Not
ready to close your business? Proven steps for turning failing
business around.
Some business owners feel as though they are against a wall with
debt and contractual obligations. They are exhausted. Their leases,
loans, and contracts pile up, while their money dwindles. Their
business is ruling their life and they just want to get out.
As a frustrated business owner, you may find yourself in this
situation. You may have tried to turnaround your failing company
with little success. And if you have no buyer on the horizon, you
may have decided you've had enough. It's time to close your doors.
But how do you go about doing this? You will find rows of books
at your local bookstore that cover how to start a business, but
little on how to close one. How will you meet the obligations of
your loans and lease? Do you owe money to the IRS, individual agencies,
or contract workers?
There are many items to consider when you close a business. And
you have some choices to make when it comes to getting rid of debt
and folding your company. Let me explain.
Straight
talk about business bankruptcy and closure
California Businesses Incorporating In Nevada - Is It Legal? California is a notoriously bad state to do business in. Regulations, worker’s compensation and tax issues overwhelm companies. Seeking relief, many incorporate in Nevada. Unless done carefully, this decision can lead to disaster.
Doing Business - Jurisdiction
Jurisdiction is a legal term used to define who has authority over something. Applied to this article, the term refers to the issue of which state has the right to regulate a business. In California, the issue boils down to whether you are considered to be “doing business” in the state.
California is the one of the most aggressive states when it comes to defining jurisdiction. If you maintain offices or have employees in the state, you are considered to be doing business here. You must register with the state and pay taxes even if incorporated in another state. This tends to makes incorporating in Nevada an expensive option since you have to pay fees twice.
If you are caught “doing business” in California without having registered, you can be in for a rough time. Initially, back taxes and fees come due. You are also going to be fined and probably suspended from doing business until an audit can occur. The California Employment Development Department may levy back taxes and penalties. Your bank accounts may be frozen. Let’s look at an example.
The California Franchise Tax Board tends to look at the facts surrounding a particular situation. Assume I own a Nevada entity for the purpose of building web sites. I receive e-mail, snail mail and work out of my house in San Diego. The tax agency is going to take the position that I am doing business in California. My office is here. I take calls here. I do the work here. This scenario is going to be very difficult to defend. Playing out the scenario, I will probably end up going out of business due to disruptions, stress and the resulting financial burden.
So, can you use Nevada business entities if you are in California? Absolutely. Typically, you need to use a double incorporation strategy. Essentially, one entity is in Nevada and another in California. One entity provides services to the other through a fair value contract, to wit, you can’t charge $1 an hour for services rendered. The Nevada entity has to have a business license, office, customary payables such as rent and the typical items you find with any business. This strategy is typically used to hold non-tangible business assets such as intellectual property or patent rights.
California has a brutal business climate. The Governator has promised relief, but an actor making promises is, well, an actor making promises. Using Nevada entities can provide relief to your business as long as they are used correctly.
About the author:
Richard Chapo, Esq., is with http://www.sandiegobusinesslawfirm.comoffering business law advice to California businesses. This article is for general education purposes and does not address every facet of the subject matter. Nothing in this article creates an attorney-client relationship.
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Straight
talk about business bankruptcy and closure
Credit Counseling, another way out
Credit counseling occurs between a client and a professional counselor. The main task of the counselor is to review the financial condition of the person by calculating the existing difference between their financial obligations and their real income. Counseling takes the following items into consideration in order to calculate financial ability: ● Total debt amount ● Interest rates on all loan accounts ● Minimum payments for credit cards ● Any other financial obligations such as medical expenses ● Total monthly income After getting all the information toge. . .
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