1 BUSINESS ENTITIES What You Need to Know with Anne Lolley for Total Training Solutions
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BUSINESS ENTITIES
What You Need to Know
with Anne Lolley
for Total Training Solutions
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877-778-5192 [email protected]
Why learn this stuff?
Vital information for newer employees
Good to have a comfort level
May need to assist customers
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common business entities
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The Entities
CorporationsLimited Liability CompaniesPartnerships (3 types)Sole Proprietorships
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corporations
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Corporations – Structure
Limited liability - owner(s) not liable Exceptions – personally guarantee loan Downside:◦ Corporate formalities◦ Director/shareholder meetings◦ Recordkeeping◦ Complicated tax returns
Separate entity (EIN)
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Corporations - Name
AssociationChurchClubCo.College
CompanyCorp.CorporationFoundationFund
Inc.IncorporatedInstituteLimitedLtd.
SocietySyndicateUnionUniversity
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Corporations – TIN/Documents
Employer identification number Must file with state Articles of Incorporation File annual reports Certificate of Good Standing CIP◦ Identify – Name/address/EIN◦ Verify – Articles of Incorporation
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Corporations – House Rules
BYLAWSDirectors
Corporate Officers
Stock
Meetings
Record-keeping
Procedures for Amending Articles / Bylaws
Limitations on Borrowing
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Corporations – State of Incorporation
INCORPORATION
Where corporation will conduct business
What about Delaware?◦ Still must register and pay taxes in other state◦ Delaware no longer that great
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limited liability companies
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Limited Liability Companies15
LLCs – Structure
Best of both worlds◦ Limited liability of corporations◦ Pass-through tax of partnerships
Owners are called “members”
Can have just one member
Usually not more than 5 members
Separate entity (EIN)
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LLC - Management17
MEMBERS
MANAGER
LLCs – Weird Option Rule
Multi-member LLC◦ Can choose to be taxed as corporation◦ No choice = taxed as partnership
Single-member LLC◦ Can choose to be taxed as corporation◦ No choice = taxed as “disregarded entity”
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LLCs – Weird Option Rule19
DISREGARDED ENTITY
IRS will ignore the LLC Owner is taxed directly
Use owner’s taxpayer identification number
SSN if individualEIN if corporation or other entity
LLCs - Name20
Limited Liability CompanyLimited Company
LC or L.C.LLC or L.L.C.
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LLCs – TIN/Documents
EIN (taxed as corporation or partnership) SSN or EIN (disregarded entity) Must file with state Articles of Organization File annual reports Certificate of Good Standing CIP◦ Identify – Name/address/EIN◦ Verify – Articles of Organization
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LLCs – House Rules
OPERATING AGREEMENT
Each Member’s InterestMembers Rights and Responsibilities
Voting PowersAllocation of Profits And Losses
ManagementMeetings and VotingBuy-Sell Provision
Limits on Borrowing
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partnerships
Partnerships
DEFINITION
Business owned by two or more persons
(and not a corporation or LLC)
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Partnerships
THREE TYPES
GeneralLimited
Limited-Liability
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general partnerships
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General – Structure
Automatically arises◦ Two or more persons co-own a business◦ Not a corporation or LLC
No state filing required No partnership agreement Simple, inexpensive Every partner is liable Separate entity (EIN)
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General – Special Problems
Customers may not understand◦No partnership agreement◦No partnership name◦No partnership EIN
Explain, sort through rulesHelp with name and EIN Encourage/require agreement
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Most lenders don’t bother29
Prudent to jump through the hoop30
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General – TIN/Documents
Employer identification number Filing is optional Statement of Partnership Authority
No annual reports No Certificate of Good Standing CIP◦ Identify – Name/address/EIN◦ Verify – Partnership Agreement / Statement of PS Authority
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General – House Rules
PARTNERSHIP AGREEMENT
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Partnership NameWhat Each Partner Contributed
Rights and ResponsibilitiesAuthority of Each Partner
Decision-makingManagement Duties
Admitting New PartnersAllocation of Profits And Losses
Resolving DisputesBuy-sell Provision
Limits on Borrowing
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limited partnerships
Limited – Structure
Certain partners will not be liable for partnership debt
At least one partner must be liableMust file with state Separate entity (EIN)
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Limited Partnership - Name35
LIMITED PARTNERSHIP
LP
L.P.
Limited Partnership – TIN/Documents
Employer identification number Must file with state Certificate of Limited Partnership File annual reports Certificate of Good Standing CIP◦ Identify – Name/address/EIN◦ Verify – Certificate of Limited Partnership
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Limited – House Rules
PARTNERSHIP AGREEMENT
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Establish Partnership NameWhat Each Partner Contributed
Limited Partner(s)Rights and ResponsibilitiesAuthority of Each Partner
Decision-makingManagement Duties
Admitting New PartnersAllocation of Profits and Losses
Resolving DisputesBuy-sell Provision
Limitations on Borrowing
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limited-liability partnerships
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Limited-Liability – Structure
None of the partners will be liable for the partnership debt
Clearly stated in partnership agreement
Must file with state
Separate entity (EIN)
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Limited Liability - Name40
LIMITED LIABILITY PARTNERSHIP
REGISTERED LIMITED LIABILITY PARTNERSHIP
LLP or L.L.P.
RLLP or R.L.L.P.
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Limited Liability – TIN/Documents
Employer identification number Must file with state Statement of Qualification File annual reports Certificate of Good Standing CIP◦ Identify – Name/address/EIN◦ Verify – Statement of Qualification
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Limited Liability – House Rules
PARTNERSHIP AGREEMENT
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Establish Partnership NameWhat Each Partner Contributed
No Partner is LiableRights and ResponsibilitiesAuthority of Each Partner
Decision-makingManagement Duties
Admitting New PartnersAllocation of Profits and Losses
Resolving DisputesBuy-sell Provision
Limits on Borrowing
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sole proprietorships
Sole Proprietorships – Structure
Business owned by one person
Simplest business structure
No required filings, documents
NOT a separate entity!
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BUSINESS = PERSON
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Sole Proprietorship - Name
TYPICAL , ACCEPTABLE DOCUMENTATION
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Dweezil Beck dba Dweezil’s Bait Shop
TRADE NAME ONLYTRADE NAME ONLY
Sole Proprietorship – TIN/Documents
Social security number No filing required No birth certificate No annual reports No Certificate of Good Standing CIP◦ Identify – Name/date of birth/address/SSN◦ Verify – Driver’s license or passport
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identifying partnerships
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Partnerships - Identifying
Automatically occurs when two or more people co-own a business (and have not established a corporation or LLC)
Even if co-owners are spouses
Even if no intent to create partnership
Focus on co-owning the business
Income tax returns/rules irrelevant
Customer must determine
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Partnerships – Why It Matters50
FDIC INSURANCE TAXPAYER IDENTIFICATION
NUMBERNOW-ACCOUNT ELIGIBILITY
GARNISHMENT UCCFINANCINGSTATEMENT
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statefiling requirements
State Filing – Birth Certificates
ENTITY BIRTH CERTIFICATE
Sole Proprietorship None
Corporation Articles Of Incorporation
Limited Liability Company Articles Of Organization
General Partnership Statement Of Partnership Authority (Optional)
Limited Partnership Certificate of Limited Partnership
Limited Liability Partnership Statement of Qualification
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State Filing – Annual Reports
ANNUAL REPORTS90-day grace period
Entity forfeited if not filedReinstatement possible
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State Filing – Certificate of Good Standing
CERTIFICATE OF GOOD STANDING
Birth certificate + annual report =
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basicbusiness
documents
Basic Business Documents
ENTITY FORMAL REGISTRATION DOCUMENTS
(BIRTH CERTIFICATES)
INTERNAL RULES / GUIDELINES
SOLE PROPRIETORSHIP NONE NONE
CORPORATION ARTICLES OF INCORPORATION BYLAWS
LIMITED LIABILITY COMPANY ARTICLES OF ORGANIZATION OPERATING AGREEMENT
GENERAL PARTNERSHIP STATEMENT OF PARTNERSHIP AUTHORITY (OPTIONAL – LAPSES IN 5 YEARS)
PARTNERSHIP AGREEMENT
LIMITED PARTNERSHIP CERTIFICATE OF LIMITED PARTNERSHIP PARTNERSHIP AGREEMENT
LIMITED LIABILITY PARTNERSHIP STATEMENT OF QUALIFICATION PARTNERSHIP AGREEMENT
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business documentsand lending
Business Documents & Lending
ENTITY GET THESE DOCUMENTS OTHER NOTES AND REMINDERS
CORPORATION
Articles of Incorporation Bylaws (along with any
amendments) Resolution (showing who has
authority to borrow and sign on behalf of the corporation)
A current Certificate of Good Standing (for Kansas and any other state in which the corporation does business)
LIMITED LIABILITYCOMPANY
Articles of Organization(Certified)
Operating Agreement Resolution (showing who has
authority to borrow and sign for LLC)
Current Certificate of Good Standing
(for Kansas and any other state in which the LLC does business)
LLCs are comprised of “members.” Those members may (but are not required to) designate a “manager.” The manager is not required to be a member of the LLC.Member-Managed LLC. Unless otherwise provided in the LLC's Operating Agreement, the members manage the LLC and each member is authorized to act on behalf of the LLC.Manager-Managed LLC. If the Operating Agreement provides for a manager, the manager will manage the LLC . . . and it is the manager (not the members) who has the authority to act (borrow money) on behalf of the LLC.
GENERAL PARTNERSHIP
Partnership Agreement (if written agreement exists)
Resolution (showing who has authority to borrow and sign for the partnership)
A “partnership” legally and automatically arises when two or more persons own a business—even if the persons are husband and wife. If a business has two or more owners and is neither a corporation nor an LLC, it is legally a partnership—a separate entity. A general partnership is not registered with the Secretary of State and might not even have a written partnership agreement. The lender should ask if a written agreement exists and obtain a copy if one does exist.General partnerships are legal entities separate and apart from the individual partners.
LIMITED PARTNERSHIP
Certificate of Limited Partnership
Partnership Agreement Resolution (showing who has
authority to borrow and sign for the partnership)
Current Certificate of Good Standing
(for Kansas and any other state in which the partnership does business)
In a limited partnership, partners designated as “limited” partners in the partnership agreement will not be liable for the partnership debt. At least one partner, however, must be a “general” partner who remains liable for the partnership’s obligations. A limited partnership must file a Certificate of Limited Partnership with the Secretary of State and its name must end with one of the following terms:
“Limited Partnership,” or “LP” or “L.P.”
The partnership name cannot contain the name of a limited partner.
LIMITEDLIABILITY
PARTNERSHIP
Statement of Qualification Partnership Agreement Resolution (showing who has
authority to borrow and sign for the partnership)
Current Certificate of Good Standing
(for Kansas and any other state in which the Partnership does business)
In a limited-liability partnership, none of the partners will be liable for thepartnership debt. This limited-liability protection will be clearly stated in thepartnership agreement and the partnership will be required to file a Statement ofQualification with the Secretary of State.The name of a limited-liability partnership must contain one of the following termsto clearly indicate that the partners are not liable for the partnership debt: “Limited Liability Partnership,” “Registered Limited Liability Partnership,” “LLP” or “L.L.P,” or “RLLP” or “R.L.L.P.”
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taxpayeridentification
numbers
Taxpayer Identification - SSN
FOR THIS TYPE OF ACCOUNT GIVE NAME AND SSN OF
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined funds, the first individual on the account.
3. Custodian account of a minor (UTMA The minor
4. a. The usual revocable savings trust (grantor is also trustee)
The grantor-trustee
b. So-called trust account that is not a legal or valid trust under state law
The actual owner
5. Sole proprietorship or disregarded entity owned by an individual
The owner
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Taxpayer Identification - EIN
FOR THIS TYPE OF ACCOUNT GIVE NAME AND EIN OF:
7. Sole proprietorship or disregarded entity not owned by an individual
The owner
8. A valid trust, estate, or pension trust Legal entity
9. Corporation or LLC electing corporate status The corporation
10. Association, club, religious, charitable, educational, or other tax-exempt organization
The organization
11. Partnership or multi-member LLC The partnership
12.A broker or registered nominee The broker or nominee
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obtaining an EIN
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Obtaining an EIN
www.irs.gov Online (preferred) – issued immediately
Telephone – issued immediately
Fax – four business days
Mail – four weeks
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secured loans article 9 filing rules
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Article 9 Filing Rules65
Article 9 Filing Rules66
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CIP considerations
CIP Considerations
Get information – before opening
Name Date of birth (sole proprietorship) Address Taxpayer identification number
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CIP Considerations
Verify identity – reasonable time
If using documentation methods . . .
Sole proprietorship – Driver’s license or passport
Corporation – Articles of Incorporation
LLC – Articles of Organization
General Partnership – Partnership Agreement / Statement of Partnership Authority
Limited Partnership – Certificate of Limited Partnership
Limited-Liability Partnership – Statement of Qualification
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CIP Considerations
Verify identity – reasonable time
If using non-documentation methods . . .
Contact the customer Compare information with other sources Check reference with other financial institutions Obtain financial statements
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birth certificate forms
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THANK YOU FOR BEING WITH US TODAY!
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2015 CUWebinarsDecember 3rd - Lending Compliance 101
December 9th - Opening Business Accounts –The Big Four
December 15th - Completing the SAR: The Narrative, The Subjects and The Crimes
December 16th - Developments in Federal Wage and Hour Law
TTS800‐831‐[email protected]
Anne Lolley877‐778‐5192 [email protected]
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