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Legal Survival Guide

Lesson 4 of 27

Four Types of Business Structures

 

Legal Survival Guide

Lesson 4 of 27

Four Types of Business Structures

 

Lesson Info

Four Types of Business Structures

All right, Strap in, Buckle in. Put your helmet on. We're gonna pick up the pace and we're gonna rock this thing out. We're gonna form some companies. We're gonna do a trademark search. We're gonna get a domain name. We're gonna make it happen. Now, let's think about why company? What do we need? A company? I'm doing just fine. If it ain't broke, don't fix it. Leave me alone. It's awfully easy to do nothing. Why would I even want to do that? Me tell you why you'll get the protection of the corporate veil. It is not like the wedding veil. It is the corporate veil. It is this veil of protection that comes over and protects the owners of the company from the liability incurred by the company. So if the company breaches a contract, they can't come. Take your personal assets. If the company hire somebody and gets into unemployment related dispute, they can come take your personal assets. It's a veil of protection where it limits shareholder liability or member liability in the business. Tha...

t's what it is. And that's why it matters. So if you were doing business, Doria is a sole proprietor. and you breach a contract, I'm gonna come take your car. And if you hire an employee and you discriminate against them because of a disability, I'm gonna come take your car. And if you, um if you, uh, agree to show up for a gig and you don't show up on time, I'm gonna come take your car. Right? And here's what the corporate veil doesn't protect. If Dori is working for Dari Photography LLC, and she's driving down the road drinking her malt liquor from a brown paper bag as she does from time to time No, I'm just kidding. And she runs over little Timmy walking across the street with his scooter and he's killed dead on the spot. Story is not gonna have a lot of luck saying I'm not responsible. Don't come take my car. It's personal liability that she would have incurred by running over Timmy while drinking and driving. Does everybody get that? So if you do the bad thing personally, not wearing your corporation had you're still gonna have personal liability. But the corporate veil gives us protection, and that is why we need to do business in an entity. So how are we gonna organize? There are four kinds. The 1st is Daria's method. Yes, I put in red what I put in red there. Diarrhea. I got danger. That's sole proprietorship that you're using your soul security number. You're just doing business in your own name. It's simple. It's easy. I don't have to think about it too much. It's perfect for creatives. It's right brain friendly. It feels good. How I can no danger. Don't do it. Partnership. Maybe you're in business with someone else. The saying goes. The only ship that won't sail is a partnership. It's sure to sink its not win the part. It's not. If the partnership's going to split up, it's when the partnership is going to split up. So if you're gonna go into a photography business with someone else, please don't do it is a partnership. Do it as a limited liability company. Now, a couple of different kinds of limited liability company you could be a single member limited liability company. Limited liability companies have members, not shareholders, kind of a weird way that lawyers say it, but actually the state legislatures created the limited liability acts and more members this is the best way to do business. It's simple. There are also corporations. Bob, for instance, his company is a corporation, but he's made an S Corp election, so the corporation is taxed like a partnership. It's passed through taxation. Or you could be a C Corp like Coca Cola, Coca Cola's A C Corp that's just a general corporation general. Corporations have taxing taxation double taxation, so they pay tax at the corporate level for corporate profits if they give dividends out to their shareholders. If you're a shareholder of Coca Cola, you pay tax on your dividends, right? So corporations have double taxation and see corpse generally are a bad idea for service oriented businesses. These are the four types of businesses now. The bonus material includes a chart of all of the tax forms and the drawbacks of each type of business, including sole proprietor LOC Partnership. See Corporate escort. It is more in depth than what I'm going into in the class, so if you buy the class, you'll get that bonus material, which will help you learn which tax forms you have to use, depending on which form of business you're gonna elect now, are you get buying an existing business. This is a quick note. Sometimes Bob says, Hey, I'm gonna buy your business Well, great by my business. And Bob buys my business and realizes I owe a bunch of bed. Take back taxes. I got, ah, awful unemployment experience rate, and I played pay a super high rate from unemployment insurance. If you're buying an existing business, you may be responsible for the liabilities of the old business. So here's the solution to that. It's super simple. If you're thinking about buying, uh, somebody else's business, it's not unusual for a veteran photographer to sell to someone else. You've got to have a lawyer in that transaction. It's too complicated for you to figure out on your own. So unless you want to be responsible for a bunch of things that you didn't know about, have a lawyer help you by that existing business. Here are some thoughts about taxes in your structure. Just this is just a quick 10,000 foot foot. Overview. L. L. Caesar Taxes partnerships Partnerships have passed through taxation, so all of the income and expenses they show up on your 10 40 either through what's called a K one. If the partnership has more than one member or the LoC has more than one member or just straight on to your schedule, see if you're the only member of the LoC partnerships get pat, taxes get passed through a single member. LLC doesn't even have to file a separate tax return. Who wants to file more returns? I don't. So if you're a single member LLC, you don't have to file any additional tax returns. See corpse or subject to double text as corpse again, or Texas of partnership. But you have to pay annual maintenance fees. You have to file a separate form 11. 20 s, right Bob 11. s in the 11. 20 s. Then you have to issue some K ones, and then the K ones get reported on the 10 40. I'm trying to make things simple. Creatives okay. And escort might be the right thing for you, but a lot of formality with the S Corp that we don't have with the LLC. Um, did you have question Bob Microphone in a multi member L L C R K ones issued? Yes. We'd file a 10 65 return if we had multi members and K ones would get issued. But most photographers, your husband and wife team count is one member, so if it's a husband and wife, it's not multi member. I learned that because I filed a 10 65 1 year with my name and my wife's name on it, and I got a friendly letter from the IRS saying, Don't file any more tax returns. We don't want him. It's a great setting up your LLC. It's simple. This is all you got to dio. Okay, if you can watch the Desperate Housewives of Orange County or the real one of the real Housewives or you can watch the, uh if you can watch the voice are all of these, you know, reality shows that suck you in? You can do this in the time it takes to watch not even one of those shows on the DVR skipping all the commercials. We're gonna do all these things today, so we're gonna do some articles organization. We're gonna do an operating agreement. We're gonna pick and pay a registered agent. We're gonna do that all together today. Um, and that reminds me I'm gonna need on this computer Microsoft office, because I and I think this is a MacBook pro that I can put a disc in, so I'm gonna need to get my disk out of there. So when we get ready to do the operating agreement, um, so we're going to do all this is gonna be fantastic. How much does it cost? We're going to do a Missouri LLC today, which is gonna be the whopping price of 50 bucks online. Okay, so if you can't afford 50 bucks, maybe we need to think about our cash flow of our business. How much does it cost to get a registered agent? If you register in your own state, you could be your own registered agent, and it won't cost you a penny. If you want to register in another state, it's gonna cost you between 52 to 50 a year for somebody to serve as your registered agent. That's just a person who gets the correspondence from the secretary of state or the corporations division that has a presence in that state. So if you guys follow along with me and create a Missouri loc, you have to have a Missouri registered agent, which I'll be happy to do for you because you have to have ah, registered agent in the state. I'll show you how to do that again. If you do it in your own state, you can be your own registered agent. Nationally, there are some choices for registered agents, including CT Corporation. That's the gold standard for registered agents. That's who WalMart would use that Coca Cola would use that Sony would use. You can use the corporation services company, or CSC. So if you're riding down at home registered agents who could be my registered agent right down C t CSC in our AI and then I s I C T CSC in our AI and, um, they have national presence. If you have a Missouri L L C, you can use Craig Heidemann. I've got a registered agent service. If you go to craig Heidemann dot com and click on it, you can get registered agent services for a year or three years, depending on what you want. There is a form that I have to email you for you to sign before it's legal. So if you do pick me today is a registered agent. It won't be binding until you fill out that form and send it back in. But again, at craig Heidemann dot com, there's registered agent services there as well, and that just means I get mail for you. And if a lawsuit gets served on me, it's the same as it gets served on you. This is true for any registered agent, so you always have to keep your registered agent updated of your address. Because if I get served with your lawsuit and I don't know how to find you, it's kind of hard for you to respond to that lawsuit, isn't it? You have to have a registered agent to do business in your home state. Cost, of course, varies, Um, so if you create a Missouri LLC like we're gonna do today, you have to take that foreign company and register it back in your home state Piece of cake. It's just a form you can fill out online. Here's what it costs. If you register in Missouri of foreign corporations, pay 105 That won't apply toe really anybody today. If you registered in Washington, you pay 1 80 California pay 50 bucks to bring a Missouri LoC into California, Florida Pay a buck 25. New York had paid to 50 and Nevada you'd pay 75. So anywhere between 50 and bucks is what it costs to register your Foreign Corp company back in your home state. But you have to do it if you were to form a Missouri company if you form in your own state. If we do a Washington LLC and you're doing business in Washington, you just pay the Washington violent fee and you're done and you can be your own registered agent. So that would certainly be cheap. Quick question. Yeah, Jim. So in order to register, we want to register in a state that we're going to do any commerce in so that correct Well, substantial porter of your business. If you go shoot a gig in Georgia, you don't have to register in Georgia just cause you're doing one gig in Georgia. You're not really have a presence in that state outside of that one gig. Thank you. But if you're gonna do substantial regular business in the state, generally you have to register their crazy question to that um, Nicole See in the chat rooms from Seneca is high nickel. Asked if I am moving in early summer next year, Do I wait to register my business name and business license until I moved to little new location or starting same same state? They're moving next summer. We don't know where or whether it's the same statement, really a different state. If you were moving to another state, you can certainly form your business entity. I would probably hold off registering, if you for in a Missouri one. I've probably wait to register it with California or the new state until you know where you're gonna land. Um, you know, you'd be OK for a short amount of time if you had to do that. But generally, you know, if she's setting up operation in that new state, she'd need to register with the new state you can pick been. Generally, you pick a business friendly climate with low costs as to where to incorporate your business. What is trivia question? I'm gonna This will go out Teoh the Internet. But I'll ask my folks here first. What ISS? The state that registers the most businesses in a given year. Okay, think about it. Ah, Virginia. And it is not Virginia. Uh, Delaware, Delaware, Delaware, Lorenzo says. Dignity. Anything. How much business goes on in Delaware? Aton. What gets done in Delaware? Not much. Everybody registers in Delaware, for instance. Creativelive Inc is a Delaware corporation, but yet I'm here in Washington state, and maybe I'd be at the studios in San Francisco. Creativelive is registered to do business in Washington and California, but they're a Delaware corporation. Why is that? Because Delaware is business friendly. What does it mean to be business friendly? Well, we have low fees. We make it hard to sue businesses. We have business friendly laws that favor businesses over consumers. You know you can. You can argue about the fairness of that. But that's the law. So we want to pick a business friendly climate with low costs. Missouri would qualify. Hiring a lawyer in the Midwest is cheaper than hiring a lawyer in San Francisco or UM um, New York or Washington or Denver or anywhere else. The rates are simply much lower, and you can pick a legal venue that's unattractive to lawsuit happy folks. So if you're doing business in Seattle in your contract. Excuse me? Your contract has a choice of law provisions, which is legal. You'd have to have that checked out in Washington because generally you can pick any venue anywhere in which people have to sue you. So you say any lawsuits that my client files against me regarding my services have to be filed in Greene County, Missouri. That's in Southwest Missouri, where I live. So that would mean anybody that wanted to sue you would have to come to Missouri and file suit in Green County. And if they sued you here in King County, that lawsuit would be immediately dismissed because that they sued you in the wrong venue because you picked where the lawsuits had to be brought. Now, there a couple of nuances, but you can pick legal venues, unattractive toe lawsuit, happy folks.

Class Description

Ready to turn your creative side project into a thriving business? Join Craig Heidemann for an introduction to the business and accounting principles every creative professional needs to know. 


In this class, Craig will take you step-by-step through the process of setting up, running, and growing a small business. You’ll learn how to use QuickBooks to manage your finances, including managing client contracts and invoices. Craig will also help you navigate the potentially-confusing tax, legal, and copyright issues surrounding small businesses. You’ll also learn how to contract and/or hire people to do the tasks you can’t do yourself. 

Whether you’re just starting out as a business owner or you’re a longtime entrepreneur ready for a refresher course, this course will give you a roadmap to business success.

Reviews

a Creativelive Student
 

Excellent course and subject topic. Mr. Heidermann is a great teacher! Wonderful explanation, clear and concise details, humorous delivery, he kept me engaged the entire time. I truly had fun watching and learning during this course.

a Creativelive Student
 

I'm literally fresh off the boat, as the saying goes, having moved back to the US after decades of living abroad. I have the photography down (in some measure due to the instructors and courses here at CL), but being new to the business of photography in this environment I was rudderless. This course helped answer all my initial questions and put me on the way to getting established in my region... and beyond! Craig makes legal issues almost fun with his jocular, engaging style. Thanks so much to Chase and the people at CL for knowing what courses real working photographers need.

Andrew V Gonzales
 

This class is amazing (as is the Instructor). Funny, real, and to the point, Craig has a great way of making these aspects of business MUCH less intimidating. Still very applicable even in 2016. Loved it!