If you have made the decision to file for Bankruptcy, you can start making an effort to repair your credit and get back on track.
The financial decisions you make after you file will impact how fast your credit can improve.
Check your credit. Within a few months of your finalization of bankruptcy, check to make sure your credit reports have discharged your debts and closed accounts are properly reported. You can request one free report per year from each of the three major credit-reporting agencies (Equifax, Experian and TransUnion).
Start a budget. You need to get your spending on track and under control. Check out our article on setting up a budget. If money is tight you may want to get an extra part time job and use that paycheck to jump start an emergency savings fund for any unexpected financial hardships. Another smart move is an emergency savings fund to help you weather unexpected financial hardship. You can set up Automatic Transfers from your checking account to a savings account. If money is tight, take a part-time job and use that paycheck to jumpstart your emergency savings fund.
Pay bills on time. Bill paying habits make a huge impact on your credit score. Making on time bill payments will improve your credit score over time. Meeting payment dates is a huge step in recovering from bankruptcy.
Acquire new credit but do it wisely. There are different products and services you can take advantage of to rebuild your credit. If you receive a secured credit card make sure they send reports of your payment history to the credit bureaus. Use your credit card wisely in order to build up credit only on items you can afford to show you are in control of your spending.
Apply for a loan. If you want to rebuild your credit score, two years after your bankruptcy you will be eligible for an FHA loan assuming you meet qualification rules. Some lenders can even qualify you for a car loan sooner than that however it will probably be at a high interest rate.
While the formal record of a bankruptcy remains on your credit report for 7 to 10 years, its impact recedes over time. Your bankruptcy is a reflection of the past. The future is completely within your control, and how you handle your finances going forward will tell your creditors whether you in fact are a good “risk” to do business with. By following these steps to recover from bankruptcy, you improve your chances of increasing your credit score over time, and having a better financial future.
One of the most common types of corporations is a C Corp.
A C Corp creates a separate legal structure that helps shield business owners’ personal assets from judgments against the company.
C Corporations have specific structures that include shareholders, directors and officers. There are many advantages to forming a C Corp:
A business owner protects his or her personal assets from the business.
Your business will be able to exist even if the owner leaves the company.
A C Corp has no limit on the number of shareholders.
You have unlimited growth potential through the sale of stock.
You get to take advantage of certain tax advantages such as tax deductible business expenses.
However, a C Corp’s profits are taxed when they are earned and taxed again when distributed as shareholders’ dividends – also known as “double taxation”. Shareholders in a C Corp cannot deduct corporate losses, which is possible to do with an S Corp.
If you are interested in forming a C Corporation for your business, call The Law Offices of Page, Lobo, Costales and Preston. We have helped many businesses form C Corporations and S Corporations and can help you too!
When starting a business, many start out as sole proprietors.
In order to protect yourself and your personal possessions many business owners will structure their business as a corporation. One type of a corporation is an S Corp.
The Law Offices of Page, Lobo, Costales and Preston would like to share some valuable information about the pros and cons of forming an S Corp for your business.
Pros of forming an S Corporation:
You are protected from liability – As an owner of an S Corporation, your personal assets are separate from your business’s assets and are protected in case any judgments occur against the business.
You have the ability to have investors invest in your business – As an S Corporation you have the ability to have up to 100 shareholders.
An S Corp can eliminate double taxation – Profits and losses are passed through to shareholders in an S Corporation and taxes are only paid once. It does, however, depend on what state you are in.
Cons of forming an S Corporation:
You have rules and fees – C Corps and S Corps both are required to file official state and federal documents including Articles of Incorporation and corporate minutes. They also must hold regular shareholder meetings and pay the required government fees.
Restrictions are set for shareholders – If your S Corp has shareholders, they will be taxed for any income the company has even if they did not receive any portion of the income. S Corps are also only allowed to issue one class of stock which may discourage some investors.
You must take a salary – The IRS requires all owners of an S Corp to make a salary even if the company is not yet making a profit.
There are many different entities you, as a business owner, can choose to have your business fall under.
A sole proprietorship is the easiest way to start a business however there are many risks that come with setting up your business as a sole proprietor. Page, Lobo, Costales and Preston APC would like to share the top 5 risks associated with running your business as a sole proprietor:
You run the risk of being sued personally. If you incorporate your business it provides a layer of protection between you and any losses your company may encounter. If you get sued as a sole proprietor, you can lose all your personal property in addition to your business holdings.
It is more difficult to get a business loan. If you apply for a loan as a sole proprietor, a lender will look at your personal finances. If they are less than stellar it may be difficult to receive a loan to help your business grow.
You are more liable as a sole proprietor. As a business owner you are held directly responsible for any losses, debts or violations coming from the business. If the business must pay any debts, they will be satisfied from the sole proprietor’s own personal funds.
You must pay self-employment tax. Some other tax benefits may not be deductible as well such as health insurance premiums for employees.
There is less stability of the business. If the owner becomes deceased or incapacitated, the business cannot continue. If the owner passes, the business is liquidated and becomes part of the owner’s personal estate to be distributed to its beneficiaries. This can result in heavy taxes to the beneficiaries.
Congratulations! Owning your own business is exciting and rewarding. Page, Lobo, Costales and Preston APC would like to share some tips for starting up your own business.
Page, Lobo, Costales and Preston APC helps small businesses get setup legally and would like to share some questions and answers for all you entrepreneurs out there. If you are setting up a new business, call The Law Offices of Page, Lobo, Costales and Preston.
Q: What type of business entity should I setup my business as?
A: You can begin as a “sole proprietor” to start doing business. It is easy and inexpensive to start as a sole proprietor however there is no legal protection for your personal assets. This means you have no limit to your personal liability for business failures or mistakes. If you want to limit your liability, set your business up as a corporation instead.
Q: Do I need a Federal Tax ID number?
A: If your business is a corporation, an LLC or has employees you need a Federal Tax Identification Number. Even if you are a sole proprietor you might want to get an EIN. If you do not have one as a sole proprietor, you can use your social security number however an EIN is more professional and less risky than giving out your SSN.
Q: What is a resale license?
A: A resale license will enable your company to purchase goods or materials for manufacture or resale without paying sales tax.
Q: Do I need to file a fictitious business name?
A: If you use any name other than your own, you will need to file a “doing business as” name. This will enable the public to know who is actually operating the company.
Have questions about setting up your business? Call us to get answers: 951-461-2500.
If you are buried in debt, you may be considering debt collection.
A debt collector does have some advantages but you should also be aware of the disadvantages too. Page, Lobo, Costales and Preston would like to share some of the good and bad when it comes to debt collection:
The benefits of using a debt collection agency:
Debt collectors have more experience – They are more assertive and consistent when it comes to getting the bills paid.
A debt collector will free up your time and energy – Instead of beign the one to make the phone calls and send out letters to collect debts, give that job to a debt collector. Plus, your number won’t show up on the debtor’s caller ID if they are trying to avoid you.
Debt collectors have advanced tools – They can communicate with debtors using new telephone technologies and third party resources that grant access to debtor information. They are also in constant communication with debtors through written and verbal methods.
The negatives of using a debt collection agency:
Debt collectors charge a heavy fee – This service obviously comes with a price. Debt collectors usually charge a percentage of what they collect for you (anywhere from 25 to 50 percent depending on the debt).
Using a debt collector can affect your client relations – Remember a debt collector is acting as your voice for your business. If they lack communication skills it may create misfortune between you and your customer. However, once an account is turned over to a debt collector they are unlikely to return to you for future business. Also, is it worth dealing with that customer who doesn’t always pay?
Your debt collector may be violating the Fair Debt Collection Practices Act – This law dictates how agencies can collect from consumers. There is however laws and regulations that a debt collector must follow. Ask for a “hold harmless agreement” in your contract with the debt collection agency.