Following up on this post regarding different forms of tax treatment for LLC’s, I thought it would be helpful to briefly discuss who can elect S corp taxt treatment.  Because of all of the benefits of S corp tax treatment for Virginia LLC’s and Virginia corporations, the IRS has certain rules regarding who may take those benefits.  If you’re a Virginia LLC or Virginia corporation, you may elect S corp tax treatment:

1. If you file Form 2553 with the IRS within their time deadline (generally within 2 months and fifteen days of formation or the beginning of the year);
2. If you have no more than 100 shareholders (owners);
3. If all of those shareholders are individuals, estates, or certain exempt organizations;
4. If all of the shareholders are US residents (no nonresident alien shareholders allowed);
5. If the company has only one class of stock (meaning every shareholder/owner has equal distribution rights);
6. If the company is not engaged in one of the named ineligable types of businesses (banking, insurance, etc.);
7. If your corporation or LLC has or adopts certain calendar year tax years; and
8. all of the shareholders/members consent to the S corp tax election.

If your company satisfies all of those requirements, then you can enjoy the benefits of S corp taxt treatment.  The Form 2553 that you file to elect S corp tax treatment can be found at the IRS website here and the instructions for the Form 2553, which have more details on the requirements and process, can be found here (both forms open as a pdf).

I have mentioned before that certain States require "pre-approval" or registration of franchises before sales are allowed to residents of those States.  So, which States are "registration" States? Here’s the list of the fifteen States that require franchise registration:

1. California
2. Hawaii
3. Illinois
4. Indiana
5. Maryland
6. Michigan
7. Minnesota
8. New York
9. North Dakota
10. Oregon
11. Rhode Island
12. South Dakota
13. Washington
14. Wisconsin; and, of course
15. Virginia

If you’re considering buying a franchise in any of the States mentioned above, the first thing you should do is check with your State regulatory organization to be sure the franchisor is properly registered to sell franchises.

Are you in a rush to have your Virginia LLC or Virginia corporation approved or to receive approval to transact business in Virginia?  The typical processing time at the State Corporation Commission is 17-21 days, which may be too long when you have a contract awaiting signature or an opportunity that has a deadline.

To speed things along, you may want to consider expedited services.  Expedited services are available for many business entity documents filed in the Clerk’s Office including initial filings by corporations and limited liability companies, applications for authority to transact business in Virginia, amendments, mergers, withdrawals, cancellations, and terminations. The service also includes preclearance of certain documents before they are actually submitted for filing.

Expedited service is not available for filing of UCC financing statements, annual reports, service of process, and requests for copies of recorded documents. Fees range from $50 to $200 depending on the document type and the requested turn around time.

Next day service is available for all elibible documents at an added fee of $100.00.  Same day service is available for eligible documents that are received in the Clerk’s Office by 12:00 noon for an added fee of $200.00.  I rarely recommend same day service because in reality the result is not appreciably different for that extra $100 fee. For an additional $25, the Clerk’s Office will fax you evidence of an expedited document’s filing upon its acceptance.

To request expedited service, you must use the State Corporation Commission’s Expedited Service Request Form which can be downloaded from the Clerk’s website.  The form has instructions on how to complete it and submit it properly.

The Richmond Times Dispatch has an article today regarding a Michigan company that was sending food service businesses around the country an official-looking notice concerning the need for proper hand washing signs for employees and offering to sell such signs to the business.  Apparently, the notice was deceptively designed to scare business owners into buying signs from this company, even though such signs can be simply made or obtained for free from the government.  Several States took the company to court to force changes to the mailings and obtain refunds for misled customers.

When you start and run a business, you will receive mailings from official-looking sources that are, in my opinion, deceptive.  While I have not seen a mailing from the company mentioned in the article, I have seen several from companies selling labor posters (minimum wage requirements, FMLA, etc.) that try to appear as if they are coming from the government and offer to sell posters to the recipients.  While the mailings are sometimes accurate in that certain notices are required to be displayed, what the mailings fail to tell you is that you can obtain the correct posters for free from Virginia and the federal government.

If you have employees and are required to post labor notices, you can visit the Virginia Department of Labor website and review an explanation of which posters are required, how they must be displayed, and then download and print them, all for free.  The U.S. Department of Labor offers a similar service for required Federal law posters, which you can also review and download for free.

When you receive mailings purportedly from government agencies or departments you have never heard of with a request to purchase something, view them with skepticism and do your research before sending in your check.