Our friends at the accounting firm of gishSeiden have brought this to our attention:

We want to remind you that the State of California may be holding property or money belonging to you. The California State Controller’s office has received unclaimed property belonging to over 13 million individuals and companies. This includes bank accounts, stocks, bonds, uncashed checks, and safe deposit box contents. Most accounts are turned over to the State when there is no owner contact with the institution or account for 3 years. Often the owner forgets the account exists or moves and does not leave a forwarding address.

Unclaimed property can only be claimed by the rightful owner. Visit the California State Controller’s website at www.claimit.ca.gov to see if they have any property belonging to you (or your relatives). You can also check the unclaimed property websites of the other 49 states. Be prepared to provide proof that you lived at the address that matches the State’s records at the time your property was abandoned.

The California State Controllers has set up this Unclaimed Property Database to help you recover money that is rightfully yours. The most common types of Unclaimed Property are:

• Bank accounts and safe deposit box contents
• Stocks, mutual funds, bonds, and dividends
• Uncashed cashier’s checks or money orders
• Certificates of deposit
• Matured or terminated insurance policies
• Estates
• Mineral interests and royalty payments, trust funds, and escrow accounts.

If you’d like assistance in determining if there is unclaimed property in your name, I’d suggest you contact Andy Levinson at gishSeiden.

I will also add a  word of caution about unclaimed property sites in general. If you look for unclaimed money sites on major search engines, you’ll find quite a few sites that are not official or government-run. I would recommend staying with the official state controller sites, as sometimes these other unclaimed money sites seem to really be just lead generation sites gathering your detailed contact info.

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This is no April Fool’s Joke. Some security experts are saying this may be the biggest security breach ever.

On April 1, Epsilon, an online marketing unit of Alliance Data Systems Corp., announced that an outside intrusion had hacked into many of its customer files. In a brief statement, Epsilon says it detected a breach on March 30 during which “clients’ customer data were exposed by an unauthorized entry into Epsilon’s e-mail system.”

Epsilon runs email campaigns and send offers to consumers who register for a company’s website. Epsilon sends more than 40 billion e-mails annually and also runs loyalty programs for Citi and Chase credit card users.

Banking institutions and retailers that are affecte by this breach: Citi, Capitol One, Verizon, Chase, U.S. Bank, Barclays Bank of Delaware, Ritz-Carlton Rewards, Brookstone, Kroger, Marriott International, Walgreens, Visa, New York & Co., TiVo, HSN and L.L. Bean.

How could this affect you?

If your name and email address were included in this breach, you should be aware that Epsilon’s databases house consumer information cybercriminals could use for targeted phishing attacks (“A way of attempting to acquire sensitive information such as usernames, passwords and credit card details by masquerading as a trustworthy entity in an electronic communication.” – Wikipedia.)

So be especially suspicious of emails that look like they are from your financial institution or a retailer you know.

Good practices to follow:

• Never provide your login ID or password requested through email.
• Don’t respond to e-mails that require you to enter personal information directly into the e-mail.
• Don’t respond to e-mails threatening to close your account if you do not take the immediate action of providing personal information.
• Do not provide or confirm any information, including credit card numbers requested through email.
• Don’t use your e-mail address as a login ID or password.
• Be caution when opening links or attachments from unknown senders.
• Delete any emails requesting personal information.

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The friendly and incredibly knowledgeable experts at Robert Hall & Associates are offering a complimentary seminar on the ins and outs of 1031 Exchanges and Self-Directed IRAs as vehicles for wealth building and retirement planning.

When: Tuesday, March 22, 2011
Check-in/Networking: 6:30pm – 7:00pm
Seminar: 7:00pm – 8:30pm
Where: 300 West Glenoaks Blvd. Suite 300, Glendale, CA 91202
RSVP: By Monday, March 21st to: jennifer@roberthalltaxes.com

Anthony Watson, tax preparer, lecturer, and real estate expert from Robert Hall, will discuss the tax benefits of these two strategies. Then they’ve brought in speakers from two companies that specialize: Exchange Resources, Inc. will discuss how 1031 exchanges work, and how you can gain greater cash flow from your investment property. and IRA Services Trust Company will discuss ways to build, protect and grow retirement wealth through self-directed investing.

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If you’re wanting to dissolve a California business entity, such as a limited liability company or corporation, you may want to do that right away.

If the entity is dissolved before March 15, and if it has not conducted business in this calendar year, the $800 annual minimum franchise tax for 2011 will not be due, in most circumstances. If you wait until after the 15th, you’ll very likely have to pay $800 for the year.

We can file your Certificate of Cancellation/Dissolution at the counter in Sacramento in the next few days and get you in under the deadline. Begin the process of dissolution by filling out the appropriate form here.

It may take the California Secretary of State’s office weeks or months to process the dissolution paperwork, but the dissolution will be effective on the day they received the filing. This is why you cannot mail it in: you must file it with a courier service, at the counter for hand date-stamping.

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In early December of 2010, one could file new Articles of Incorporation or Organization at the counter in Sacramento, and expect about a six day turnaround. And just like last year at this time, processing times have recently extended considerably.

The California Secretary of State is reporting turnaround times for new corporations and LLCs at between 23 and 26 business days.

We’ve reported on this before: with budget cuts and a growth in new filings, the queue at the Secretary of State’s office can be a moving target throughout the year.

There is the 24-hour expedited filing offered by the state, for an additional $350 filing fee. Let us know if you have any questions about the best way to file and speed things up.

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As the end of the year approaches, one very important question is on the minds of many our clients:

Should we dissolve our unused corporation or LLC, or face another year of taxes?

The end of a relationship can involve a mixture of emotions – pain, happiness, relief. The ending of a business is much the same especially when your business is often one of the most intimate relationships in your life.

As with so many partings, you and your business need closure. As far as the law is concerned, that will likely include the filing a certificate of dissolution for corporations and a certificate of cancellation of LLCs, and perhaps other steps for your situation, including shareholder. board, or member approval.

On its face, that seems easy enough – find the right business forms on the Secretary of State’s website, fill it out, send it in. In fact, there aren’t even fees unless you need a rush processing. Or use Formation Solutions to assist in this matter: California for-profit corporation dissolution, LLC dissolution

But read carefully. Every form has conditions. The state wants to know things have ended responsibly.

In order to wind-up your corporation, you’ll need to have a few things done.

1. Your corporation’s debts need to be provided for – either completely paid, arranged to be paid or paid to the maximum extent of which the corporation is capable.
2. Any assets must be divided up equitably among the shareholders.
3. The corporation must file a final return with the California Franchise Tax Board.

You must also report how it was determined to dissolve the corporation – whether by unanimous vote of the shareholders, or by partial vote. If it was by a vote of less than 100 percent, you will need to file a Certificate of Election to Wind-Up and Dissolve along with your Certificate of Dissolution.

LLCs face similar requirements. In order to make your way through a Certificate of Cancellation, you’ll need to have several issues resolved.

1. Your LLC will need to distribute assets and any profits to its members.
2. The company will need to have its debts paid or arranged to be paid.
3. A final tax-return must be filed with the California Franchise Tax-Board or you must certify that it will be done.

Again, if the ending of the LLC wasn’t done my unanimous vote of the members, you’ll need to complete a supplementary Certificate of Dissolution to explain the circumstances surrounding the cancellation. The form requests any supplementary proof you have of an honest, correct dissolution vote.

With both corporations and LLCs, if a company never had assets or the entity was never actually used to conduct business, the dissolution forms become simple and easy. In activity of a significant length of time provides a similar benefit.

The main thing is to keep good records – especially of ownership votes to dissolve and your wind-up accounting.

Although situations may vary, many believe that completing the legal dissolution process is an important step to protect yourself. Please consult with an attorney on such matters. If it’s daunting or there are complicated circumstances surrounding your dissolution – get a qualified business attorney to assist you and guide you through the process.

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Nothing feels worse than paying more than you have to because of your own actions. With all things you manage to drive your business, it can be challenging to keep track of legalities that may seem fairly boring or unimportant by comparison.

The only problem – they aren’t so unimportant.

Forgetting important filings and renewals can cost you a lot in late fees and penalties. The first step is maintaining a list of the things you need to track.

1. Statement of Information. California requires every corporation and LLC to file a Statement of Information with the Secretary of State. For-profit corporations need to file annually based on your date of formation while LLCs and non-profits can file biennially. You’ll only part with $25 if you get your Statement in on time. Once your company becomes delinquent, expect a hefty $250 penalty fee to get everything straightened out. Most other states have a similar filing requirement.

2. Tax Returns. No one should be surprised that the IRS and the California Franchise Tax Board want to hear from you at least annually and on-time. You can ask for extensions if necessary – but you need to communicate. If you owe money and you file late, expect late penalties. If you file and pay taxes quarterly based on expected earnings – then you need to be extra careful to track your taxes. If you file annually, note the ending of your business’ tax-year and make sure to file within four months of your tax-year ending.

3. State Licenses. If your business receives special licenses or permits from the state, keep track of the expiration date. Expirations can have no rhyme or reason other than they are the anniversary of the date the state initially processed your license. The consequences of operating without a valid license can be steep and severe – especially if your business is in a field like healthcare, gas stations, insurance, or finance.

4. Local Licenses. They may not seem like much – just a certificate that you might post on the wall somewhere in your office – but local business licenses are still an important legality. Again, these licenses are usually renewable on the anniversary of their initial issuance. You need to note this down and keep track. More importantly, if you operate a business that is specifically regulated by your county or city such as restaurants, then you can face expensive penalties or even forced closure if you don’t keep up on regulations.

As an example, the City of Los Angeles is known for tracking down companies that have not filed for their city business tax certificate, and imposing heavy fines and interest.

5. Federal Regulatory Fees and Permits. If you are a business lucky enough to fall under federal supervision, then you probably need no reminder of the importance of compliance. Keep careful track of your filings and fees. Companies which deal in securities should make SEC and FINRA compliance a top issue just as construction companies that deal with environmental issues need to keep up with permits and fees to the EPA.

In all of these situations – the key is to create deadlines and markers in your calendar – even if you have someone your rely on to deal with these tasks for you. Someone else’s negligence or mistake could cost you financially or even cost you your business.

Best Practice: mark down renewal fee and filing reminders two months in advance of their deadlines. Handle it early. Check in with your accountant, attorney, assistant or whoever you have helping you with these matters as soon as you see that reminder in your calendar.

While many, if not most government agencies will send you reminder notices or forms, you can’t rely on them – and they will hold you accountable either way.

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Tax concerns are usually at the top of the list when it comes to selecting an operating structure. Here’s a quick overview of a few tax benefits for the most common business entities:

A  Sole Proprietorship is the default structure if you’re operating on your own and haven’t officially registered your business as a corporation, LLC (Limited Liability Company), or Non-profit.  A sole proprietorship is NOT a legal business entity: you pay personal income tax on your earnings (as well as self-employment tax), can subtract some expenses as itemized business deductions on your tax return, and you’re personally liable for all of the debts the business incurs.

Why it might be a good idea

• You’re only taxed once on your earnings from the business
• There’s no need to file a separate tax return for the business
• Net losses can be “carried” to prior or later tax years to offset tax liability
• Hidden tax perks, like healthcare reimbursement arrangements and provisions for hiring family members abound

A traditional Partnership is also a “pass through” business entity, and is sometimes seen as the default structure when multiple parties run a business without forming an official entity (like an LLC or corporation). Just like a sole proprietorship, capital gains and income are taxed to the business owners, typically at a higher rate than they would be for some other business structures.

Why it might be a good idea:

• Partners are only taxed once on business earnings
• Partners can “assign” property, income, or debt to other partners, allowing for a tremendous tax savings in many cases.
• Assets can be more easily transferred out of the business to the owners without “property disbursement” taxes

The two main types of corporations are S-Corporations and C-Corporations.

First, it’s important to understand that corporations are considered a C corp when they are formed. With the Secretary of State, there is no distinction. To them, you are just “a corporation.” Period. Not S or C. This is a distinction made by the IRS and honored by state tax boards.

An affirmative action (making an election to be taxed as a small business corporation: IRS Form 2553) is needed to change your “C” corporation to an “S corp.”

A C-corporation files corporate tax returns and pays taxes on its profits. Then, from what remains after taxes, a corporation may distribute earnings to shareholders in the the form of dividends. Shareholders are then taxed on dividends, which means that the owners effectively pay taxes on the same earnings twice- once at the corporate level, and then as individuals.  This is known as “double taxation.”

For some situations, a C corp can be preferable. Most of our clients are small businesses and prefer to make the S election.

An S-Corp works like a sole proprietorship or general partnership, where income passes through and is taxed to individual shareholders.  Typically, profits and losses are allocated proportionally to ownership share.

Why an S-Corp might be a good idea:

• No self-employment tax, resulting in considerable tax savings in many cases
• Pass-through taxation means that losses can be deducted on your personal income tax return

Why a C-Corp might be a good idea:

• Corporate tax rates are often lower than top-bracket personal tax rates
• Special incentives for hiring, purchasing equipment, and other expansion-based activities (including deductions for start-up costs)

Limited Liability Companies and Limited Liability Partnerships

LLCs and LLPs are statutory business entities where rules can vary from state to state.  Generally, both LLCs and LLPs can elect to be taxed as much like S-Corporations or general partnerships, where income “passes through” the entity directly to the owners.  This avoids the double-tax issue faced by a traditional C-Corporation.

Why it might be a good idea:

• Typically considered flexible in terms of taxation
• Flexibility in profit distribution means that owners can assign income and losses in the most advantageous way for tax purposes

Though tax savings is an important consideration, the type of entity most suited to your business will depend on a variety of factors. We always recommend that you consult with a professional tax adviser to find the appropriate entity for your situation. If you’d like assistance in finding a great CPA or attorney for guidance on these issues, contact Formation Solutions. Also talk with other business owners, and do your research before making a decision.  If you’ve got any tax tips for new business owners, comments, or questions please share ‘em with us!

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Are you ready to form a new corporation or LLC, but you’re waiting to file your Articles of Incorporation or Organization until January to avoid the $800 California Minimum Annual Franchise Tax?

Well, there are a couple things you might want to consider.

1. Do You Really Want to Wait?

First, if you need the protection of a legal business entity now, then you need it now. Sure, I can understand the desire to wait a couple months and avoid having to pay 2010 franchise tax. But if you are conducting business activities that you feel warrant the protection of an LLC or corporation, is it really worth waiting to save 800 bucks?  Maybe it is, maybe it isn’t. Please consult an attorney about the right timing for you.

2. Long processing times in January. File Now with Future File Date.

There have been budget cutbacks, and the California Secretary of State has closed offices and consolidate document processing unit. If January 2011 is anything like January 2010, if you file Articles in the January, plan to wait 45-65 business days to be officially formed. This wait could slow the launch or growth of your business and even put you at risk.

There is an option: file now with a “future file date.” You can file your Articles for your new LLC or corporation now, with a request of a specific file date. In fact, you don’t need to ask for January 1, 2011: any entity formed after 12/17 is considered to not have a 2010 tax year.

This should speed things up considerably. If you file now, with a 12/18 file date request, you might even have a 2011 LLC or corporation before 2011 is even here.

3. Bonus to this plan: 2010 Tax Deduction.

Business startup costs are tax deductible. So why not deduct these expenses from your taxes sooner rather than later?

Update: The following is a comment from Matthew Berger, an attorney based in Carpinteria, CA. We thank him for his contribution to the conversation and encourage you to see his website if you have questions for any attorney.

This works only if the entity doesn’t do any business until 1/1/11. The entity won’t avoid the minimum franchise tax (MFT): the issue is when the corporation or LLC is required to pay its first MFT, and that depends on when the government …considers the entity to have its first year. A corporation or LLC formed after 12/18/10 and not doing business until 1/1/11 will be deemed to have its first year beginning 1/1/11.

The rules for when the MFT is first due are different for corporations and LLCs. A corporation does not have to pay its MFT for the first year (until 4/15/12, if incorporated after 12/18/10 and not doing business until 2011), whereas the LLC doesn’t get its first year for free and will have to pay the MFT on the 15th day of the fourth month of existence, which will be 4/15/11 if deemed to have been formed on 1/11/11. By forming after 12/18/10 and not doing business until 2011, the corporation and LLC will not be deemed to have formed in 2010, and thus can put off payment of its first MFT to 2012 for a corporation and 2011 for a LLC.

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Formation Solutions, Inc. is providing this notification as a courtesy to our clients and all business owners.

Business owners are reporting that they have been targeted by a phishing email scam. The scammers are sending e-mails to businesses in an attempt to lure recipients into clicking a link that directs them to a fraudulent site. The e-mails refer to a federal tax payment issue and are written to appear as if they are from the Internal Revenue Service (IRS).

If you receive one of these e-mails, do not click the link. The IRS does not communicate through e-mail, and this is not a legitimate communication. The email link contains a virus designed to infect your computer and steal critical information from your company. Formation Solutions has obtained a copy of one of these e-mails, a portion of which is reproduced here for your reference:

Delete this e-mail immediately. Do not save the e-mail in your system or forward it to anyone.

We’ve also seen this variation:

From: EPS Tax
To: NAME
Subject: Re: NAME: Federal Tax Payment ID: NUMBER has been rejected.

Your Federal Tax Payment ID: NUMBER has been rejected.

Please, check the information and refer to Code R21 to get details about your company payment:

Information valid till 11/09/2010. In other way forward information to your accountant advisor.

http://eftps.gov/R21

EFTPS: The Electronic Federal Tax Payment System PLEASE NOTE: Your tax payment is due regardless of EFTPS online availability. In case of an emergency, you can always make your tax payment by calling the EFTPS.

(That link in there is fake. In the actual email, you can see that it’s coded to a different URL.)

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