How to File Annual Reports with a Tax Return in North Carolina

For those of you running a business in North Carolina, March 15th (actually the 16th this year because the 15th was a Sunday) is an important day—it’s tax time! Some of you might be scrambling to meet the deadline, others have already mailed their returns and it’s business as usual. But if you operate a corporation and changed your registered agent in North Carolina during the past year, you should double check what you sent/are sending to the Department of Revenue.

Like many states, North Carolina annual reports can be filed online, but what’s unique about North Carolina are the requirements when you don’t file online, and how your CPA might be tempted to file the paper form for you.

Each year, North Carolina will send tax forms to corporations registered to do business in the state. Annual report forms are sent along with these tax forms, and if your corporation has a CPA, this form will likely land in their hands. In other states, annual reports are actually classified as a tax (in Alabama, the annual report is part of the Business Privilege Tax (BPT)), and your CPA may treat the North Carolina annual report as such. In most cases, this may be advantageous as you can knock out two tasks in one, but if you’ve recently changed registered agents, this could result in a massive paperwork blooper.

In North Carolina, all business entities are allowed to file annual reports online. Annual reports are due April 15th, one month after the tax due date, and are filed with the NC Secretary of State. North Carolina corporations, however, that opt to file the annual reports with their tax return file a paper form of the annual report, which is sent directly to the NC Department of Revenue. There is no difference in fees no matter which form you file, but if your tax person isn’t familiar with annual reports, they could file the wrong information on behalf of your corporation in North Carolina.

North Carolina annual reports require the following information:

  • Name of Corporation

  • Fiscal Year End

  • Registered Agent Information

  • Business’ Principal Contact Information

  • Principal Officers

If any of this information has changed in the past year and you’re filing the paper form, you’ll want to check that your tax person filed the proper information. It’s easy to make a mistake as North Carolina prompts users to print a pre-populated form filled with information that could be inaccurate. CPAs and accountants could blow right through this information without checking or even knowing what the correct information is.

To file your North Carolina annual report online, visit the Department of the Secretary of State’s website. You’ll need to search for your business’ name and click on “file annual report,” after which you’ll be led through a series of prompts and eventually be able to pay the filing fee with a credit card or electronic check.

If you’re filing a paper form as part of your corporation’s tax return, you can only access a pre-populated form. Use the link above and click the option to print the form. On the pdf, make any needed changes and send the paper form with the $25 filing fee along with your tax return to the Department of Revenue.

North Carolina does allow businesses to amend annual report information. To make an amendment, use the link above and click the option to “amend annual report.” If any information about your business needs to be corrected, you can make the amendment.

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How Profitable Can a B Corp Be?

As benefit corporations and certified B Corps continue to gain favor with social entrepreneurs who are seeking more than just profit, many investors and onlookers have referred to it as a trend that will pass. Their notion is based on the fact that most B Corps are privately-held companies and it has yet to be proven that these socially-conscious companies and both do good and turn a profit in the public market. However, that theory is about to get a big test.

Recently, Etsy filed for an initial public offering (IPO). Soon, the general public will be able to buy Etsy stock. The company, registered in Delaware, was not formally created as a benefit corporation. But Etsy is a certified B Corp, and CEO Chad Dickerson has said that Etsy is committed to its ethos.

Etsy will not be the first B Corp to go to market. More than a year ago, Rally Software went public and its results have been mixed. But Etsy is a much larger company with name brand recognition. The stock is far from a sure thing, though.

In its IPO, Etsy showed that it hasn’t been profitable in several years and there’s been some sloppy accounting internally; both of those items should make investors wary. Etsy seems to be going after the same type of pitch another Internet giant works. Amazon, in its best years, is barely profitable and has never paid out a dividend. An Etsy investment will be similar to an Amazon one in that regard. Etsy can only hope to mirror Amazon’s growth.

As part of Etsy’s IPO, a small percentage will go to Etsy.org—its nonprofit. Etsy.org is dedicated to “educating women and other under-represented entrepreneurial populations to help them build businesses that regenerate communities and the planet.” Will investors be will let some profits go in order to help fund such a high-minded notion? I think we can all agree that such a thing would be ideal, but I think we can also agree that we don’t always live in an ideal world. After all, money is money.

One thing about Etsy, however, is a sure thing. Watching what happens to its stock will be fascinating.

If investing in this socially-conscious company has peaked your interest, it seems another, possibly larger B Corp test is looming. Forbes has reported that it’s being speculated that the disrupting, cool-eyeglass-wearing, Internet darling Warby Parker will be filing for its own IPO later this year. If you’ve kept up on companies I’ve written about in the past, you’ll know Warby Parker is a favorite of mine. They seem to be doing everything right, and may be a better indication of what a B Corp can do in the public market if their IPO comes to fruition.

What do you think? Let me know in the comments below.

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Delaware DOUBLES the Research and Development Tax Credit for Small Businesses

The First State has made the decision to fully match the federal research and development tax credit for small businesses! Here’s what you need to know, even if you’re not based out of Delaware:

What is research and development?

In the business world, research and development is the innovation and introduction of new products and processes by which a business operates and creates their products. Research and development is important because it helps your business compete on a global scale by modernizing and bettering products and services.

What the tax credit increase actually looks like:

Delaware’s tax credit increase was introduced in HB 318 in early May 2014. The Bill amends the current code relating to the research and development (R&D) tax credit by doubling it, all while keeping in place the annual cap of $5 million for the credit as a whole.

If your business has made less than $20 million per year for the last four years, then you are considered a small business in Delaware, and your federal R&D tax credit will be matched 100% by Delaware! If your business made over $20 million per year in the last four years, Delaware will still match the federal credit by 50%. Not bad!

The importance of the increased tax credit for businesses

Having a 50% larger R&D tax credit really reduces the risk of trying something new for businesses—especially small businesses where a risk could cost them everything. The idea with the tax credit increase is that now businesses will hopefully devote time to research and development, which could raise their value in the global market.  This all equals business growth in and a bolstered economy for Delaware. Ingenious, isn’t it? It’s amazing what a few business-friendly laws can eventually do for a place. Now if only the rest of the country would follow suit.

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President, Treasurer, and Secretary: The Role of Officers within a Corporation

Various officers assume different roles within a business—here’s a brief description of who they are and what they do.

What are officers?

The officers’ conduct the day-to-day business of a corporation and put the actions and policies established by the board of directors into action. If you choose to form a corporation, you will likely name the officers of your business in the corporate bylaws. Before we talk about officers, though, there are a few terms that should be clarified because you’ll hear them when talking about the makeup of people and positions within a corporation.

Shareholders:

Shareholders can also be referred to as stockholders. The shareholders are the people (or other legal entities) who own shares of stock in the corporation. Essentially they own the corporation. They have the right to vote on major issues within the corporation, which includes the right to elect the board of directors. A small business might have just one shareholder—the owner/founder of the business.

Board of Directors:

This is the governing body of the corporation. It is made of up individuals who have been chosen by the shareholders. The board’s job is to establish policies and oversee the actions of officers. They make their decisions at director’s meetings or by written consent.

The officers of a corporation

When you form a corporation, these are some of the corporate officer positions elected by the board of directors:

  • CEO or president: This is the guy or gal in charge, and they oversee the daily operations of the company. They are also responsible for delegating tasks to other officers and even employees. They can be responsible for signing important documents such as major contracts, legal documents, stock certificates, and the like.
  • Treasurer or Chief Financial Officer: This person is essentially in charge of funds within the business. If you operate a smaller corporation, then this person deals with all financial aspects including payroll and billing. In a larger corporation, the CFO would do more oversight of financial operations within the company.
  • Secretary: The secretary of your business keeps corporate records and prepares minutes of the board meetings as well as shareholder meetings. Recording minutes of a meeting means that the secretary takes note of who is present, the names of directors, and other formalities in a document.

Other officer positions

Of course depending on the size and operations of your corporation, there are other officers and positions (such as Chief Information Officer, Chief Investment Officer, or Chief Operating Officer), but those noted above are some of the most common.  In smaller corporations, one person can even assume multiple officer positions. Do you have any additional questions about officers and their roles? Feel free to ask in the comments below.

As always, thanks for reading.

-Drake

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Business Owners Take Note: Delaware Has Raised Taxes for Certain Business Types!

If you operate an LLC, limited partnership, partnership, or corporation in Delaware, tax hikes are coming your way in July.

Delaware has very recently made some changes to their tax code for businesses: On March 18, 2014, House Bill #265 w/HA 1, HA 3 was introduced. By April 10 it was passed by the Senate, and on April 15 it was signed by Governor Jack Markell.

The Act amends Title 6 and Title 8 of the Delaware State Code, which covers taxes and fees for Delaware businesses. For what is often lauded as the most business-friendly state in the nation, the numbers seem to be going the wrong way.

What you need to know:

  • Registered partnerships, limited partnerships, and limited liability companies must pay an annual tax of $300 (which was previously $250).
  • Corporations must now pay a minimum $175 franchise tax if their authorized capital stock does not exceed 5000 shares (which used to be $75). If they have between 5,001 and 10,000 shares, then the tax has increased from $150 to $250.

But rest assured: according to HB 265, your annual corporate taxes will never be more than $180,000 (or less than $175. Whew.)

Annual reports for Delaware were due March 1 for domestic corporations, and are due June 1 for LLCs, LPs, and partnerships, yet in Section 6 (c) of the Act it states, “This Act shall be effective as of January 1, 2014.” A quick visit to the Tax Instructions page via the Delaware secretary of state website informs us, however, that the Act will become effective July 1, 2014—considering January 1, 2014 has come and gone by the time HB 265 was signed. And don’t worry—there will be no retroactive tax collection.

Keep in mind that if you do not pay on time, there is a penalty

Although the tax increase could hurt your pocketbook, don’t ignore what you owe to the state, cause there will be penalties:

LLCs, partnerships, and limited partnerships:

$200, plus 1.5% interest per month on your unpaid balance.

Corporations:

$125, plus 1.5% interest per month on your unpaid balance.

Many Delaware businesses will be affected by this tax increase, but the state of Delaware claims that the increases could generate as much as $51 million in additional tax revenue next year. Do you think the increase is worth the additional revenue? What would your reaction be if this affected your business?

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Cultivating the Future Workforce: Delaware Has the Right Idea

The state of Delaware is thinking ahead by providing early opportunities for an ample, skilled workforce.

Governor Jack Markell has continued to emphasize Delaware’s extremely business-friendly climate by unveiling a new initiative which would prime high school students for the workforce.

In early April 2014 Markell presented  the Accelerated Career Paths program, which allows high school students to receive professional manufacturing certificates when they graduate. The state has enabled this by joining forces with Delaware Technical College and the Delaware Manufacturing Association to create a two-year program which students can join as juniors and seniors. They would attend classes in the traditional school setting for part of the week, and then receive hands-on, real-world training right at Delaware Tech the other part of the week, as well as have the opportunities extend into the summer months.

This program shows Delaware’s dedication to creating opportunities for a broad range of economic talent for future generations. As Governor Markell has noted, wages in the manufacturing industry are generally 16% higher than averages wages in the US economy.

Delaware understands that the quality of the workforce can and will positively affect their economy. It’s up to businesses to decide where they wish to locate their operations, and whether they decide to start a business in Delaware. By creating an ample pool of skilled workers, Delaware is increasing their chance of attracting big industry and jobs, and continuing their legacy as one of the most business-friendly states in the nation.

 

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Happy Volunteer Appreciation Day! What to Know Before Using Volunteers for Your Nonprofit

Operating a nonprofit organization on a budget? There are many folks willing to donate their time. Here’s what to consider before taking on volunteers with your organization.

On the heels of National Volunteer Appreciation Week (which was held April 6-12, 2014), April 21 was proclaimed Volunteer Appreciation Day throughout Washington State by Governor Jay Inslee. According to the state, there are more than 2 million volunteers throughout Washington, donating roughly 47 hours per person annually. With so many volunteers willing to donate their time to a good cause, what should you know about having volunteers help out with your nonprofit?

How to obtain volunteer work for your nonprofit

Before recruiting volunteers, make these considerations to help ensure that everything runs smoothly:

  • If you are holding a fundraiser, make sure you meet your state’s requirements for fundraising before you actually engage in fundraising activities. Different states have different rules, but most states require that you register with them as a charity when forming a nonprofit, before any fundraising takes place.
  • Be clear about the fact that the volunteers are volunteering their time, and shouldn’t expect any monetary reimbursement. Being clear about this from the get-go will help avoid potentially awkward situations or angry people who thought they were going to get paid.
  • Is there liability involved? If your volunteers engage in work that might be potentially dangerous or result in liability on the nonprofit’s behalf, be aware that your nonprofit could be held responsible if someone got hurt on the job. One way to circumvent being potentially liable is to draft a waiver or release that must be signed. Remember that this is not bulletproof, especially if there is gross negligence on behalf of your nonprofit. Some states have charitable immunity laws in place to help shield nonprofits against liability, but not all.
  • Is the volunteer really a volunteer, or are they an employee? Sometimes the lines become blurred, like if compensation for travel or a daily food stipend comes into play. The US Department of Labor has a fact sheet that can help to define whether a volunteer is engaged in work that might actually determine them an employee. This would make the nonprofit responsible for following minimum wage and hour laws, along with worker’s compensation and benefits regulations.

Cover your bases

Volunteer work can keep a nonprofit afloat on a small budget, and is often considered the lifeblood of many nonprofit organizations. Ensure that your volunteers have a safe, hazard-free environment to work in, are aware of their volunteer status and purpose of your organization, and also make sure you are in compliance with your state when it comes to various nonprofit rules and regulations. You can check out the US government’s volunteer resource and find information about volunteers available in your state. With the right planning and execution, your nonprofit organization can benefit greatly from the abundance of generous people willing to help.

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LLC to Corporation, Corporation to LLC: Can You Convert Your Business?

Some states allow for business entities to convert from one into another, and some don’t. Here’s how to approach converting your business.

Let’s say you own a limited liability company, but your business is growing, and you’ve made the decision to incorporate. Or maybe you operate a corporation, but have been thinking that an LLC would better suit your needs. What’s the next step? Washington State recently introduced Senate Bill 5999, which allows for LLCs to convert into domestic corporations, and vice versa. This got me thinking—what if your state does not offer this conversion option? And if they do, what steps do you need to take?

Dissolving a business if you can’t convert

If there is no business entity conversion option in your state and you want to switch, you will have to dissolve your business and form under the new entity. The process of dissolving your business involves a domestic dissolution form that must be filed with the state, usually along with a fee. As always, each state is different as far as where you send the form, how much the fee is, and what the form is called. After you dissolve your current business, then you will form a new limited liability company or a new corporation. This involves filing new formation documents with the state, as well as paying the accompanying filing fee.

What to consider if your state does offer entity conversion

With some states, such as Colorado, the conversion process is online and simple. In others, the process can be a bit more involved, including paperwork that needs to be mailed into the secretary of state. Despite how your state handles a business entity conversion, here are some important aspects to think about:

Advantages to a business entity conversion:

  • You can keep your original filing date—the date you initially started your business. This is beneficial because it gives your business a history and shows you are established. Would you feel more comfortable doing business with a company that was formed in 2003, or a company that appears to have been formed in 2014? This way you don’t have to start from square one.
  • It is cheaper than dissolving your business, then forming a new one. Most states charge a dissolution fee, as well as a fee to form a new business. These can start to add up. When converting your business from one entity to another, you will only have to pay one fee to the state.

Don’t forget to take these precautions when converting a business:

  • Converting your business could change your annual report date—make sure to keep up on any changes, so that you can continue to file your annual report on time in order to stay in good standing with your state.
  • Make sure to update your new company information with your registered agent, including company name and possible change of address.
  • Contact the IRS and let them know about the change so that they can update their records. Update your Employer Identification Number or shut down the old one if necessary. Your new entity could affect the way your business is taxed.
  • Update your corporate ending on the name of your business! States require that certain entities have certain endings—for example a corporation generally must have the words corporation, incorporated, corp., co., or other specific words or abbreviations in its name. Different rules apply for LLCs.
  • Once you have updated your business’ name with the state, make sure to make the change on business cards, social media, logos, websites, and anywhere else your business’ name appears.
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How to Be Your Own Registered Agent in Nebraska

You’re required to maintain a registered agent for your Nebraska business. Here’s how to be your own:

When you form a business in Nebraska, the state asks that you have a registered agent. The registered agent is an individual or business that is responsible for accepting mail on behalf of your business; this includes annual reports, mail, and service of process.

How and when do I get a registered agent for my Nebraska business?

If you have not yet formed a Nebraska business, you can become your own registered agent when you fill out the formation documents. There is space on the formation documents for the address and name of the business’ registered agent; put your information here. Once the documents are filed with the state, you are officially registered agent for your Nebraska business.

What if I already have a registered agent?

If you already have a registered agent for your business, then you will need to file a Domestic Change of Registered Agent and/or Office form (there are different forms for LLCs, corporations, and non-profit corporations).

On this form you must write in your current registered agent’s information as well as the new information it will change to—which will be your name and physical street address. There is a $15 filing fee for for-profit corporations and LLCs, and $10 for nonprofits. Send the form and fee in to:
Secretary of State
Room 1301 State Capitol, P.O. Box 94608
Lincoln, NE 68509

What are the requirements for being your own registered agent in Nebraska?

If you plan to act as your own Nebraska registered agent, know that there are some important rules you must adhere to:

  1. You must have a physical street address in Nebraska. A PO Box won’t do. The state wants to be assured that there is an actual address that you can be found at in case your business is served.
  2. You must keep regular business hours. These business hours must be kept at your physical street address in Nebraska so that you can be reached at a normal time, consistently.
  3. Your business cannot be its own registered agent. While you as an individual person can be the registered agent for your business, the business cannot act as its own agent. Another business can, however (such as a commercial registered agent company).

Some final thoughts:
If you can stick to the above guidelines, then you can act as your own registered agent for your Nebraska business. Just remember: once you have filed those documents with your name and address on them, they are searchable public knowledge. You must also be fine with process server knocking on your door.

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Do You Need Original Signatures When Starting a Business?

With the increasing popularity of online registration for new businesses, which states still require an original signature?

What is an original signature?

When you form a business or register your business in another state, there are multiple signatures that need to be on the formation documents. Before you send your formation documents in to the secretary of state to be filed and approved, you might have to get an original signature–depending on which state you’re in. An original signature is an ink signature on your formation documents, signed there by the person it is requested of. Not a copy, not a stamp, but an original signature.

Who requires original signatures, and on what documents?

There are only a handful of states anymore that require an actual original signature on formation documents. Original ink signatures are required in Maine, New Hampshire, New Mexico, South Carolina, Vermont, Virginia, and Wyoming. They are also required for domestic forms in Alabama. If you try to get away with a copied signature in Wyoming and New Mexico especially, you’ll be rejected.

If you have someone else form your company for you and they live across state, you will either have to sign in person or they will have to mail your formation documents, you will need to sign, and send them back.

What do other states accept?

Many states allow you to provide an electronic signature—meaning you simply type your name in a box on the form if you are doing an electronic filing online. If you are filing via paper and mailing or faxing it in, then a copied signature will suffice, as will a signature that has been scanned and placed on the form, or signed with a mouse.

In a state that does not require ink signatures, you can generally email it to the person whose signature you need, they can sign it, and email it back to you with a copied signature.

Which forms need what signatures by state:

State Signatures needed for domestic forms Signatures needed for foreign forms
Alabama LLC: Member
Corporation: Incorporator, cardholder (if applicable)
LLC: None required
Corporation:
None required
Maine LLC: An authorized person
Corporation: Each incorporator
LLC: Authorized person
Corporation:
Authorized person
New Hampshire LLC: A manager, or member if no manager is available.
Corporation: All incorporators,
LLC: Authorized person
Corporation: Chairman of the board of directors, president, or other officer.
New Mexico LLC: Organizer, registered agent’s acceptance signature
Corporation: Incorporator, registered agent’s acceptance signature
LLC: Authorized person, registered agent
Corporation: Authorized officer, registered agent
South Carolina LLC: All organizers
Corporation: Registered agent, incorporators, an attorney
LLC: Registered agent, authorized person
Corporation: Registered agent, authorized person
Vermont LLC: Organizer
Corporation: Incorporators
LLC: Organizer
Corporation: Authorized person
Virginia LLC: One or more organizers
Corporation: One or more incorporators
LLC: An authorized person
Corporation: Chairman or vice-chairman of the board of directors, president, or other authorized person
Wyoming LLC: Organizer, registered agent
Corporation: All incorporators, registered agent
LLC: Member, manager, or other authorized person, and registered agent
Corporation: Chairman of the board, president, or other officer

 

Key

Member: An owner of an LLC.
Incorporator: The person (or persons) who fills out and files your articles of incorporation with the state.
Authorized person: An individual who has been authorized by someone within the business to sign.
Manager: A person chosen by members to manage the LLC. Can also be an owner of the LLC.
Organizer: The person (or persons) who fills out and files your articles of organization with the state.

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