Our team at Gulati Law is sending you this friendly reminder of the deadline to update your business’s Annual Corporate Report with the Florida Department of State Division of Corporations. If you have not filed yet, please prepare to do so soon. Continue reading “DEADLINE APPROACHING: Annual Corporate Reports 2021 due soon!”
For developing entrepreneurs, one of the most pertinent obstacles encountered when starting a small business is obtaining the funds. Money is always a major concern for those who desire to be successful throughout the ups and downs of business. When applying for a business loan, there are a few things to consider:
Fitting the Criteria
Depending on which bank you are using to apply for a loan, there are several staple criterion they may consider. Here are a few things they may look for when reviewing your application for a small business loan:
- The purpose behind it. For a loan guaranteed by the Small Business Administration (“SBA”), this could include how you will use the loan proceeds, the size of the business, and the type of business dealings you will be associated with. Unsound business practices such as lending, pyramid sales, and gambling will not qualify for a loan in almost all cases.
- How able you are to pay back the loan. Banks strongly prefer that the loan be fully secured, however this may not be a make-or-break factor. Providing strong collateral through personal and business assets as well as holding personal investments in the business may prove your capacity to return on investment.
- Character and experience. Providing a favorable and stable credit history both personally and within your business may reflect a responsible and accountable attitude.
Providing the Proper Information
There are going to be a least a few necessary documents when going in for a loan. Although this may vary depending on the bank, obtain these basic documents to be the most prepared:
- A clear and detailed business plan. This may include personal information such as past education, employment, experience, and all other information relevant to your business.
- A credit history of all present and previous businesses as well as personal history of all partners.
- Financial statements (past, present, and projected). Includes both personal and those of owned and shared businesses.
- Projections of income for 1 to up to 5 years.
- Personal guarantee of all business owners.
- All legal documents pertaining to your business (copies of contracts with third parties, franchise agreements, commercial leases). Gulati Law can help you through this process.
Begin the Process Wisely
Before going into the bank and asking for a loan, there are a few basic steps to take to educate you on how to go about the process. This means doing your research.
- Choosing which lending institution benefits you the most. The smaller the business (especially in start-up phase), the less likely a large bank will grant your loan request. Small businesses tend to be less profitable for them, yet require the same amount of servicing and underwriting.
- Speak with other small business owners that you trust. Chances are many people starting out with their own businesses have gone through the same steps you are now preparing for. Getting honest advice could prepare you for any unexpected obstacles and lead you in the right direction.
- Approach your current lending institution or ones you have worked with in the past. They may be more willing to work with you one on one and provide helpful tips and information.
- Look into local community banks and credit unions. These smaller lending institutions frequently get overlooked and may offer a better option for your business.
- Speak with your legal counsel, they may be able to connect you with resources you were unaware of.
If you have any questions or concerns regarding your start-up business or obtaining a business loan, contact us today we would be happy to help.
Source: Small Business Administration
Choosing your business structure could have both legal and tax implications, that why it is so important to structure your business according to Federal and State laws.
In Florida there are a variety of different corporate entities with both advantages and disadvantages.
Below are just a few corporate entities that Florida offers:
- Limited Liability Company:””A limited liability company is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The “owners” of an LLC are referred to as “members.” Unlike shareholders in a corporation, LLCs are not taxed as a separate business entity. Instead, all profits and losses are “passed through” the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership would.”
- Corporation (C-Corp):”A corporation (sometimes referred to as a C corporation) is an independent legal entity owned by shareholders. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts the business incurs. Corporations are more complex than other business structures because they tend to have costly administrative fees and complex tax and legal requirements. Because of these issues, corporations are generally suggested for established, larger companies with multiple employees.
- Corporation (S-Corp):”An S corporation (sometimes referred to as an S Corp) is a special type of corporation created through an IRS tax election. An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. An S corp is a corporation with the Subchapter S designation from the IRS. According to the IRS, S corporations are “considered by law to be a unique entity, separate and apart from those who own it.” This limits the financial liability for which you (the owner, or “shareholder”) are responsible. Nevertheless, liability protection is limited – S corps do not necessarily shield you from all litigation such as an employee’s tort actions as a result of a workplace incident. What makes the S corp different from a traditional corporation (C corp) is that profits and losses can pass through to the your personal tax return. Consequently, the business is not taxed itself. Only the shareholders are taxed. There is an important caveat, however: any shareholder who works for the company must pay him or herself “reasonable compensation.” Basically, the shareholder must be paid fair market value, or the IRS might reclassify any additional corporate earnings as “wages.””
- Partnership:”A partnership is a single business where two or more people share ownership. Each partner contributes to all aspects of the business, including money, property, labor or skill. In return, each partner shares in the profits and losses of the business. Because partnerships entail more than one person in the decision-making process, it’s important to discuss a wide variety of issues up front and develop a legal partnership agreement.”
If you are interested in setting up a corporate entity, it is important to consult with a Florida Business Law Attorney, one who has set up business entities as well as understands them.
Putting a value on your business is one of the most important things when looking for investor or a profitable sale. However, there are many common mistakes that are made when valuing a business.
A business is not only worth what someone will pay for it, but also taking into account the following:
– The historical account of the company;
– Potential for growing profit, as well as existing profit;
– Geographic location;
– Skills and experience of existing staff; and
– Your personal investment.
It is important to consult with a Florida Business Law Attorney to make sure all your Corporate documents are in order either before you sell or buy.
To read more about this article please visit: http://under30finance.com/how-to-value-your-business/