TRAINING: Getting Incorporated/ Incorporation as Agent

United Real Estate does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any action.

Watch this video to get a basic Overview of Taxes Related to Real Estate Agents.

Why Should You Incorporate? 
Personal Asset Protection:
  • If you are operating as a sole proprietor, and someone brings a successful lawsuit against your business, your personal assets could be at risk!
  • Worst case scenario, you can lose personal property such as: 
    • Car
    • Money
    • Personal property
Tax Flexibility
  • Enjoy tax options that are not available to sole proprietorships
Examples:
  • If you form a corporation under S-Corporation status, your tax advisor can help you with a structure to pay yourself some of your earnings as personal income and the rest as shareholder dividends. This may potentially save you taxes compared to a sole proprietorship.
Credibility
Clients, businesses, vendors and partners prefer to do business with an established business. Adding Inc or LLC to your business name gives you a more polished look for your brand!
  • If your company is in a corporation, your personal property will be kept separate, like building a brick wall between them.
  • Less likely to be audited than a sole proprietorship
  • Deduct business expenses
  • Elect how you are taxed
Steps to take to incorporate yourself as an agent:
1. Decide on what type of holding company you desire:
  • C-Corporation - Exists separately from the people who own, manage, control and operate it. Can enter into contracts, pay taxes and is liable for its debts. Issues shares of its stock, as evidence of ownership, to the person (s) or entities that contribute the money or business assets that corporation uses to conduct its business. Stockholders or shareholders own the corporation and are entitled to any dividends the corporation pays. Double taxation can occur.
  • S-Corporation - Avoids double taxation. Allows profits and some losses to be passed through directly to owner's personal income without ever being subject to corporate tax rates
  • Sole proprietorship-You are not a separate and is not a legal entity.
  • Limited liability company- Separates your business from your personal assets.
2. To set up begin with a name for your corporation:
  • Search to make sure the name is available and is not the same as or too similar to an existing name on the California Secretary of State's records or misleading to the public. 
  • Please read through their Name Regulations & additional Statutory Requirements and Restrictions
  • You can do a search online through Business Search, but it is only a preliminary search and not intended to serve as a formal name availability search
  • You can check for availability by submitting an availability form. You can list 3 names in order of preference
  • You can reserve a name for 60 days by filing a Name reservation request form with the Secretary of State. Must be mailed or filled in person. Cannot email. You can submit up to 3 choices, send in a check for $10 payable to the Secretary of State.
  • Bonus: Check if the Domain name is available even if you don't plan to open a website right away
3. Choose a Registered Agent. This person can be:
  • Yourself
  • Hire a Registered Agent
    • There are many companies that will take care of all necessary paperwork for a fee.
  • Member of your LLC/Corporation
4. Prepare and File Articles of Incorporation/Organization
  • Create and file Articles of incorporation/organization with the Secretary of State, there is a fee for filing, you can check how much the fees are here.
  • To form an LLC in California, you must file your Articles of Organization with the California Secretary of State's Office
5. Have your organizational meeting and create your company bylaws.
6. Get your federal employer identification number (FEIN) and open your incorporation's bank account
7. Get business licenses from the county and/or city where you will do business.
8. Submit your initial report called Statement of Information within 90 days.
9. Make sure you are keeping up with all California taxes and fees to avoid a dissolution and/or penalties to the entity.

More info can be found on Secretary of State website.

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