Online Incorporation MaxBlog

The ability to raise capital is an important issue that you must consider as an entrepreneur. In fact, the decision of which type of entity to form when incorporating your business can be determined by this point alone in some cases. It is also vitally important to consider your cash flow needs to start out so you are able to grow your business later on.

There are basically two types of financing, debt and equity.

Debt financing is where you borrow money to be repaid over a period of time with interest. Full repayment is required within1 year or less for a short-term note and more than a year for long-term debt. Also, the lender does not gain any ownership in the company but may require a personal guarantee for the loan, especially for small businesses.

Equity financing is described as an exchange of money for ownership in the company, usually though common stock. This type of financing basically allows you to raise capital without incurring debt. The inherent disadvantage however is that by issuing stock in the company, your ownership interest is diluted and loss of control is possible.

When it comes time to incorporate your business, you’ll need to consider the different characteristics regarding raising capital associated with each type of business entity. The main point of difference is whether stock can be issued to the general public or not. Online incorporation services at MaxFilings provide an easy way to incorporate your business once you choose the type of entity you will be forming.

Only a C or S corporation can issue stock to the general public. Stocks can make it easier to raise investment capital and transfer ownership, and the ability to offer stock options can assist the company in recruiting and retaining good talent. All stock issued is subject to various state and federal securities laws.

A Limited Liability Company (LLC) cannot issue common stock to the general public, but the benefit of raising capital is replaced by the relative simplicity and ease of operating an LLC. Capital is generally raised through the companies’ partners and debt financing.

Both corporations and LLCs, however, must maintain the ratio between debt and equity financing at an acceptable rate. Too much or too little of each may make it more difficult to attract investors and obtain debt financing from a lender, who may question the ability of the note to be paid back.

In the end, this decision cannot be made lightly and must involve the counsel of an attorney and accountant. However, the two main points to consider in regard to raising capital boils down to growth needs of the company and the administrative requirements of a C corporation, S corporation, or LLC.

If you will be conducting business outside your state of incorporation, you must apply for and receive foreign qualification from each state your business will operate in.

A new article, What is Foreign Qualification?, posted in the Knowledge Center at MaxFilings provides a good overview of the process of applying for foreign qualification.

The foreign qualification process involves paying filing fees and submitting the proper paperwork, which includes:  

• A name availability search
• Appointment of a registered agent
• Certificate of Authority registration

Read the article for a good overview of foreign qualification and who needs it. It’s easy to file for foreign qualification online at MaxFilings.

Trying to figure out what to do for insurance with your newly formed corporation or LLC? MaxFilings has just published an overview of the three main types of insurance that small business owners need to be aware of here.

Even if you haven’t incorporated yet, be sure that your buisness has adequate insurance by consulting with a qualified buisness insurance professional. And be sure to keep in mind the added protection of limited liability provided by forming a corporation or LLC. You can learn more here: Should I Incorporate My Business?

If you’re ready to take this step, you can see costs to incorporate and then form your business easily at MaxFilings.com online incorporation service

Getting your company incorporated can be a very busy time for you. Handling the legal matters is just another thing piled on to preparing business plans, marketing strategies, etc. There are few errors that can’t be reversed with the help of legal counsel but dealing with things correctly and professionally in the beginning can save you precious time and resources.

It’s important to institute a corporate structure that is easily adaptable to changing business and financing needs. Susan Schreter, a coach that helps entrepreneurs find reliable investors recently tapped into the expertise of Joe Whitford, a law partner with Davis Wright Tremaine and long-time advisor and advocate of productive venture building. He discussed the 6 most common mistakes he is often called in to correct. Take care to avoid these mistakes as you incorporate your business:

1. Only Authorizing Common Stock-It is recommended for young companies trying to raise capital should issue both common and preferred stock and business founders should only receive common stock. Depending on the state and the tax implications, 30 million common stock shares and 20 million preferred stock shares are recommended.

2. Over allocation of Shares-Many companies dole out too many shares to founders, initial employees, and consultants. This leaves too few for actually raising capital and growing the business. It is recommended that only ¼ to 1/3 of shares are allocated to these people in order to leave an ample amount for raising funds.

3. Establishing a High Initial Stock Value-The Internal Revenue Service requires stock recipients to pay tax on the estimated market value of the shares, which can be very costly if those valuations are set too high.

4. Granting too lenient shareholder rights-Entrepreneurs should not include provisions in the articles of incorporation that allow shareholders to acquire additional shares in future financing transactions. These rights should be negotiated on a per transaction basis.

5. Invention Assignment-Many companies do not take due diligence in documenting the ownership of inventions by founders and new employees. By not declaring an invention as being owned by the company rather than an individual, funding opportunities and technological alliances can be lost.

6. Not including shareholder agreements with company founders-It is always best to detail the duration of services with founders who receive stock in a company in order to retain certain rights to one or more individuals that may lose interest in a company.

Avoiding these 6 mistakes can save your company a lot of hassle. Turn to the online business incorporation leader MaxFilings to assist you with forming your company and find other important information in the Knowledge Center at MaxFilings.

Yes, MaxFilings has gone ahead and taken the plunge. We know that plenty of people starting a company would love to take advantage of registered agent service but often forego it just because of cost.

So, we’re now offering registered agent service FREE with our MAX business formation package!

The MAX package is a great value, as it includes several components entrepreneurs will find very useful for getting a business up and running quickly and economically. It’s the most comprehensive business formation service offered by MaxFilings. It includes a preliminary name check, expedited priority processing, a kit and seal with sample forms, business forms on CD, obtainment of a Federal Tax Identification Number (EIN), along with preparation and filing of articles of incorporation in any if the 50 states or the District of Columbia.

See the official press release

See the business formation packages and costs

It has been documented on this incorporation blog and in the Knowledge Center at MaxFilings that an operating agreement, while not required in many states, is necessary for even solely owned/operated limited liability companies.

Creating an operating agreement for a LLC can be more time-consuming than for a corporation since state laws governing an LLC are much more flexible. Many of the issues the operating agreement addresses are already detailed in law for corporations.

Therefore, it is important to know what should be included when meeting with your attorney to draft an operating agreement for your LLC. In general, an operating agreement needs to include ownership percentages, management, voting, allocation of profits/losses, distribution, members’ rights/responsibilities, ownership changes, and amendments/dissolution.

Be aware of the elements needed in any operating agreement when forming your LLC with MaxFilings online incorporation center. LLC Operating Agreement - What Should be Included? addresses the general elements needed for an LLC Operating Agreement.

If you’re incorporating your business, chances are you’ve heard you will need “articles of incorporation”. Though it may sound like a complicated set of documents, it is actually the initial document that sets forth the information about a corporation that is required by the laws of the state in which you are forming your corporation.

Articles of incorporation are sometimes also called the certificate of incorporation or charter - in fact, these 3 terms are often used interchangeably. Bear in mind that some of that information will be included in the public record.

So, if you are forming a corporation in California for example, you’ll need to submit the information required for California articles of incorporation. Here you can learn more about the specifics for incorporating in California, including articles of incorporation.

MaxFilings now has available the Business Forms CD, which contains over 50 customizable forms that virtually every business needs. Now, whether you are starting a new business or trying to instill more administrative order in your current one, having easy access to a wide variety of business forms will be a tremendous convenience.

The CD includes 26 common business forms that provide an outline for hiring employess, collecting payments, and other common legal documents used in business such as a contractor agreement and power of attorney.

All forms are formatted in Microsoft Word and can easily be manipulated specifically for your business.

The Business Forms CD also includes 24 additional forms specific to corporations such as a proxy, stock purchase agreement, and certificate of corporate vote to name a few.

Along with online incorporation and business services, the Business Forms CD available now at MaxFilings is an additional tool in helping you effectively manage your company.