Before you file to form your new entity with the Secretary of State, you should meet with your accountant to discuss the various tax implications of forming a corporation, LLC, or partnership. Using the appropriate business entity is most important. Your accountant will also be able to advise you on choosing how to be taxed—whether as a partnership, S corp, or C corp—and filing the appropriate documents.
Once you and your accountant have decided on the appropriate entity and tax election, you are ready to form your new entity and consult with your attorney. You will need to select a name for your new entity, and we will make sure the selected name is available before filing to register your entity.
In order to register an entity successfully, you will also need to choose a registered agent for your entity. This registered agent is an individual or another entity that will accept mail for your new entity, including any lawsuits, judgments, and other official mailings. Generally, the registered agent must have a physical address within the state of Georgia and, with some exceptions, has to be an in-state resident or another entity registered to do business in the state.
Once your new entity is formed, you will need to consult with your accountant or financial advisor about applying for a federal tax identification number from the IRS. Every new entity needs a tax ID number in order to operate, open bank accounts, borrow money, and more. Every entity will need to file its own income and employment tax returns, and your accountant will also assist you there. You will also need to obtain insurance for the entity in its own name.
After receiving your tax identification number, you should open separate accounts for your new entity. All money associated with your new entity should flow through these new accounts, and all operational costs should be withdrawn from these new entity accounts. Under no circumstances should the personal funds, assets, or accounts of members/shareholders be mixed with those of the entity. Similarly, entity funds should never be used to pay personal expenses of members/shareholders, to make personal investments for members/shareholders, or for any other purposes not related to the entity’s business. The entity’s cash or other assets can be transferred to members/shareholders only in limited circumstances. While your entity is actively engaged in business, transfers should only be made to members in three situations: (a) to make distributions permitted under the terms of the entity’s governing documents and state law insolvency restrictions; (b) to reimburse members/shareholders for reasonable expenses incurred on behalf of the entity; and (c) to pay reasonable compensation for services performed by members/shareholders for the entity, the amount of which has been agreed upon in advance. You should note that reimbursement of unreasonable expenses and payment of unreasonable compensation may be treated as a distribution subject to the insolvency restrictions.
Members/shareholders can lease property or loan money to the entity, but appropriate arrangements should be made and documented. For example, if a member/shareholder rents an office, production facility, or warehouse to the entity, there should be a written lease, and the terms should be fair to the entity. It is a good idea to document loans from members to the entity with promissory notes and to provide for a reasonable rate of interest that is actually paid.
Your business should be operated as an entity that is separate from its members or shareholders. The business of your entity should be conducted in the name of the entity, and the entity’s name should be used on all agreements, contracts, leases, orders, and other arrangements entered into by the entity. This name should also be used on all products, signs, advertisements, correspondence, business cards, telephone directory listings, and similar items.
You also have yearly requirements after your entity is created. Each year between January 1 and April 1 following the year of the initial filing, you will have to file an annual registration statement with the Secretary of State in order to keep your entity in good standing. Failure to file this annual registration on time can cause the Secretary of State to dissolve your entity.
Additionally, many entity structures require an annual meeting of members/shareholders and an update of the entity’s corporate minutes and records. Minutes should be kept for all meetings, noting who was present, what issues were presented, who voted for what, and what actions were taken. Some decisions require unanimous consent under Georgia law, like selling all assets or dissolving the entity—you should consult your attorney prior to your annual meeting to discuss the topics that will be presented at the annual meeting. If your members/shareholders have also entered into a buy-sell agreement involving the periodic updating of the entity value, the members/shareholders should also meet and update the annual valuation each year and keep it current.
If you have an entity created in another state, you can register that foreign entity to do business in Georgia. Foreign entities are not always required to register with the Georgia Secretary of State, but there are penalties assessed to entities that do business in Georgia without proper authority. In order to register in Georgia, you will have to complete an application and submit a certificate of existence from the state where your entity was originally created. Once a foreign entity registers to do business in Georgia, it will also have to name a Georgia registered agent with an office in Georgia and file an annual registration between January 1 and April 1 each year, as a domestic entity has to do. If your entity files to do business in Georgia and then later stops operating in Georgia, you can file an application for withdrawal with the Secretary of State.
You may also decide you no longer want to use or operate your entity after it is formed. You can dissolve or terminate your entity with the Secretary of State after it has been filed and formed by submitting an application to the Secretary of State. If you are attempting to dissolve a corporation or a nonprofit corporation, you will also have to run a notice in the local newspaper of your intent to dissolve the company.
Below are some common questions and answers that are taken from the Georgia Secretary of State’s website at https://sos.ga.gov/index.php/corporations/commonly_asked_questions . Their website also contains even more questions that may be helpful to you as you plan, operate, and wrap up your entity.
How do I change an entity’s address?
The address is changed by filing an annual registration. If an annual registration has already been filed in the current calendar year, then an entity’s address may be changed by filing an amended annual registration. The annual registration or amended annual registration may be filed, and changes made, online through the following link. There is a fee for filing an annual registration or amended annual registration. Please see the fee schedule.
How do I change an officer(s) of a corporation?
Officer changes are made by filing an annual registration. If an annual registration has already been filed in the current calendar year, then you may make officer changes by filing an amended annual registration. The annual registration or amended annual registration may be filed, and changes made, online through the following link. There is a fee for filing an annual registration or amended annual registration. Please see the fee schedule.
Georgia law regarding limited liability companies (“LLCs”) requires only the listing of the registered agent; thus, officers, members, or managers for LLCs are not listed and there is no procedure to “change” them by filing with the Secretary of State.
What is the purpose of an annual registration?
The purpose is to comply with the law. The annual registration is also the means for changing officer, registered agent, or address information. The filing also confirms that the entity still exists.
When must an annual registration be filed?
Georgia corporations file the first annual registration within 90 days of the date of incorporation, and between January 1 and April 1 each year thereafter. Limited liability companies, limited partnerships and foreign corporations file the first annual registration between January 1 and April 1 of the year following the initial filing, and between January 1 and April 1 each year thereafter.
What is the “registered agent” of an entity?
The registered agent is the “mailbox” for the corporation. The registered agent is the person or entity located in this state designated by the entity to receive any service of process, documents, or other official communication on its behalf. The registered agent may or may not be an owner, shareholder or officer of the entity. Many entities use their attorney or a professional corporate service company for this service. The registered agent’s address must be a street address in Georgia, and the agent must be located at that address. A post office box or “mail drop” may not be used as the registered agent address. Please review O.C.G.A. §§ 14-2-501 and 14-2-1507 (profit corporation); 14-3-501 and 14-3-1507 (nonprofit corporation); 14-8-46 (foreign limited liability partnership); 14-9-104 and 14-9-902.1 (limited partnership); and 14-11-209 and 14-11-703 (limited liability company).
Who can be a registered agent?
The registered agent for a Domestic Profit and Nonprofit Corporation may be:
- Individual or entity (e.g. LLC, LP, LLP, general partnership, etc.) who resides in this state;
- Domestic profit corporation, nonprofit corporation, or limited liability company; or
- Foreign profit corporation, nonprofit corporation, or limited liability company authorized to transact business in Georgia.
(See O.C.G.A. §§ 14-2-501, 14-3-501, 14-2-140 and 14-3-140.)
How can I change the registered agent of my entity?
The name of the registered agent and/or the registered office of an entity is changed by filing an annual registration or an amended annual registration if an annual registration has already been filed for the current calendar year. An annual registration or amended annual registration may be filed online through the following link. There is a fee for filing the change. Please refer to Corporations Division filing fee schedule.
Are trade names registered with the Secretary of State?
No. Pursuant to O.C.G.A. § 10-1-490, trade names are registered with the clerk of superior court of the county in which the business is chiefly carried on or, in the case of a domestic corporation using a trade name, in the county of its legal domicile. A trade name is also known as a “DBA” or “fictitious name.”
How can I check the status of my corporate entity?
Go to http://www.sos.ga.gov/Corporations/. Go to online services and perform a search for your entity by name, control number, officer or registered agent. Search for your entity and check the status.
There are many entities available for business ventures and our firm has the experience and expertise to counsel you on each and every option.