How to Incorporate in Georgia vs. How to Start a Georgia LLC

LLCs and corporations both provide liability protection for their owners. This means that each business entity acts as a shield between the human element and the physical business, so that if a lawsuit was to be filed, or a bankruptcy was to occur, the owners of the business are not likely to see their personal assets (cars, homes, savings, investments, etc..) to be used to pay debts. But beyond that, most people don’t entirely understand the differences between LLCs and corporations. Active Filings is about to drop some knowledge. Let’s take a quick look at some of the structural differences between corporations and LLCs. People looking to start a business often ask whether they should set up an LLC or incorporate for their new venture. Like everything else in life, the answer depends. Below you’ll find the three factors we think will help you make an informed decision.

• Ease of maintenance
  Corporations have to keep minutes, hold meetings, and record votes and resolutions. LLCs require none of these things, saving you time and the overall hassle. There are fewer forms required for registering, and there are generally fewer start-up costs. The knock against LLCs is that they aren’t perpetual. Unless your LLC’s operating agreement specifies exactly what happens in the event a member dies, resigns or declares bankruptcy, most states require that LLCs dissolve when these events occur. Corporations, however, can exist as their own entity, regardless of what happens to the individuals involved in the business.
• Desired tax structure
  By default an LLC is a pass-through tax entity, meaning that the income is not taxed at the company level. The income or loss as shown on this return is ‘passed through’ the business entity to the individual members, and is reported on their individual tax returns. Less paperwork. More straightforward. A corporation is a separately taxable entity, and pays tax on the income prior to any dividend distributions to shareholders. If and when corporate earnings are distributed to shareholders in the form of dividends, the corporation does not receive the reasonable business expense deduction, and dividend income is taxed as regular income to the shareholders. Complicated. Paperwork. The Alaska LLC wins this one.
• Investors
  When it comes to investing in a company, most investors feel most comfortable investing their hard earned money into corporations. The biggest reason investors prefer corporations is their favorable taxation rules. Unlike LLCs, a corporation’s shareholders are not taxed on company profits unless profits are distributed, which means the dividends paid from the corporation can be structured to take advantage of the best tax scenario for the shareholders. If you plan to grow your small business into a larger entity and attract investors, forming a corporation is your best bet.

Note that whether you form an LLC or a corporation, you’ll need to file a Beneficial Ownership Information (BOI) Report with the Financial Crimes Enforcement Network (FinCEN) once your company is officially formed with the state of Georgia. This report provides the federal government with identifying information about your company and those with the most control over profits and business operations. However, unlike state filings, the information shared in your report does not go on the public record and there is no filing fee. (Though if you don’t want to file this on your own, we offer BOI filing service for just $25.)

One final thought on LLCs and corporations. While the local florist down the street is a fine upstanding company, their LLC just doesn’t have the prestige of a Nike, Inc or a Walmart, Inc. When you hear the word corporation, many people think of big multi-national companies with tons of resources at their disposal. While the LLC is perfect for the small to medium-sized business, the words Limited Liability Company (LLC) doesn’t carry the same weight as the corporation. While LLCs first came into being in the late 1970s, the corporation is the oldest recognized business entity in the US, and thus they carry with them an aura of prestige.

While we’ve already broken down the differences between an LLC and a corporation, we’re going to dig a bit deeper into the pros and cons of forming an Georgia LLC or corporation. Take a look below to see what makes Georgia LLCs and corporations unique:

• Low Cost Annual Report
  Lots of state use their annual report as a way to generate some extra revenue, sometimes charging hundreds of dollars. Georgia keeps it simple for both LLCs and corporations. Both pay $50 ($60 if filing by mail) and the online portal to file and pay is straightforward and easy to use.
• Publishing Notice for Corporations
  Georgia requires all corporations to publish their “notice of intent” to incorporate. The corporation must publish once a week for two weeks in a newspaper with circulation in the county where the corporation plans to form. Failure to meet the publishing requirement may cause the corporate veil to be pierced and disregarded by the state of Georgia, which is not a great outcome for anyone looking to incorporate.
• Low Sales Taxes
  Georgia has one of the lowest sales taxes in the nation at 4%. Counties can add as much as 5%, and the average combined rate is 7.33%, according to the Tax Foundation. While the state doesn’t tax grocery food sales, localities can. A low sales tax generally means more money for small businesses to either use to re-invest in their business, or put in their pocket. Either way it’s a win win.
• Georgia Employment Tax Credit
  The Georgia Department of Labor (GDOL) coordinates the federal Work Opportunity Tax Credit Program (WOTC). This program provides employers financial incentives when hiring workers from targeted groups of job seekers by reducing an employer’s federal income tax liability. The tax credit can be from $1,200 to $9,600 per qualified employee.

Georgia LLC or Georgia Corporation? Final Answer.
We’re going to go out on a limb and say the LLC is your best bet for almost everything you’ll need in terms of a business entity. It will be your best choice if you are operating a small or medium-sized business, and investors are not one of your top priorities. If your business will be growing substantially and investors will be the key for that growth, and you have the means for the amount of paperwork required and understand the difference in the asset protection, your best bet will be to form a corporation.

Georgia requires newly formed corporations file an Initial Report within the first 90 days of incorporation. The initial report contains general details about your business, like who are the owners of the corporations, purpose of the business and your corporation’s registered agent. It costs $100 (plus an additional $50 for the state’s Initial Report for a total of $150) to file your Articles of Incorporation with the Georgia Corporations Division. You can file the document online or by mail. If you choose Active Filings, we’ll make sure the process of incorporation is as painless and straightforward as possible.

Here’s a quick over view of the information you’ll need in order to properly fill out your company’s Articles of Incorporation:

To start an LLC in Georgia, you must file Articles of Organization with the Georgia Corporations Division. You can file the document online or by mail. The Articles of Organization cost $100 to file. Your name and address are required on these forms. Hiring Active Filings as your registered agent allows you to use our information instead.

Filing your Georgia Annual Registration is part of keeping your business in good standing with the state. At it’s most basic, the state wants to know if your business has made any changes with regards to members, directors, addresses, and so on. If you don’t file your annual report or don’t meet the filing deadline, you run the risk of losing your business’s good standing and will have to pay penalties, fees, and possibly even interest to reinstate it. Don’t run this risk. Hire Active Filings and never miss a filing deadline.

How do I file?
You can file online or by mail, but you’ll need to go online to print out the form, so might as well save some time and do it all online (plus the state charges an extra $10 for paper filings). Or save even more time and hire Active Filings and we’ll organize and file your report for you.

First you’ll log onto the Georgia Corporations Division website.

Choose between the following filing options:
“One Click Annual Registration with No Changes – No Login Required”
“Annual Registration with Changes – Login Required”
“Print Annual Registration Form”
Complete your report online OR print and complete a paper form.
Submit your report and filing fee to the Georgia Secretary of State.

If you are mailing your report, mail your form(s) and check to:

Georgia Secretary of State
attn: Corporations Division
Floyd West Tower, Suite 313
2 MLK, Jr. Dr.
Atlanta, GA 30334-1530

How much does the report cost?
$50 for LLCs and Corporations
$30 for Non-profits

When do I need to file?
All annual reports are due between January 1 and April 1.

Almost no one enjoys taxes. They are, however, an integral part of successfully doing business in America. While we’re not tax professionals, we definitely will do our best to try and explain what kind of taxes your business will be expected to pay.

How will my corporation be taxed?
Corporations face “double taxation.” First they pay taxes on net profits from the business, and then get hit a second time when taxed on the dividends they receive from those earnings. Dividends are taxed at the shareholder’s personal tax rate. An LLC doesn’t have this problem, which means anyone looking to form a corporation should take note of a state’s corporate income tax and personal income tax.

How will my LLC be taxed?
Single member LLCs, meaning it’s just you running your business, are treated like sole proprietorships by the IRS. This means that any profits or losses your LLC experiences, will pass-through to you as the single owner. All you have to do is file a Schedule C with your personal tax return (IRS Form 1040).

What if my LLC has more than one member?
As with a single member LLC, the IRS will view your multi-member LLC as a partnership. The LLC will retain it’s pass-through tax status, with a few wrinkles with regards to paperwork. Instead of one member filing a 1040, instead each member will have to file a Return of Partnership Income form (IRS Form 1065). This document lets the IRS check and make sure each owner is reporting their income properly. Beyond that, each LLC owner will attach a Schedule K-1 (Partner’s Share of Income, Deductions, Credits, etc.) to their Form 1040. This form shows the IRS each member’s share of the LLC’s profits and losses.

Here’s a tip: if your LLC is going to have more than one member, it would be a good idea to draw up a simple operating agreement. Most states don’t require an LLC to have one, but with so many cooks in the kitchen, you’ll want clear documentation with regards to ownership percentage, voting rights, distribution of profits and losses, as well as rules for buying out a member. You won’t be require to file the agreement, but it should be signed by each member and kept with the LLC’s important documents.

Beyond the basic information you’ll also need:
• payroll documents
• bank and credit card statements
• accounting documents
• partnership agreements
• depreciation schedules
• gross receipts
• checking and savings account interest

What tax forms do I need to file?
Corporations: Form 600
Partnerships:  Form 700
LLCs: Form 500

What is the corporate income tax in Georgia?
6%

What is the personal income tax in Georgia?

When are my taxes due?
Your tax returns are due as usual, April 15th for all calendar year filers.

Can I get an extension for my taxes?
Georgia offers a 6-month extension for Corporations moving the filing deadline to October 15 for C Coroporations and September 15 for S Corporations. (for calendar year taxpayers).To request a Georgia extension, file Form IT-303 by the original deadline of your return. You are required to provide a reason for needing the Georgia extension.