How Do I Sign California Banking Form

Esign articles of incorporation template

what's going on Alex here and today I'm going to talk about the tax implications of forming an S corporation in California now forming an S corporation is a bit of a misnomer because you can't actually form an S corporation at the state level what you can do is form a business entity then make an election to have it treated as an S corporation for income tax purposes now don't worry if none of what I just said makes sense because in this video I'm gonna show you step-by-step how to form a business entity how to make the S corporation election and how to maintain that election moving forward now before we get started I want to mention that none of the information presented in this video is legal advice or tax advice so definitely consult with a qualified attorney and/or tax professional before acting on any of the information presented in this video now this video is gonna be split into different sections so if you want to skip ahead to any particular part of the video I'm gonna include links in the video description which will allow you to do so with all that out of the way let's get started now what better way to learn about S corporations then with a handy dandy spreadsheet let's take a look alright so here in the spreadsheet I've outlined some of the important points of forming and maintaining an S corporation as you could see they're highlighted and bold here and there's quite a few of them they go A to J so we're gonna touch on each point one by one now the first item on the list here is form a business entity now let's talk about this one for a bit unfortunately you can't go to the state of California and say I want to start an S corporation that choice simply does not exist alright instead you have to form another type of business entity be it an LLC limited liability company or a corporation or a limited liability partnership what have you but you have to choose one of those business structures none of which is an S corporation as I mentioned an S corporation election is what gives you that treatment but that happens after the business entity is formed and that brings up the question which business entity should i form there's really two important considerations to take into account where you're choosing a business entity type now the first question is the legal side of things and the next question is the income tax side of things okay so let's talk about the legal side for a second first of all what kind of business entities even available to you because as a CPA in California I cannot legally form an LLC for my business I have to form a professional corporation which is what California allows CPAs working in that capacity to work ass I don't have LLC as a choice so you have to consider all of those different rules and regulations based on your industry based on your location because different rules might stipulate which forms a business entity are available for you in which are not now once you have that conversation with a qualified attorney they should also be able to touch on limited liability which is one of the common reasons that business owners put an entity in place in the first place and the question there is in which situations do you have limited liability and in which situations do you not and this is a common question that I get and I immediately have to refer clients to speak with an attorney because the concept of limited liability and legal liability those are legal concepts so I can't comment on them I'm not an attorney myself but it's an important consideration and important conversation to have with a qualified attorney who would be able to guide you in that regard to show you exactly when you may be protected and situations where you may not so having that conversation from a legal perspective is extremely important because it allows you to narrow down your options in many cases in terms of what sort of business entity you want to have at the state level and depending on what options you have available on the legal side that may limit the options that you have on the tax side so for example if you form a single-member LLC at the state level meaning an LLC with just one owner then you can report the income and expenses for that business on Schedule C of your form 1040 so you're filing only one tax return being your personal income tax return and then you're attaching a schedule to it to report your income and expenses for the business now let's say that instead of an LLC you've formed a corporation now your options may be a bit more limited because you no longer have the option of reporting the income and expenses on Schedule C of form 1040 that's out of the question now instead you're going to need to file form 1120 to report the income and expenses pertaining to that corporation now if you make the S corporation election then you can have it treated as an S corporation but you're still filing form 1120s which is a separate tax turn in addition to your personal return and this is a point of confusion for a lot of business owners you can have an LLC which is the limited liability company and then make the S corporation election to have a treated as an S corporation for tax purposes so this confuses business owners because they have an LLC at the state level but now they're being treated as an S corporation it's kind of weird but that's the way it works similarly you can form a corporation at the state level make the S corporation election and then have it treated as an S corporation for income tax purposes so even though you didn't form an S corporation you now essentially have an S corporation from an income tax perspective now a similar thing will happen with a limited liability partnership you can have it LLP at the state level but then make the election to have it treated as an S corporation for income tax purposes so it's a little bit confusing in that respect but you need to understand that the nature of your business from a legal state perspective does not necessarily correspond to its classification for income tax purposes you have some freedom on the income tax side to make certain elections to have your business treated as an entity other than what it was formed as at the state level so that's an important thing to keep in mind it's a it's a common point of confusion so once you have the legal questions set the legal structure set then it's it's wise to take a look at the income tax implications and see what's available there but the crucial first step is to form that business entity so you could then make the S corporation election and a common question is well hey I've run my business as a sole proprietor can't I just make the S corporation election for myself unfortunately the answer to that is no you can't be an individual who then makes the S corporation election to have yourself treated as an S corporation you need a business entity so at the very least you need LLC LLP a corporation and then you can make the S corporation election for that entity now let's take a look at what forming a business entity actually entails in California now if you're forming an LLC you're gonna be filing articles of organization okay that's gonna be the organizational document for your limited liability company let's take a look at what that looks like and by the way all the that are in the spreadsheet I'm going to include him in the video description so you can navigate directly to the websites that I'm showing you here make it easy for you alright so on this site California does a wonderful job of presenting all the required forms so let's go to a limited liability company California domestic just for now and we have formation articles of organization let's click this and while we're here let's also note that it's a seventy dollar filing fee so California has to take a cut alright and as we can see here this is relatively straightforward form nothing too scary this is the Secretary of State articles of organization for limited liability companies and they want the LLC name business addresses information regarding service of process what the management's going to look like and so forth so nothing really scary here pretty straightforward and once this is filed by either yourself if you're doing this on your own or by your attorney they should typically take care of this for you now once this is filed you'll be able to take a look at it on the California Secretary of State website let's take a look at what that looks like and this will allow you to just confirm that it's been filed it's been received and you're all good so if we go here again link is going to be in the video description for you so let's take a look at LLC's let's just type in design and as you can see here is a list of LLC's here in California let's just take a look at three for four and here you can see that the registration statement is right online it's public information so let's take a quick look at that and here are the articles of organizations that's how that's gonna work there's gonna be a date here and this is going to be the essentially effective date for your entities so definitely take a look at that for corporations the process is similar but instead you're gonna be filing Articles of Incorporation okay and let's take a look at what that looks like we'll go back to this handy dandy site here let's click on corporations domestic California and then we have this general stock one and let's just note that this is a hundred dollar filing fee for this one let's see what that form looks like and similar to the articles of organization you're gonna see that it's not too scary alright pretty general here we've got articles of incorporation of a general stock corporation we got the name of the business business addresses and formation regarding service of process pretty straightforward nothing too crazy and similarly once this is filed you're generally able to take a look at the California Secretary of State website just to see that it's been received and that you're all good there and let's take a look at what that would look like all right so back here on the business search site let's take a look at corporations this time let's type in design and you can see that here's a list of corporations and a lot of these have been suspended or dissolved I mean none of these are actually active at the moment let's see if we could find an active one okay all right so albergue designed fleet of San Francisco Bay let's take a look here and as you can see all these documents are available except that the registration statement apparently it's not available it was formed in 1963 so they're probably still uploading those records but anyway you get the idea let's see if we can actually find an active entity here for which the Articles of Incorporation are available let's look at angels for industry design engineers alright and this was 68 okay I'm not having any luck here so we're gonna move on alrighty so let's go back to our spreadsheet to summarize to form a business entity if you're looking at LLC's there's articles of organization that you can file and the Articles of Incorporation are applicable to corporations so if that's the business entity type you're putting together that's what you're gonna have to form again there's too early for us to talk about the S corporation election yet because we're just forming the business entity now you might be wondering how long is it gonna take for California to process my articles of incorporation or articles of organization that's a great question California has a site for that as well if you can believe it so let's pull up this link here and you can see that depending on the entity type let's just look at limited liability company filings they'll tell you that we are currently processing requests received via the following methods on the date indicated so I'm filming this on the 21st or 22nd depending on whether I want to acknowledge if this is 2:00 in the morning or not and you can see that for formations of registrations their processing ones that received essentially a we can go online and about 11 days ago if it's in person so typically this will be file online so you can wait for about a week for this to be actually processed and show up on the site so the next thing you want to take into account is the statement of information now a statement of information is a document that gives California more info on the business entity that you've formed so later they can track you down and haunt your dreams if you owed them even a dollar in tax I'm kidding I'm not totally kidding but the statement of information for LLC's and corporations generally needs to be filed within 90 days of the registration date of the entity so for LLC's let's take a look at what the statement of information actually entails alright let's open this up ok so as you can see here the statement of information must be filed within 90 days of registering with the California Secretary of State and every two years thereafter and there's a six-month filing period to make it as difficult as possible to figure out when you need to file this thing but just keep in mind every two years the statement of information needs to be filed all right and similarly for corporations there's also statement of information that you need to file but there's an important distinction being that for corporations it must be filed within 90 days of registering with the California secretary statement every year thereafter and of course there's also a six-month filing period that makes this a little bit more confusing than it needs to be but you can kind of see it laid out here right at the beginning of the form and take a look at the statement of information itself nothing too crazy here as you could see it asks for a corporation name business addresses officers directors information for service of process and so forth so nothing too crazy here it's a bit more detailed than the Articles of Incorporation or articles of organization but it just gives California a little bit more background about your business it's also important to keep in mind that there is the ability to file a statement of no change which is a simplified version of the statement of information and the statement of no change can be filed in any year except that first year so let's say that you filed your first statement of information within 90 days of registration and then you're required to two years thereafter instead of filing a new statement of information you can file a statement of no change which is a simplified version of the statement of information but it just allows you to get the form filed that much more simply so let's take a look at what the statement of no change looks like for corporations and we can pull up the form here all right and if you scroll down you can see that in many ways it's similar to a statement of information but instead it has a paragraph here that says there's been no change in the information containing the previous statement for information filed with the California Secretary of State okay so it's a little bit more streamlined of a filing so if nothing's changed pertaining to your corporation or your LLC you may be able to file a statement of no change there is still a filing fee associated with it because at the end of the day we are in California but it's a bit more streamlined way to get that handled [Music] [Music] [Music]