The High-touch Legal Services® Blog…for Startups!

© 2009-2014 Dana H. Shultz, Attorney at Law

How Much Does It Cost to Obtain an EIN?

Antique cash register, symbolizing the cost to obtain an EINThis post about the cost to obtain an EIN (Employer Identification Number) in the United States is an Advertisement under Rule of Professional Conduct 1-400, Standard 5.

Recently I have received many inquiries from foreign owners of new companies in the U.S. They want to know how much it will cost to obtain an EIN. This post provides that information. (more…)

Can I Walk Away from My Suspended LLC?

Photo of people walking, symbolizing walking away from a suspended LLCThis post addresses a question that arises frequently from founders of California limited liability companies that have been suspended: Can I walk away from my suspended LLC?

A suspended LLC is the result of a founder who has neglected to file Statements of Information with the Secretary of State, or file returns with or pay amounts due to the Franchise Tax Board, or both of the foregoing. Please see Why was My Corporation / LLC Suspended or Forfeited? (more…)

How Can I Move My Corporation to Another State?

Logo for Quora, where Dana Shultz answered a question about moving a corporation to another stateThis post addresses how one may move an existing corporation to another state. It is based on a question that I answered on Quora (What state is best to incorporate an S-corp if you plan on moving away?).

I find that for most entrepreneurs, it makes sense to incorporate in the state where the entrepreneur resides. As I wrote in In which State should My Startup Incorporate?

Incorporate in the state in which you are doing business, unless there is a good reason to do otherwise [in which case the other state chosen probably will be Delaware]. (more…)

How Can I Find a Lost EIN?

Internal Revenue Service logo, symbolizing a lost EINAn Employer Identification Number, issued by the Internal Revenue Service, is the most important identifying number for US businesses, especially for tax purposes. This post addresses how you can find a lost EIN.

Find the Lost EIN Yourself

The IRS Lost or Misplaced Your EIN? page starts by recommending searches for existing records that should include the lost EIN:

  • The IRS confirmation notice that was provided when the EIN was issued.
  • Bank accounts that were opened, or governmental licenses that were issued, based on the EIN.
  • Tax return that were filed.
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You *Don’t* Need an ITIN to Bring Your Company to the US

Logo of the Internal Revenue Service, which issues the ITINI recently have received several inquiries about whether a foreign company or its owners need an ITIN (Individual Taxpayer Identification Number) when they bring their business to the US. The answer is, “No.” The rest of this post explains why that is the case.

When a company wants to do business in the US, it needs an EIN (Employer Identification Number).

For a foreign or foreign-owned company, obtaining an EIN can be intimidating. This is especially true if the principal officer lacks a US social security number. (The EIN cannot be obtained quickly and easily online.)

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Avoid Paying California $800 per Year … for 15 Days

Logo of Franchise Tax Board, which charges the California $800 annual tax

The California $800 per year minimum franchise tax applies to both corporations and limited liability companies. Many people do not realize, however, that the tax can be avoided – at least, for a short time.

As explained in Franchise Tax Board Publications 1060 (for corporations) and 3556 (for LLCs), there is a “15-day rule” or “15-day exception” stating that the minimum franchise tax need not be paid for an initial tax year if:

  • The corporation or LLC was formed (Articles filed with the Secretary of State) during the last 15 days of the entity’s tax year, and
  • The entity conducted no business during that period.

So, if an entity has a tax year ending December 31 (as most do), then it can be formed on December 17 or later, and it will not have to pay the California $800 minimum franchise tax until the following year.

Dana H. Shultz, Attorney at Law? +1 510 547-0545? dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

IncNow Joins Hall of Shame

Almost two years ago, I wrote about how Delaware corporations with no-par-value stock can find themselves obligated to pay extraordinarily high franchise taxes (In Delaware, No-Par-Value Can Cost a Bundle). Yesterday, a reader of this blog pointed out that IncNow, an online incorporation service, virtually lures naive customers into this tax trap.

Here is what the reader reported to me:

  • IncNow’s default assumption is that no-par stock will be issued.
  • IncNow does not invite the user to specify a par value (in contrast to LegalZoom, for example, which does).
  • IncNow’s representative said that the reader “could assign a par value to shares, under special requests at the bottom of the checkout form” [emphasis added].

In my opinion, considering par-value designation a “special request” is ridiculous on its face. But doing so with tens or hundreds of thousands of dollars at stake is grossly irresponsible. As a result, IncNow has been added to this blog’s Hall of Shame.

Dana H. Shultz, Attorney at Law? +1 510 547-0545? dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

Re-incorporation Won’t Save Amazon Affiliate from Termination

LawPIVOT logo

This post is based on a question that I answered on LawPivot: Q. I have a web business that has been adversely affected by the termination of Amazon’s affiliate program in California, where I currently run the business, resulting from the state’s new sales tax law. Does each state have its own requirements as to what constitutes “doing business” in that state, and is there any way I could maintain CA as my primary place of residence, were I to incorporate in a different state?

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When “Doing Business” isn’t “Doing Business”

Scrawled question mark, symbolizing questions about the different meanings of "doing business"

Significant responsibilities or liabilities can depend on whether one is “doing business” in a state. As this post explains (principally referring to California law for examples), doing business” can mean three different things in three different contexts.

Doing Business as a Foreign Entity

First, an out-of-state entity will need to register with a state as a “foreign” entity if it is doing business in the state. As explained in Doing Business in CA? Be Sure to Register”, the term used in the California Corporations Code is to “transact intrastate business”, which is defined as “entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce” (emphasis added). (more…)

Something You Might Want to Do BEFORE You Kill Your Company

ET Brutus logo

Although failure of a company is no fun, this morning I received an e-mail on this topic that made me smile. Sent with the subject line “Sell Those Dogs!”, the e-mail discusses how ET Brutus* buys the securities of dead or dying companies so owners can recognize losses for tax purposes.

The following excerpts from the ET Brutus website summarize the company’s value proposition:

ET Brutus helps private equity investors easily and legally recognize investment losses in the tax year of their choice. Specifically, it purchases stock of dead or dying companies for $1 plus a small service fee of $25 per position so the investor can recognize the tax loss.

By selling your interests to ET Brutus, you have a provable legal event that allows the tax loss to be recognized. Some companies may take a year or more to officially close. With ET Brutus, you can recognize the loss in the tax year of your choice.

I’m not a tax expert, so I don’t offer tax advice. If you’re considering such a transaction, check first with your tax advisor.

* If you do not catch the pun in this company’s name, check out Wikipedia’s discussion of “Et tu, Brute?”, then look closely at the logo, above.

Related post: How to Kill Your Company when that?s the Only Choice

Dana H. Shultz, Attorney at Law  +1 510 547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.