Judging from the number of readers who are asking about starting a small business, there's never been a better time to do so. But a lot of people seems to get stuck on the legal paperwork. Michael in Oklahoma is trying to sort out the different forms of corporate ownership.
Which is the best way to set up a new small business, like a gourmet deli: C Corporation, LLC, subchapter S? We'll need to borrow most of the seed money for stock, freezers, etc.
-- Michael M., Oklahoma City, Okla.
We get this one a lot. Unfortunately, there are just too many angles to give a categorical answer. It’s like asking what’s the best way to build a house. Each business is different, and these different forms of ownership were set up to take those differences into account.
So you really need to see a lawyer who knows the ins and outs of these different business structures to make sure you pick the one that’s right for you. If you promise to have this handled by a professional, we’ll touch on a few general highlights you’ll want to think about.
Promise? OK, here goes:
The whole idea behind setting up a corporation is to insulate you from certain liabilities like debts, taxes, lawsuits, etc. The corporation, as a legal entity, is still liable, but you aren’t personally. In other words, if the corporation can’t pay its debts, for example, you don’t lose your house.
A corporation is created by filing papers with your state and following certain procedures: naming a board of directors, holding annual board meetings, assigning ownership to shareholders, keeping and filing certain records, etc. One big difference between a C and S Corporation is that an S corporation passes income directly to the owner(s), who report profits or losses on their personal tax returns. A C corporation files its own return -- which can mean you pay taxes twice: once as a corporation and again after the corporation pays you income or dividends.
An LLC, or limited liability company, operates under a different set of rules, but as the name implies it still limits your liabilities. It also can give you more flexibility – there are fewer restrictions on ownership, for example. On the other hand, if you want to sell your stake in an LLC you have to get approval of the other owners, which shareholders of corporation don’t usually have to do.
Picking the right one means matching the rules and procedures with your situation. So find someone who’s set up hundreds of these, and then let them ask the questions. The money you save will more than pay their bill.
I have some Krugerrand coins. Please tell me where to sell them.
-- Pris, Singapore
Judging by the surge in gold demand lately you shouldn’t have much trouble selling these one ounce gold coins, which were first minted in South Africa in 1967.
Though prices have recently pulled back a bit, the value of an ounce of gold has soared above $500 an ounce to its highest levels in more than 20 years – up 15 percent in the last month alone. No ones knows exactly why demand has picked up, but much of the buying is coming from China and India, where traditionally strong demand for gold jewelry has been fueled by rapid economic growth and rising incomes. Buying is also reportedly strong from investors who may be worried that inflation is picking up again.
But though you may have an easy time finding a buyer, the trick is to find one who will give you a fair price. The best way to do that is to find a reputable dealer, and a good place to start would be the dealer you bought the coins from.
If that’s not an option, you’ll need to find a dealer, and then contact them and arrange to ship the coins based on their instructions. In addition to shipping and insurance fees, you may also be asked to pay a “counting fee” – or other charge for handling the purchase. (Always ask upfront and get the terms in writing.)
Don’t expect to get the full spot price you see posted for an ounce of gold; the difference represents the dealer's commission. Just the way stocks trade with a different “bid” (buy) and “ask” (sell) price, you’ll see a “spread” in the price that buyers pay and sellers get for their gold coins.
As of Friday, you could get $495.40 for your Krugerrand (about 2 percent less than the $504 spot price) according to Art Levine, a gold dealer with MONEX in Newport Beach, Calif. Levine says they buy Krugerrands, but if you didn’t buy the coins there, you’ll have to open an account and give them time to test them and make sure the coins aren’t fakes. Apparently, there are bogus Krugerrands floating around out there with less gold content than the real ones, according to Levine. (That sounds like another good reason to buy and sell from a dealer.)
The bigger question, of course, is whether this is a good time to buy or sell. Some “gold bugs” think prices are headed even higher – especially if rising energy prices begin to stoke inflation in the broader economy. On the other hand, gold has rallied like this before – crossing $500 three times since hitting an all-time high of $850 in 1980 – only to slump back down below the $400 mark. After the last rally fizzled, fell to $250 in 1999.
Is there a Web site that I can pull up to find the dates and amounts of dividends issued by companies?
R.C., Address withheld
Yes, you can find this on MSN, among other financial information sites. Go to http://moneycentral.msn.com/investor/charts/chartdl.asp? and enter the symbol.
If you haven’t been to the site before, you may have to download a piece of software to make charts interactive.