Business Formation

In order to create an LLC, articles of incorporation first need to be filed with the Secretary of State or similar government agency. Next, the LLC members need to enter into an operating agreement which sets forth the rights of the members and the rules for running the company. An LLC may also need to apply for a tax identification number with the IRS.

Generally states require the filing of a corporations Articles of Incorporation, the initial franchise taxes, and corporate filing fees.

A close corporation is also known as a closely held corporation. It is a corporation in which the stock of the corporation cannot be traded on a public exchange such as the NYSE, NASDAQ, etc. and the number of shareholders must be specified, and typically cannot exceed 30 and certain limitations may be placed on the transfer of stock. A close corporation can be advantageous for small businesses.

Most jurisdictions do not require publication in a newspaper unless an existing unincorporated business intends to incorporate without a change in its name. That business must then publish its intent to incorporate in the local newspaper for four consecutive weeks (in most jurisdictions). While a few jurisdictions (Georgia, Arizona, Illinois, and Pennsylvania), require publication of the corporate name to be published in a newspaper local to the county of the registered agent

Incorporating will not keep another business from using your name. Filing articles of incorporation only prevents the secretary of state from filing a document to create another corporation, limited liability company or limited partnership that has the same, a deceptively similar, or similar name as the entity already in existence. Generally, every business must protect its own business name and the good will that it has acquired from the sale of its goods or services in a specific geographic area.

Shares of stock represent ownership of a corporation. When no shares are issued, no individual(s) owns the corporation. Therefore, shares must be issued to those individuals who will own the corporation. Most states have created many exceptions and exemptions from registering a stock issuance with the State or with the Securities and Exchange Commission for most small businesses, it is recommended to contact the appropriate entity to determine whether you must file a notice of stock issuance on a state or Federal Level.

SIC stands for the Standard Industrial Classification Code. It is a four digit number assigned to identify a business based on the type of business or trade involved.
The first two digits correspond to major groups such as construction and manufacturing, while the last two digits correspond to subgroups such as constructing homes versus constructing highways.
A company can determine its SIC number by looking it up in a directory published by the Department of Commerce, or by checking in the SIC book in the reference section of a local library.
SBA size standards are based on SIC codes.

Although you purchased a sole proprietorship for 1 amount, that amount must be allocated to the individual assets for depreciation purposes.
Allocation is based on the proportion of the sales price to an individual assets fair market value at the time of the sale. Speak to your local CPA about the allocation formulas.

A REMIC is an abbreviation for a Real Estate Mortgage Investment Company. Generally it holds a fixed pool of mortgages. A REMIC is not a taxable entity for federal income tax purposes. Generally, a REMIC is treated as partnership and the partners considered residual interest holders. Net income from the REMIC is passed through to the partners. The partners pass through income issued to the partner on Form 1066, Schedule Q and is reportable on IRS Schedule E, page 2.