How can I protect my business name?

Trade names can be registered through the Indiana Secretary of State, and for wider marketplace protection, throught the U.S. Patent and Trademark Office. A search can be done through the USPTO's online system for all state and federal trademark registers to see if a proposed name is being used.

For many businesses that operate on the Web, trade names are synonymous with domain names, such as Amazon.com and Monster.com. Domain names are not registered through state or local government; rather they can be obtained through numerous online businesses, most of which will allow you to conduct a name search prior to purchase to make sure your chosen nmae is not taken.

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What should I name by business?

There is more to naming your business than just coming up with something that sounds good and you happen to like. Thought must be given to state and local requirements and making sure you don't infringe upon the rights of someone else's business name. You will need to determine whether your trade name will be the same as the full legal name of your business.

Of equal importance is finding out whether your name or a very similiar name is being used by another business, and if so, what rights they may or may not have to use the name in the area where you do business. Keep in mind that some businesses only file trademarks within their locality, so it is possible that the same name can be used elsewhere.

Answer provided by Chuck Roach - Roach Law Office

Should I be an LLC or a Sub-S Corporation?

Before the early '90's, the "preferred" form of organization generally was an S corporation because it combined the limited liability associated with a corporate structure with flow-through treatment of tax benefits to its owners. An LLC is sometimes preferred because in addition to each of the aforementioned benefits, an LLC is not subject to many of the restrictions to which an S corporation is subject. In addition, future restructuring of an LLC genearlly avoids certain negative income tax consequences that future restructuring of a corporation may involve.

A rule of thumb has developed among many accountants that if the business will be actively managed by the shareholders[s], and it will be a small business, a sub-S corporation is the choice. For real estate or other "passive" investment type companies, the LLC is the choice. Again, because this decision is vitally imporant to the financial health of the company and its owners, you are strongly advised to obtain advice from your accountant before proceeding. If you do not have an accountant we can recommend one to you.

Answer provided by Chuck Roach - Roach Law Office

Is personal liability protected by the corporate form?

In all corporations, shareholders are not personally liable for corporate obligations unless corporate formalities have not been observed. Such formalities provide evidence that the corporation is a separate legal entity from its shareholders. Failure to do so may open the shareholders to liability of the corporation's debts. Corporate formalities include issuing stock certificates, holding annual meetings, and recording the minutes of the meetings. Many of these tasks invovle simple preparation of documents, which can be prepared by your attorneyon an annual basis and included in your corporate book.

Answer provided by Chuck Roach - Roach Law Office

What is the difference between a C corporation and an S corporation?

Both S and C corporations are formed the same way - by the filing of Articles of Incorporation with the Secretary of State's office. As a legal matter, the S corporation is identical in many ways to the C corporation because both limit the shareholders' personal liability. But as a tax matter, the S corporation offers the advantage of avoiding taxation at the corporate level. In order to obtain S status, a company files Form 2553 to "elect" to be treated as an S corporation. If accepted by the IRS, the company is then taxed like a partnership. The corporation is not taxed, but the income flows through to shareholders who report the income on their individual returns.

Note that the 2553 is a tax election only; and enables the shareholder to treat the earnings and profits as distributions, and have then pass thru directly to their personal tax return. The catch here is that the shareholder, if working for the company, and if their is a profit, must pay herself wages, and it must meet standards of "reasonable compensation." This can vary by geographical region as well as occupation, but the basic rule is to pay yourself what you would have to pay someone to do your job, as long as there is enough profit. If you do not do this, the IRS can reclassify all of the earnings and profits as wages, and you will liable for all of the payroll taxes on the total amount.

Answer provided by Chuck Roach - Roach Law Office

What is a corporation?

A corporation is a more complex business structure generally. It is a legal entity separate from its owners, called "shareholders," who own shares of stock in the company. For "regular" or C corporations (often used for large and publicly traded companies), profits are taxed both at the corporate level and again when distributed to shareholders. This is the tax disadvantage which is avoided by the "pass through" entities such as LLCs and S corporations.

Answer provided by Chuck Roach - Roach Law Office

How is the LLC treated for tax purposes?

The LLC enjoys the same "flow-through" tax treatment that partnerships and S-Corporations do. The rules concerning capital accounts, contributions and other basic partnership taxation principles apply to LLCs as well. In short, this means that although the LLC must file a tax return, the LLC owners report income and pay the taxes owed on such income using their personal returns.

The LLC itself does not pay taxes on its income. (Currently, the IRS has not developed a separate tax return form for LLC, so the same form used for partnerships is used, Form 1065). The owners will each file a Schedule K-1 with their personal income tax return, which will show their "share" of the LLC income. While this structure avoids the double taxation dilemma of the C-corporation, an LLC (like the partnerships and an S-corporation) cannot retain earnings without the owners of the business having to pay income taxes on those earnings anyway.

One of the very best features of the LLC is the fact that the owners can divide up the ownership interests differently from the rights to distribution of profits (and losses). For example, an individual goes into business with another person, and both wish to own 50% of the business. However, one individual is going to work for the LLC full-time while the other wishes to keep another full-time job and work for the business part-time. Each may still own 50%of the ownership while dividing the profits interests into a 75%-25% split or some other ratio, to reflect the different levels of effort.

Answer provided by Chuck Roach - Roach Law Office

How does the LLC end?

The death, retirement, withdrawal, or bankruptcy of a member or manager may end the existence of the LLC, depending on the terms of the operating agreement. Apart from the death, retirement, bankruptcy or withdrawal of a member or manager, an LLC usually only ends upon the date of expiration (often set 25 - 30 years from the date of formation) or, if there is no expiration date, then upon mutual agreement of a majority of the members.

Answer provided by Chuck Roach - Roach Law Office

Who runs the LLC?

If there are many members of an LLC, a limited number of people can be chosen to actually run the LLC for the members. They are the managers. The managers can be, but do not have to be, members of the LLC. The managers can be set up to resemble a board of directors if that is what the members want. Managers are not required for an LLC. The members may simply retain all managerial authority for themselves. Or they can grant partial or limited powers to certain members and/or managers. In fact, almost any practical division of power among members and/or managers is possible with an LLC. This flexibility of control by the owners is one of the very best features of the LLC.

Answer provided by Chuck Roach - Roach Law Office

How is an LLC created?

After submitting Articles of Organization to the Secretary of State's office, the members enter into a written agreement, called the "Operating Agreement," about how the LLC will be run, who is in charge of running it, how profits will be divided up, etc. If there is no operating agreement, then the "default" rules for running an LLC kick in. These default rules are found in Indiana LLC statute. Generally speaking, it is better to have an operating agreement than it is to rely on the default rules, if only because it forces the members to think about many practical aspects of running a business at the outset and then agree about such matters before real money is at stake.

Answer provided by Chuck Roach - Roach Law Office

What are the specific qualities of an LLC?

As discussed previously, the LLC is advantageous for small businesses becasue it combines the limited personal liability feature of a corporation with the tax advantages of a partnership and sole proprietorship. Profits and losses can be passed through the company to its members or the LLC can elect to be taxed like a corporation. LLCs do not have stock and are not required to observe corporate formalities, such as the maintenance of annual director or shareholder minutes. Owner are called members, and the LLC is managed by these members or by appointed managers.

Answer provided by Chuck Roach - Roach Law Office

What are the qualities of the "simpler" business organization - sole proprietorships and partnerships?

The sole proprietorship is a simple, informal structure that is inexpensive to form; it is usually owned by a single person or a marital community. The owner operates the business, is personally liable for all business debts, can freely transfer all or part of the business, and can report profit or loss on personal income tax returns.

Partnerships are inexpensive to form; they require an agreement between two or more individuals or entities to jointly own and operate a business. Profit, loss, and managerial duties are shared among the partners, and each partner is personally liable for partnership debts. Partnerships do not pay taxes, but must file an informational return; individual partners report their share of profits and losses on their personal return. Short-term partnerships are also known as joint ventures.

Answer provided by Chuck Roach - Roach Law Office

Do I need a written contract for a small project?

Of course the answer to this question is…. it depends. The benefit of a written agreement is clarity, as its job as a legal matter is to define the duties of the parties, establish the consideration to be “paid” by each party to the other, and set forth remedies in the event either party defaults on his or her obligations.

There are occasions in our personal relationship when this kind of certainty may not be absolutely necessary. But in business, the best practice is to have written agreements in place to avoid misunderstandings, preserve relationships, and when absolutely necessary, have a legal basis to obtain a remedy through the court system. That doesn’t mean the contract must be lengthy. A one page agreement is often sufficient. Other times it makes sense to include more terms to cover various contingencies.

As in all business matters, the key is to use your best business judgment in assessing the cost versus benefit to your operations. If the agreement is crucial to your business or if it will be used frequently, the answer is you need it in writing. In that event, you should seek the advice of a legal professional to assist in the drafting or review of the document.

Answer provided by Chuck Roach - Roach Law Office

What type of business should I be?

One of the first decisions that you will have to make as a business owner is how the company should be structured. This decision will have long-term implications, so you are strongly encouraged to consult with an accountant and attorney to help you select the form of ownership that is right for you.

Organization of a business entity is done for several reasons, the most important being to limit liability and financial expenses to the capital dedicated to the venture. You need to respect the entity, keep proper records and take appropriate actions. This will preserve the "insulation of liability" and make key issues like "who owns what and what rights are there" much easier to determine down the road.

While there are several factors that determine how a business is initially organized, tax factors generally play a primary role. The form in which a business is organized depends on an analysis of the particular facts of the business. However, start-ups often are organized as a "flow-through entity" which is an entity that is subject to a single level of tax. Specific types of flow-through entities include partnerships, limited partnerships, LLCs and S corporations.

These are the entities of choice for most new business owners looking to formally organize. Subject to certain restrictions, start-up losses of such an entity may "flow-through" to its owners in the form of tax deductions. Alternatively, a company may be organized as a regular, or "C" corporation. A significant disadvantage to operating as a C corporation is that its earnings are exposed to "double taxation" which means that the corporation is subject to income tax on its earnings and the owners are taxed when the company distributes the earnings as a dividend. But there is no single "right" answer. It depends on what kind of business you have, who will own it, what sort of deductions it will generate and the accountant you use.

Answer provided by Chuck Roach - Roach Law