sba loans

[cob]

what does " C " corp.
mean and how does it work

[ViperTX]

C corp is what you have when you incorporate your business. You see it used like this Forbes, Inc.

A C corp is its own entity, unlike a LLC (limited liability company/corporation). An LLC can have a managing owner/partner while a C corp. has shareholders as the owners of the company.

In a C corp. you have a double taxation system....the profits of the corporation are taxed when they are made and when the profits are distributed as dividends they are taxed again.

In a LLC you generally have to disburse your profits to each owner and the profits are taxed at the owner's income tax level.

Paul

[ViperTX]

cob,

If you're applying for an SBA loan, you only have until October to get a 90% loan guarantee, check with the SBA about the date after that date they will drop to an 80 or 85% level, which basically means you have to provide the difference in funding 10 % or 15/20%.

So, get your butt in gear.

Paul

[harryn]

Dividends are but one of many ways to move income from your business to your pocket with a C Corp. A C Corp can also take deductions in ways that are impossible for other structures.

Take a look at 2 simple examples:
- health insurance
- paying yourself as income

C corp - full cost is deductable as an expense, no matter if you are profitable or not. Left over losses can be carried forward to more profitable years.

LLC / S Corp - only deductable if you are profitable

Individual Proprieter - only deductable if your total medical expenses in THAT year exceed something like 7-10% of income, and then you can only deduct the part that exceeds this.


Paying yourself money
- dividends - sure that is one way
- own some equipment and rent it to your business under a firm written contract
- license a technology from yourself to your business
- Pay yourself income at a level that stays below the jump in rates - that is deductable as an expense

I am a "one man show" operation with a "C" Corp, and have done some of the others in the past. We (my own and the C Corp) are 100% legit on our taxes, and I can tell you, it is less this way. Go talk to a professional tax preparer with 10 examples in hand for income, various expenses, etc. Have him run some numbers for you and see which works better.

[cob]

thanks for clearing some of this stuff up
please bear with me because all this is knew to me
so basically the best way to go is incorparated (c crop) is that what you mean.
thanks

[ViperTX]

cob,

You can always go from an LLC to a C Corp without any problem.

The biggest hurdle you face is becoming profitable...each has its advantages. Just pick one and go with it.

I'm not sure what state you're in, but your Secretary of State most likely has a web site with all the forms you need to file. Generally, you will need Articles of Incorporation, and you'll want to file as a small entity (I think that is what it is called) to avoid the SEC requirements, this basically means that you can only sell stock to knowledgeable investors, and there is generally a limit of 30 inventors, and you can't advertise the sale of your Corporation's stock. It is pretty simple to set up and your State's web site will also has requirement's of what you have to file at the end of each year (normally an annual report, board meetings to discuss business, etc.)

You will have to get an Employer ID from the IRS, etc.

Feeling swamped again....

Don't get bogged down, take your first steps and ask questions as you go along, there's enough experience on this site to make your head swim.

Paul

[fredhh47]

Four words of advice: DON'T FRACKIN' DO IT!
1. If you do, the lender will push you to go to the highest possible amount that they imagine you might be able to pay, if a miracle occurs. (But they don't really care if you don't, they'll take everything of value that you own).
2. The SBA will offer you almost no advice or counseling, and don't even bother to ask the lender.
3. If you REALLY, REALLY want that over-inflated loan, you will spend 6 months to two years trying to prove how the hell you're going to pay it. Financials and bank statements are only the tip of the iceberg.
4. After two years of monkeying around, when you actually sit down to sign the loan forms, you find out that you're paying the SBA 2% of the loan up front. Consider this about as useful as buying "insurance" from an arsonist who is about to burn your house down.
5. If you ever get into trouble, DO NOT EXPECT the SBA to help you out. They may sic some retired executives on you to "guide" you, but what do they know about your business.
6. When or If you fail, they will come after you like the hounds of hell and will show no mercy. Not the SBA, mind you, the Lender. The SBA will be hiding in the shadows behind the lender, hoping like hell you pay up, so they (the SBA) don't have to pay off the lender and then try to collect from you. And they WILL try to collect from you, even if the lender got every last nickel you had.
7. The lender wants only one thing. Your monthly payments, interest and late payment penalties.

'Nuff Said.

[driveshaft]

It's a shame that this world had gotten so complicated. I come from a small town and in 1979 at age 24, I went to a bank that didn't know me, but the president knew my family name. He loaned me the money to buy into a failing business that in his words, "the community needs this business", so he took a chance on me. Unheard of these days!
Of course we weren't talking about that much money in todays world. I succeeded and became his next door neighbor a few years after.

30 years later, still in business (a different business) , working alone now, still a "C" corp, same wife, same CPA, same bank, but my friend/ neighbor/ business mentor has passed away.

I don't have any opinions or experience on an SBA loan but I will tell you that being successful in any business isn't easy. Sometimes I wish I had a good machining job to go to everyday instead of dealing with the public.

[tjskcnc]

My 2 cents worth.....

About 20 years a go I started my own sign company. Started out with paint brushes in hand, some business cards, and went door to door plying my trade. In 3 years I went from earning about $800 a month to over $10,000 a month.
My divorce and a few other circumstances killed that business, but I paid for everything in cash and when I closed the doors on that business, I owed nothing to any bank or lending agency. I was able to sell off all my vehicles and equipment to pay off any outstanding bills and taxes and was able to walk away cleanly, with some cash in hand.

I worked 14 hours a day, 7 days a week, with very few days off. I can't remember ever thinking "I wish I could quit this and get a regular job." Closing my business and getting a "regular' job was one of the toughest decisions I ever made.

Now, every day at work I think, "I wish I could quit this job and work for myself again." I hope to be doing just that within the next 6 months, doing dimensional signage with my DIY CNC mills - no loans and fully paid for.

Just remember this:
You may not have a boss looking over your shoulder, but your business will "own" you, so be certain that you enjoy what you do. If not, all the paper work, bookkeeping, accounting, advertising, taxes, licenses, permits, customers, deadlines, suppliers, collecting your money, etc...... will drive you insane and destroy the satisfaction of being your own boss.

Good luck.