Incorporating Your Business

So, you’ve done your research and decided to form an LLC or incorporate your business. Maybe you want to protect your personal savings and other assets, maybe your financial advisor mentioned you could save in taxes, or maybe you simply need a legal structure to win a large client contract. Whatever the reasoning, it’s time to take the next step for your business.

The only question is how?

For the small business owner, this process raises many questions. Where do I start? How much does it cost to incorporate or to form an LLC? How long does the process take? Can I form my own corporation or LLC or is an attorney required? In this post, I’ll break down the steps required to incorporate a business or form an LLC, as well as explain the three different methods: do-it-yourself, legal filing service, or an attorney.

In most cases, you can set up an LLC or Corporation with the secretary of state’s office for whichever state you choose as your ‘state of incorporation.’ And as a general rule of thumb, if your business will have fewer than 5 shareholders, it’s best to just incorporate in the state where you actually live or have a physical presence.

Here’s a quick overview of the process for both the LLC and Corporation:

How to Form an LLC

The LLC requires much less formality, while still protecting the personal assets of the business owners from any liability of the company. For an LLC, you’ll need to file Articles of Organization or Certificate of Organization with your state’s secretary of state. While the LLC is less formal, these documents must contain at least the minimum requirements as described by state law before they can be successfully filed (and your LLC processed).

How to Form a Corporation

To form a corporation, you’ll need to take the following steps:

Draft “Articles of Incorporation” or “Certificate of Incorporation”

The Articles of incorporation must be executed by a person designated as “incorporator.” The incorporator must be an adult and doesn’t need to be affiliated with the corporation in any way other than merely filing the document. Later, this person will pass a resolution assigning all rights and duties to the board of directors.

Submit your articles of incorporation. In most states, the agency responsible for corporate filings is the Secretary of State (usually the Corporations Division).

Once the state office has processed your documents, they will return the certified documents to the address provided.

Elect a board of directors: The Incorporator executes a corporate resolution electing a board of directors assigning all rights and duties to the board.

Issue shares: The Board of Directors issues shares to designated shareholders.

S-Corp: And lastly, if you want the pass-through tax treatment of an S-Corp, you’ll need to file IRS Form 2553 with the IRS within 75 days of the start date of your corporation.

How long does the process take?

Depending on the state and its current workload, processing time may vary from 1 day to 3 months. Unfortunately, as states are facing budget issues and staffing cuts, we are seeing longer backlogs, particularly at the beginning of the year. There’s also a ‘rush filing’ option, which in many states must be done via walk-in delivery. If you’re filing yourself, you can bring the completed forms in person to the secretary of state’s office. And if you’re using an online filing service, they will have a courier located near the state office to bring in your forms for rush service.

How should I file?

The three methods for filing your Articles of Organization or Articles of Incorporation are: do-it-yourself, a legal filing service, or an attorney. For full disclosure, I am founder and CEO of CorpNet.com, an online legal filing service, but will hopefully provide objective advice here, because depending on your specific situation, each option has its own set of pros and cons.

Do-it-yourself: In this case, you can download or request the forms from your secretary of state’s office, complete, and submit the forms on your own. This is obviously the lowest cost method (you’ll still have to pay the state filing fee; exact fee amounts vary by state; for example, in California it’s $100 for a Corporation and $70 for an LLC for standard filings). This is a good option if you’re more concerned about saving money than time, and if you have a relatively high tolerance for paperwork and minute details.

Online legal filing service: An online legal filing service will file the documentation for you. This option is slightly more expensive than filing yourself, but for some, the time savings is invaluable. Legal documents can be tedious, time-consuming and fraught with details. Regulations and requirements vary across states, even down to the little details like paper size, font size, number of copies, ink color, etc. By turning to a service that specializes in these matters, you can save yourself the headache and hassle of learning and staying current on each and every detail. And you can focus your time and energy on your own business.
Of course, it’s important to understand that a document filing service is well… a document filing service. It’s not a substitute for an attorney, accountant or tax advisor. These service companies cannot give you specific legal or financial advice for your set of circumstances.

Attorney: If you have particularly complex business needs — for example you have strict requirements for shareholder structure or stock allocation, or you’re dealing with millions of dollars up front — you should retain your own expert counsel to help get you started. An attorney will be able to assess your situation and provide specific legal advice. Likewise, a tax or financial advisor can help you figure out the financial implications in forming an LLC, S Corporation, or C Corporation.

When it comes to legal matters, I’ll be the first to say that trying to save a few dollars up front can end up costing you big in the long run. Trust your gut; if you feel like you need to bring in expert counsel, then by all means do so. Just remember that you are able to file for incorporation or LLC formation without an attorney, and this could be a reasonable and cost effective way to go. Whatever method you choose, make sure to pat yourself on the back for taking this important step for your business and yourself.

Merchant Accounts: What to look for

Although the actual payment processing is nearly universally the same across all merchant account services, the best merchant account providers have high approval ratings, get your account up and running quickly, have low start-up and monthly fees, offer great customer service and posses a wide array of hardware for their clients. It takes a combination of all of these things to stand out in the marketplace.

Average Approval Rating 
This term means something a bit different in a merchant-account context than it does in common usage. The approval rating for online merchant account services refers to the percentage of applications a company approves. The higher a service's approval rating, the higher the chance you have of getting an account through that service. This is an important number to know, especially if the service charges an application fee.

Cost per Month 
It does you as a retailer very little good to accept payments if the service takes more in fees than you make in profit. The best merchant account services offer low monthly service fees as well as low per-transaction costs.

Start-up Cost
 Any merchant account service that makes it too expensive to start accepting payments shouldn't warrant your consideration. Some services can cost as much as $300 before you can even accept a dime in payments. 

Account Set-up Time
 In addition to having low start-up and monthly costs, the best companies turn your application around within a day or two after you submit it. Lesser services can take up to a week.

Customer Service 
Allowing a company to handle your payments involves a huge amount of trust. If a company does not have great customer service, it doesn't deserve to handle your livelihood.

Internet-based Features
 More and more companies are moving to a primarily online business model. Therefore, virtual terminals and gateways are features we look at very carefully.

POS Swiper Features
 Brick-and-mortar retail outlets are not going away, no matter what the digital evangelists may say. You will always be able to walk into a store with money and walk out with goods or services. The best merchant account services provide a wide array of point-of-sale hardware for your physical retail outlet.

An internet merchant account is a simple but important thing. When you are shopping for a merchant account service, always keep in mind that the service needs you more than you need it. There is no reason to go with anything less than the best company you can find.

Checklist for starting an Online Business

Have a Business Plan

- Define your niche market. - Develop your business identity. - Write brief mission statement. - Have a reliable source for your product- manufacturers/suppliers. - Have a reliable source to deliver your product- direct delivery or drop-shippers.

Address your Web Logistics

- Choose a web hosting provider. - Address costs, liability and your plan on how to handle service interruptions, denial of service, or risks associated with the products and/or services you offer. - Designing your e-commerce site: Will you contract a web designer and/or graphic designer? - Address web-marketing & Search Engine Optimization for your website and products - How will you ensuring that your clients find you on the web?

Address your Business Logistics

- Establish your phone & fax service. - Establish PayPal/Google checkout accounts or a merchant account (direct credit card processing)? - Create your business procedures, fees and dispute mechanisms. - Information Security: Determine what services are offered/needed to establish security for payments and/or the personal information of your customers/site users. - Contract with a preferred shipper: set up shipping provider accounts; establish fixed & discount shipping rates. - Purchase shipping supplies. - Contract with suppliers/vendors.

Legal Issues

Create the Terms & Conditions of Use for your website: - Consider disclaimers & limitations of liability. - What state's laws will apply? How and where will disputes be litigated? - How will you require customers/users to read these Terms & Conditions and make them legally binding? Warranties/liability for products, services, content: - charge backs, consumer disputes, procedures for returns - responsibility for shipping and handling costs - Liability for 3rd party content (product descriptions, endorsements, comments) - Liability and use of copyrighted materials/trademarks- Will you monitor copyright issues and complaints? Safeguarding Privacy: - Establish procedures for safeguarding certain non-personal information. - Determine marketing practices: Will you sell website user information? - Certain industries and certain information require privacy notices. - Ensure compliance with applicable Federal and state laws (particularly if kids under 13yrs use your site).

When do you need a Merchant Account?

When it comes to e-commerce, businesses large and small require a method that allows them to collect and process credit card payments.  If this sounds like your business, then you need a payment gateway which is generally provided by a merchant account.  Finding a merchant account provider can be somewhat of a challenge yet anything can be overcome when doing a little research.

How Much Will it Cost?

For the most part, merchant account providers will charge you a fixed rate per month along with a certain percentage for each sale.  Keep in mind that there may be other fees as well.  When dealing with a reputable provider, these fees will be for maintaining your shopping cart, verifying customers, processing monthly statement, etc.   Having a merchant account is vital in the realm of e-commerce as most consumers today prefer to shop online with their credit cards.  If you can’t accept this form of payment, you may as well not even open up a storefront.

How Can I Get One?

When searching for a merchant account, you will find that most providers are pretty reasonably priced.  The catch is that you must qualify.  Some of the qualifications for a merchant account include background checks, credit checks and proof that you are actually running a legitimate business.  Additionally, some will require that you commit to their service for a certain amount of time and charge cancellation fees for breaching the contract.  Others do not have stipulations and will allow you to part ways at any given time without taxing on fees.  This is why it is very important to look into a particular merchant account provider before deciding on a service.   As with most web-related processes, it is best to find a company that is in good standings and has been in the industry for a while.  This gives you better assurance that the provider will be around and won’t cause you to miss out on crucial sales.

What Should I Look For?

When comparing merchant account providers, don’t hesitate to grill them with hard questions.  One thing you definitely want to known is the estimated time frame for depositing funds into your account following a sale.  Retail sales generally do not take long to process, therefore, there is no need to wait an ungodly amount of time for your money.  You should look over the merchant account contract with a fine-tooth comb because the sooner you get paid, the better.  Always keep your eyes peeled for all the standard charges such as monthly fees, setup fees and cancellation fees if they apply.  You also want to look for any hidden fees that might deduct from your bottom line.  After all the fees have been tallied, you should then calculate the overall cost of service to find out if this solution actually works for your business.

A merchant account is a vital tool in the world of e-commerce and when signing up with the right service, you will find that it can save you noteworthy fees in comparison to a service like PayPal.   The key is finding a reliable provider that is going to be around and won’t try to nickel and dime you to death.

How to Build an Online Dropship Store With Products

Starting an online drop-ship store with products involves several key steps. Most drop-shippers sell to small retail or wholesale customers, or to people who own online stores. These retail, wholesale or Internet businesses use drop-shippers so they can purchase items in low quantities. They also may need you to ship products for them. You will need to find your own wholesale or manufacturer supplier for your online drop-ship store.

Step 1

Create a name for your online drop-ship business. Register your business name as a DBA (doing business as) through your city or county administration office, according to Business.gov.

Step 2

Decide what types of products you want to sell and drop-ship online.

Step 3

Search the NAW (National Association of Wholesaler-Distributors) website at Naw.org. Call and ask the NAW if they can supply a list of wholesale suppliers that sell the products you want. The Thomas Register of American Manufacturers lists potential manufacture suppliers.

Step 4

Call several wholesale and manufacturer suppliers. Find out which one sells the products you need. Make sure your wholesaler or manufacturer also offers drop-shipping so you can order small quantities if necessary. Select the wholesaler or manufacturer supplier that offers you the lowest unit cost, as you will need to buy products inexpensively as a wholesaler.

Step 5

Obtain a merchant account through your bank so you are able to accept credit card orders.

Step 6

Create your website by using online store-building software. Obtain pictures of the products from your wholesale or manufacturer supplier. Order samples of the products if the wholesaler does not supply pictures. Take a picture of the products and post them on your website. Follow the format of the software in setting up the descriptions and prices of your products. Add a shopping cart for customers to check out when they are finished shopping. Add a button for customers to purchase by credit card. Include an "About" page that describes the benefits of buying products from your company. Create a "Contact" page on your site with your business name, address, phone number and email address.

Step 7

Create a URL (uniform resource locator) or website address for you online store. Determine whether that address or domain name is available by visiting domain registration websites. Register your domain name.

Step 8

Find an ISP (Internet service provider) or someone to host your website. Note that some providers also offer web hosting.

Step 9

Follow the instructions of your web host in getting your website live on the Internet.

Step 10

Submit your website to various search engines. Find a search engine optimizer through a web design firm or Internet consultant. Use your search engine optimizer to achieve a first-page ranking in search engines when people search for your products.

Step 11

Order products from your supplier when people place orders through you. Pay your supplier only your wholesale cost. Keep the rest of the money as profit.

Step 12

Ship the products out for your customers.

Establishing a Merchant Account to Accept Credit Cards Online

With a little more than 51 percent of Americans carrying two or more credit cards according to a 2012 report by Experian, a credit-reporting agency, any small business owner is smart to at least consider accepting credit cards as a form of payment. Whether you run your company from an online store or a mom-and-pop shop, a credit card merchant account is an important asset to your business. You have numerous options for setting up an account to accept credit cards from customers—the decision depends on how you plan to "meet" with your customers.

Step 1

Determine the most common place where you'll come into contact with your customers—in person, over the phone, or on a website. This decision is key to determining the type of merchant account you should seek.

Step 2

Choose a traditional merchant account if you plan to take credit card payments from customers at an established location. This is the option for a standard brick-and-mortar business. With this merchant account you need electronic credit card swiping equipment.

Step 3

Choose a mail or telephone (MOTO) merchant account if most of your customers call in to purchase items. This is common for businesses that advertise on the radio or television and solicit phone orders. You can enter the customer's credit card information on an electronic terminal (no swiper necessary) or by using online processing software.

Step 4

Choose a merchant account that establishes an online gateway or virtual terminal so that you can take credit card payments from customers on your website. With this type of merchant account you do not need any physical equipment other than your own computer to view payments.

Step 5

Choose a cell phone or mobile merchant account if you plan to accept credit cards from customers in person while on the road at trade shows and fairs. The only equipment you need for this type of account is your cell phone. Some merchant services providers also offer wireless credit card swiping machines that you can use with a wireless internet connection.

Step 6

Select a merchant services provider who offers the type of account you need. Examine the transaction and processing fees associated with the service—merchant services providers commonly charge a percentage of the sale, a flat per-transaction fee and a regular monthly fee to maintain the account.

Step 7

Fill out the application for the merchant account that meets your needs. You'll have to provide your Social Security Number so that the company can perform a credit check. If approved, you'll receive a package via snail mail or email with information about how to set up your payment acceptance device and start accepting payments. You'll also receive a merchant number unique to your account. If you have to purchase equipment to go with your merchant account, your sales representative will guide you on the appropriate machines to buy.