Transferring real property, or other assets, into an LLC or corporation can help you protect yourself from personal liability. This is typically done with property you anticipate having another party involved with in some way, such as a rental property. Transferring property can help protect you from personal legal liability.

The process for transferring property to your LLC is similar to selling your property to a another party. You’ll just need to completely transfer ownership to the corporation instead of an individual, like in the event of a sale. It’s a simple three step process that we detail below.

Step 1: Form an LLC or Corporation

You can’t transfer your real estate property, or any other personal property, into your LLC or corporation until you’ve actually formed a new legal entity. This can be a complicated process if you’re not familiar with the proper documentation or if you’re not up to speed with your state’s rules and regulations. Typically you’ll need to register a business name and file the LLC or corporation paperwork with your secretary of state’s office.

NOTE: For the remainder of this article, when we refer to an LLC, the same concept applies to a corporation.

If you haven’t completed this process before then you’ll want someone familiar with the formation documents involved, especially if you have any partners or other members of your LLC. You don’t want to lose any of your own rights to the property because you weren’t sure how to structure the LLC or what basic clauses you needed in your partnership paperwork.

Using an experienced company,like ours that has completed 60,000+ business formations, is important to make sure you’re completing the LLC formation process correctly. Getting an LLC formed and filed isn’t necessarily difficult but it does require a certain level of expertise to make sure nothing is missed that could hurt you or your business later.

Step 2: Complete a Quitclaim Deed

At this point you may want to consult with an attorney to make sure you complete the right deed for your personal property transfer. If you’re transferring real property than most of the time you’ll want a quitclaim deed that shows this transfer of ownership. When executed, a quitclaim deed transfers any interest the grantor has in the property to a grantee. In this case, you will be the grantor and your LLC or corporation will be the grantee.

There may be certain laws surrounding compensation for the transfer in your state, which is another reason you may want to consult an attorney. The laws would be what compensation is required when transferring property from one party to another. There also could be a transfer tax, depending on your state, if there is no compensation paid from the LLC for the property.

Step 3: Record Your Quitclaim Deed

In order to receive full legal protection for your personal assets when you transfer the property to your LLC you’ll need to record the deed at your local city or county clerk’s office. This recording creates a public record of the property transferring from you to the LLC, so the world is put on notice that you no longer own it and can’t be held responsible for anything that happens with it.

Recording the deed requires either going down to your local clerk’s office or mailing the paperwork, depending on the rules of your state, and then paying a nominal fee. This is an important step that must be done because otherwise there is no notice to third-parties that may have a legal dispute with the owner of the property in the future, which is a legal requirement to pass legal liability to a new owner.

Other Steps to Take When Transferring Property to Your LLC or Corporation

While the required steps to transfer property to an LLC don’t make for a long list, there may be more things you need to consider and take care of that depend on your situation. Not every single person looking to transfer property to a legal entity will need to complete these tasks, but they should be understood to make sure they aren’t a necessary step for your process.

Additional steps you should keep in mind if you decide to transfer personal assets to an LLC include:

1. Change Any Property Leases: If your property is being rented out, and you’re already under contract with a tenant, then you need to make sure you change all legal documents and leases to note who now owns the property (the LLC). In fact, you may want to just get brand new leases signed that are in the name of your LLC instead of yourself.
   
   
2. Notify Your Lender: If you have a mortgage on the property then it is likely that you have some language in your agreement that stipulates a requirement of you notifying them when ownership changes. This could cause a rate increase, but you always want to make sure you’re being compliant with previous agreements.
   
   
3. Obtain a Tax ID Number: You may not have to obtain a tax id number, but chances are that if you’re wanting to move property into an LLC then you’re likely doing something that requires this to happen. If your LLC has more than one owner, if you have employees, or if you meet other requirements that vary by state then you’ll need to get this tax ID number when you create your LLC.
   
   
4. Open a Business Bank Account: Opening a business bank account will help you further separate your personal assets from the assets in your LLC. If you move personal assets into an LLC to protect yourself legally then you won’t want to put that at risk by mingling your personal and business funds into a single account. Instead, open a business bank account to keep it all separate and keep your other personal assets safe from anything that happens with the LLC.

Pros & Cons of Moving Property Into an LLC

There are things you need to keep in mind when you decide to transfer personal assets to an LLC. For example, your actions may result in certain tax consequences, which we’ll summarize below. While the legal protections are nice, it’s also important to note that you may end up hurting yourself financially if you decide to transfer a property you currently have a mortgage on. We detail the most important pros and cons of transferring personal property into an LLC below.

Pros of Moving Property Into an LLC

The pros for moving property into an LLC include:

• Personal Liability Protection: If you’re dealing with another party with your property, like having a renter, then it makes a lot of sense to use an LLC or corporation to shield your personal assets from anything that may happen with the property. This way if there is a lawsuit later over an event on the property, like an accident, then no one will hopefully be able to come after your personal assets, like your personal home, for damages.
  
  
• Protect Your Property From Your Property: If you have multiple properties that you’re renting out then it is a benefit to keep each one in a separate LLC or corporation in order to shield each one from potential liability of the others.
  
  
• Tas Advantages: There can be certain tax advantages to owning real property in an LLC and running any money making activities with that property as a business. This is something you should consult a CPA on to determine what could be the most beneficial to you.
  
  
• Better Defines Partnerships: If the property you’re moving is jointly owned by more than just yourself, then moving it to a multi-member LLC or corporation is beneficial. Not only can there be tax benefits this way but it also clearly defines the ownership and management responsibilities within the legal entity. This makes your partnership much more clean and easy to navigate, especially if anything goes south later.

Cons of Moving Property Into an LLC

The cons of moving property into an LLC include:

• Tax Consequences: While there can be certain tax benefits, there can also be certain tax consequences of moving property. You may incur a delayed tax consequence or if multiple people own the property then you could trigger a tax event for someone else. Make sure you speak with a CPA to fully understand how this could help or hurt you from a tax standpoint, and consult with any partners to make sure it works for them.
  
  
• Mortgage Rates Could Increase: Many owners of rental property will get a good rate on their mortgage by purchasing the property as an individual. If you later transfer the ownership over to a business, then you would likely no longer qualify for the much lower rates your lending institution gives to individuals. You probably have a legal obligation to share this transfer to your lender, but when they find out it could cost you a lot of money by your rate being increased.
  
  
• Insurance Costs Could Rise: One thing that many people don’t consider when transferring property to an LLC or corporation is insurance. If the ownership of your property changes to a business then your insurance carrier could make you change any current personal insurance policy to a commercial policy. These commercial policies typically have much higher premiums, because of the nature of businesses to litigate more frequently than individuals.

Getting Started

As we mentioned above, the first step to transferring property to an LLC or Corporation is to register your LLC or corporation. You can do this today by letting us help. It’s a simple three step process where you select your company type and state, you fill out a simple online form, and we send you back all of your paperwork. Get started today so you can realize the legal protection of an LLC with your property!

Tax deadlines for 2018 are quickly approaching (some are due in just 14 days from publication of this post!) so here’s what you need to know to file your LLC or Corporation (or S-Corporation) taxes and some services that can make it easy for you to get done fast.

Who Needs to File

Anyone who owns part of any US business must file a Federal tax return regardless if you are a US citizen or had any revenue. Even if you didn’t do any business you still must file an “all zero” tax return. See below for assistance.

Tax Forms and Deadlines by Business Entity Type

• 1-Member LLC
  • IRS Forms to File: 1040 with Schedule C (Instructions)
  • Due Date: April 15
  • Non-US Citizens: 1-Member LLCs that are owned by a non-US citizen must file Form 5472 and a “pro forma” Form 1120 (Only indicating the name and address of the foreign-owned LLC, its employer identification number and the date of formation). In addition, non-US citizens are required to file Form 1040-NR (or Form 1040-NR-EZ).
• 2+ Member LLC
  • IRS Forms to File: 1040 with Form 1065 (Instructions)
  • Due Date: March 15* for form 1065
  • Non-US Citizens: Form 1040-NR (or Form 1040-NR-EZ).
• Corporation
  • IRS Form to File: 1120 (Instructions)
  • Due Date: April 15* for form 1120
  • Non-US Citizens: In addition to Form 1120, C-Corporations that are owned 25% or more by non-US citizens must also file Form 5472. Finally, non-US citizens are required to file Form 1040-NR (or Form 1040-NR-EZ).
• S-Corporation (or LLC taxed as an S-Corporation)
  • IRS Form to File: 1120S (Instructions)
  • Due Date: March 15*

* or the 15th day of the 3rd month after your fiscal year ends. The vast majority of S-Corporations and Partnerships have a fiscal year that ends on December 31 (you would have had to indicate a different year when obtaining your FEIN to specify anything else).

Recommended Services

• TurboTax Business – Just like regular TurboTax for your personal 1040 tax return, this service will help you self-file Schedule C (simple), Form 1120 or 1120S for your business. Definitely simpler than doing yourself but requires a fairly good grasp of business taxes for the form 1120 and 1120S. We recommend this option for clients that are familiar with business taxes or have a new company and only a few transactions.
• Greenback Business Services – This service will have a professional accountant file Corporation or LLC taxes (and 1 state form, if applicable) and have lower-cost options based on your annual revenue starting under $500. Note that they can also file your personal tax returns as well. MyCompanyWorks customers receive an automatic discount of $75 when purchasing a return.
• 1-800-Accountant – They provide tax, accounting, bookkeeping and payroll service for those who prefer a “full-service” solution.

Other Resources

• MyCompanyWorks Business Tax Guide – goes into more details about the taxes above, non-citizen taxation, state taxes, sales taxes, annual reports and basically everything you need to keep  your company compliant.

One of the most daunting aspects of doing business as an entrepreneur is coming to the realization that your business is failing and needing to decide whether to salvage or close it for good. Business owners must often review their operations to determine how sustainable the business is. When the business is no longer profitable due to a poor economic situation, strong competition or other factors, it is essential that a business owner knows how to close a business the right way.

The dissolution of a business involves a step-by-step process. Knowing how to close a company will save you from any potential lawsuit, loss of business and personal reputations, and excessive charges. Whether it is an LLC or a corporation or a sole proprietorship, this checklist will guide you all the way through the dissolution of your business.

How to Close a Corporation or LLC

Step 1: Think and decide.

Before arriving at the decision to close your company, it is essential to assess the debt obligations and financial strengths of your business.

Review your current situation. Is there any expenditure that you can eliminate to improve your company’s profitability? Check if there is anything you can do to negotiate the lease, reduce the payroll costs or perhaps lower overhead expenses by finding more cost-friendly vendors. By reducing expenditures, you will also have the opportunity to stay in business or even make your business more salable.

Seek expert advice or do research on the internet. Before finalizing your decision to close your business, speak with an attorney, an accountant or other business advisor. Let your accountant review all financial aspects of your company and the possibility of preventing business failure. If closing your business is the last recourse, an attorney can guide you in complying with all legal requirements.

Step 2: Review all documents.

Whether you are a corporation, an LLC or a sole proprietor, you need to review all documents relevant to your business, including articles of organization, bylaws, and other agreements to determine your next step.

LLCs likely require a member’s approval for dissolution according to the operating agreement. Typically, if the majority supports the decision to close the business, then everyone can push through with the process including settling all accounts, paying all employees and filing the necessary paperwork. It is crucial to know the state laws of the state in which your business is incorporated or registered.

Corporations may also need the votes of its shareholders to dissolve the business. The business documents of a corporation will determine the procedures required for closure.

Finally, once you are sure about closing your business, start contacting your creditors and notify them of your plan. This enables your creditors to compute all outstanding debts. Before selling your company’s assets, discuss your liquidation plans with your creditor and talk about how you want to settle your debts.

Step 3: LLC or Corporation Action

Whether it is a limited liability company (LLC) or a corporation, company owners should approve the business dissolution. With a corporation, the shareholders should accept the decision. If you are wondering how to dissolve an LLC, it is important to have the approval of the members. For small businesses, members or shareholders typically take part in the daily operations and usually are aware of what takes place every day.

The corporation’s bylaws and the operating agreement of LLC outline the needed approvals and the dissolution process. Complying with formalities means that the board of directors should create a draft and render approval of the resolution to dissolve. Following this, the shareholders vote on the resolution approved by the director. These actions are documented and kept in the company record book.

Step 4 File dissolution documents.

After the members or shareholders vote for the dissolution, documents should be filed with the state where the business was registered or incorporated. The dissolution of a company starts with the filing of Certificate of Dissolution, also referred to as the Articles of Dissolution, depending on the state.

Some states require the filing of documents before letting the creditors know or before resolving claims. Other states require your company’s tax clearance before filing the Articles of Dissolution. In this case, the company or LLC has to pay the back taxes first.

Step 5: Cancel licenses, permits, and registrations associated to the business and settle your employees’ wages.

Is your business leasing a space? If so, then you will need to notify your landlord of the termination of your lease. Your landlord may require you to either pay the whole amount of the lease or he or she will find a replacement for your space. This is known as mitigating damages. You would be accountable for the leasing fee from the time your contract is terminated until the time a new tenant leases your space. There are times when landlords allow the payment of termination fee, particularly when the location is on high demand.

Settle what you owe to your employees, including any unused vacation leave and wages. Issue a final paycheck to your employees within a specific period. The US Department of Labor offers links to certain state agencies for you to determine whether your state requires you to pay the unused vacation time of your employees. Depending on how big or small your business is, you will be required to notify employees before closing down the business for good.

Part of closing down your company is filing the payroll taxes. Submit your employees’ withheld taxes to the federal and state government within the allotted time. If you fail to comply with these tax requirements, you may be subject to pay a penalty fee and the government has the power to seize your assets to collect the amount owed.

File all the required federal and state tax information. Consult the checklist that the IRS uses for closing a business to make sure that you meet all tax obligations. Talk to your accountant and determine which taxes to pay.

Step 6: Collect the money owed to your business.

Once you have chosen to close your business, collect the money owed to your company so that you can pay off creditors. Consider calling the debtors to politely request the remittance of their payment. Offer a discount as an incentive for the debtor to settle what they owe to your business immediately.

Attempt to collect debts before announcing your business closure. A debtor may attempt to hold out on settling the debt if he or she has the idea that the business is closing. If you have accounts receivable, sell them to a company that purchases account receivables. Such companies will purchase your debt at a lower value and pursue the collection of the debts aggressively for their own profit. Although you will not obtain the full amount of your account receivables, you no longer need to collect any debt and will obtain access to funds quickly.

If you have any outstanding orders, fulfill them. If you are under contract to offer certain products or services, fulfill them or negotiate. It is essential to discuss matters with your clients concerning their outstanding orders and resolve such matters. If you fail to reach an agreement or compromise, you can be held accountable for breach of contract.

If you have assets or business inventory, sell them. It is important to perform a complete inventory of your assets and start selling them. Offer discounts when necessary to move the products at a greater pace. Consider selling your assets at auction. Holding an auction enables you to sell the inventory quickly without added shipping costs. You may also consider selling them to a consignment store. These types of businesses accept goods and sell them. After selling the good, they will give you part of the sale. Consider selling your smaller assets online. Large items will have higher shipping costs.

Step 7: Settling the claims of creditors.

Creditor claims can either be rejected or accepted by your business. Accepted claims should be settled through payment unless satisfactory arrangements are made with creditors for reimbursement. For instance, a creditor may consent to resolve the claim for 80% of the original amount. With rejected claims creditors should be informed in writing that your business rejects their claims. In this case, the assistance of an attorney is needed.

Step 8: Distribution of remaining assets

After paying off the claims, whatever remains of your assets should be distributed to all business owners in proportion to the ownership share. For instance, if 80% of the business belong to you and your partner has the 20% share, you obtain 80% of whatever remains of the assets. Distributions should be reported to the IRS. If the business has various stock classes, corporate bylaws generally summarize the procedure for distribution of assets to these shareholders.

How to Close a Sole Proprietorship Business

A sole proprietorship is a business owned by only one person and without partners. This means that the owner is legally accountable for all decisions concerning the operation or termination of a business. To close a sole proprietorship, below are the step-by-step processes.

Step 1: Inform all employees.

If your business has employees, inform them of your plan to close the business. A company that has roughly 100 employees has the responsibility to give its employees a 60-day written notice before the closing.

Step 2: Notify your clients and vendors.

Send notifications to your clients and vendors of your plan to close your business. Arrange project completion, payment for invoices and fulfillment of any outstanding contracts. Notify them of the final date of business, the final date of services and provide them with copies of any agreements.

Step 3: Cancel all licenses and sales tax identification number.

When closing your company, you should also cancel your sales tax identification number and any business licenses. Do this through the business licensing department of the state where your business is located.

Step 4: Tax work.

File the final tax paperwork. The complexity of filing relies on the scope and size of your sole proprietorship. Report all income including losses and capital gains.  

History: 

An Apostille is a certification from a US Federal or State government that allows a document from that office to be accepted in any of the countries that have signed the Apostille Convention adopted on October 5th, 1961. In the United States this typically is the Secretary of State in each US state or the US Department of State (for Federal Documents).

Purpose: 

Many of our international clients who form a company in the USA may also need an an Apostille or “Certificate of Authentication” (for countries that did not participate in the Apostille Convention). This is because their home country may need to verify that the documents filed in the USA are legitimate. Many times this is so they can open a bank account or meet other business or licensing requirements in their country.

Procedure:

First, you need to have filed the original business formation document (Articles of Incorporation or Articles of Organization to create the Corporation or LLC), then you need to have that document reviewed and “stamped” with the Apostille certification as well as provide the correct filing fee (and additional expedite fee if you are in a hurry). Typically this is done in the same office of the Secretary of State where you file the business formation document. The person responsible for approving the Apostille will then review and stamp the documents and return them to you via mail or courier.

Tips:

It’s best you submit your original formation documents and Apostille request at the same time so you can save some “back and forth” time between filing departments or have to wait for the formation documents to return (only to send them right back to the same place). Otherwise, you can simply send the documents in to receive the stamp (make sure to include pre-paid envelopes or courier airbills to prevent your documents from being misplaced).

Note that MyNewCompany.com, Inc. can obtain your Apostille or Certificate of Authentication in any US state starting at $35 plus state fees.

MyCompanyWorks would like to introduce our newest exclusive product: The Startup Wizard. The Startup Wizard is like a startup checklist on steroids and is personalized to your specific business entity type and state.

We used to provide our clients with a state-specific checklist in PDF format that shows them all of the “post-formation” tasks they need to complete after we formed their company. This includes tasks like opening a bank account, getting a business license or setting up your accounting system. With the Startup Wizard, we now have a custom web-based checklist that is personalized for your state and entity type.

What this means is that, for example, if you needed to file an Initial List for your Nevada Corporation, our checklist would provide the specific instructions to do that as well as many other important startup tasks.

Features:

• Included FREE with every business formation.
• Covers steps such as getting a business license or resale permit.
• Simple instructions for holding an Organizational Meeting, adopting Bylaws or Operating Agreements and Issuing Stock or Member Certificates.
• Progress Tracking (0 to 100%) as you complete each step.
• Weekly Automatic Email Reminder with attached PDF summary of remaining steps. Unsubscribe anytime.
• Downloadable as a PDF file if you prefer to print or view/save elsewhere.
• Multiple companies? You get a Startup Wizard for each one so you can track them separately.

Benefits:

• Don’t spend hours learning these critical steps, let the Startup Wizard guide you step-by-step.
• Save hundreds of dollars in time saved by having a simple checklist of things other services would charge you for.
• Properly set-up your new company without having to learn complex legal forms or procedures.
• Prevent costly mistakes or errors in the set-up of your company that could cause problems in the future (perhaps allowing lawyers to pierce your “Corporate Veil” and expose personal assets).
• If you utilize our service for your clients you can give them personalized guidance using the Startup Wizard.
• Peace of mind that you’ve set-up your company properly the first time.

We hope you like the Startup Wizard and let us know any feedback – thanks!