.
  • We don’t sell your info. If you opt-in to a service (like our email newsletter) you can easily unsubscribe. We protect our clients and our Privacy Policy reflects that.

I hope I’ve given you a good overview of the industry and what to expect. Let us know any other scams or lies in the comments and we’ll update this post.

What’s Hot in Startups 2013

Friday, July 26th, 2013

Start Me Up: What's Hot in the World of Startups
Image source: www.businessmba.org

Performing Server Updates

Friday, July 12th, 2013

MyNewCompany.com, Inc. will be moving our web site and order system to an upgraded server with our web hosting provider Rackspace Friday July 12, 2013 at 4pm PST and our order forms and main site will be unavailable for approximately 3 hours as we perform this upgrade. We apologize for the inconvenience but if you’d like us to email you when the site is updated, simply send an email to support@mynewcompany.com (our email system won’t be affected by the move) and we’ll notify you once the upgrade is completed.

Thank you!

New Website Design Launched!

Friday, April 5th, 2013

After 6 months of hard work by our designer, developers and the rest of the MyNewCompany.com team we’re proud to launch our new website design at http://www.mynewcompany.com ! We’re still working out some small spacing and font issues, but overall the launch was a great success and we’re eager to get any feedback you have good or bad.

This new design features fast-loading, clean CSS/HTML that should look great in all browsers. In addition, we’ve also made sure our mobile site is looking good at http://m.mynewcompany.com 

In the coming months, we’ll be working on:

  • Upgrading and simplifying the design on our BEMA™ Order Forms.
  • Upgrading and adding features to our ComplianceLock™ Service.
  • Adding a ton of great content to this blog; make sure to follow us on Twitter and Facebook where we’ve been posting great links and small business ideas and news.

Enjoy and let us know your thoughts on our new site!

How to Create a Small Business Intranet

Friday, April 5th, 2013

Lifehacker has a good article on how small businesses and teams need to “stop repeating yourself” and collaborate with a company “wiki” and use it as an intranet. Basically, you want a password protected web page where everyone on your team can view, edit and collaborate on ideas, processes and “how to’s” so a team member does need to keep asking for information or bother anyone on how to do something, what is so and so’s phone number, what is the time-off policy, etc. The basic premise is that if you need to send an email to everyone in the company about something (especially how to do something, a policy change, procedure update, etc.), you can probably post it on your small business intranet where everyone can access it.

If you can centralize your company documents, instructions, contact lists and procedures in one place, and make that information easy to update, then you have a fantastic time-saving resource. Moreover, you have gotten one step closer to automating your business, standardizing your procedures. You’ve also made your company more valuable because a) you can sell it as a “system” and b) you can have your company run by others who know what to do and how to do it.

Lifehacker recommends MediaWiki, the free open-source software that powers WikiPedia, to power your intranet. However, the learning curve is steep, it requires installation on your own web server and is not entirely user-friendly. There are many other professional solutions like HyperOffice and Microsoft Sharepoint but they have their own complexities – usually too many bells and whistles for a small business intranet.

We use and recommend EditMe. EditMe is like a user-friendly, password protected version of WikiPedia. Basically, you setup an account instantly, double click the page you are on and you can edit it in a regular Word-like editor. Same goes with the side menu where you will be adding links to other pages (which you can create in one click). Basically, you create a page, name it, then link to it on your menu – you can even attach files to each page (employee manuals, etc.). You can add users with different permissions (view/edit/delete, etc.) quickly and it sends email notices when pages have been updated. A basic account starts at $19/month (30 day free trial as well) and is easily the best $19 MyNewCompany.com has ever spent. I’ve seen all the intranet solutions and this is by far the easiest for small business.

Small Business Intranet suggestions:

  • Have a “Home” page that everyone must check daily – this is where you post any important notices or updates – prevents endless “memo” type emails. Tip: set company browser home pages to this page.
  • Let anyone make updates but make sure there is an “administrator” who can reverse those updates and “undelete” files and pages. EditMe has this feature.
  • Recommended pages: Contact List, Procedures Manual, “How to” page (change printer ink, setup email account, etc.), Business Ideas, Suggestion Box, Marketing Info, Vendor List, Employee Contact Info, projects, etc.
  • Make sure every employee uses it. EditMe takes 10 minutes to learn so every new and existing employee should get an overview.

Optional:

If you need to collaborate on a higher level, you may want to consider, in addition to a small business intranet, using a simple project manager like BaseCamp. BaseCamp has some additional features that make managing tasks, projects and more extremely simple and they offer a free basic account.

So “stop repeating yourself”, setup your intranet now and focus on your business – you won’t regret it. 🙂