19
Aug
2014

proving ownership of a delaware llcThe Delaware limited liability company (LLC) is certainly our most popular entity type. More than two-thirds of all new companies that we form are LLCs! Many clients use the Delaware LLC due to the protection of personal assets and flexibility that it offers.

One of the questions that we are often presented with is, “I need to know how to prove ownership of a Delaware LLC. How can I do that?” When you form a Delaware LLC, you are not required to provide the state of Delaware with any owner / member information. For more information on what is required, take a look at this article, which explains the requirements. The minimal information required is great for many clients, as they are aware this offers another layer of protection on top of Delaware’s strong corporate law. However, this often leads to the question of how they will then display ownership.

The Delaware LLC is governed by a contract among all the members called the “operating agreement,” which all members must sign. As a member, you should have a copy of the agreement, which you can then present to a bank or other official to verify that you are a member of the LLC.

In addition to the Delaware LLC operating agreement, you are also able to prove ownership by showing your LLC membership certificates. Like a stock certificate, the LLC membership certificate should be distributed to the members, displaying the percentage of ownership they have in the business. In many cases, clients also use what is called the “member resolutions,” which can also display specific privileges or responsibilities of a member or members within the Delaware LLC. You can find templates of all these documents within our company kit that is included in our Standard and Premium packages.

We’re available to answer any questions you may have about forming and maintaining a Delaware LLC. Simply call (800-345-2677), email, or live chat with us!

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18
Aug
2014

what is foreign qualification“What is foreign qualification?”  “What does it mean?”  “Do I have to do it?”  We hear these questions on a daily basis from our clients.  Incorporating in Delaware is an important first step in the governance, protection, and ultimately, the longevity of your company.  Delaware has the strongest corporate law structure and the largest body of case law.  Delaware is recognized as the most friendly business environment.  That’s why over 64% of Fortune 500 companies and almost all new IPOs call Delaware home.

Foreign qualification is the process of registering your Delaware LLC or corporation, which is considered domestic to the state of Delaware and foreign in all other states, as a foreign entity in your home jurisdiction.  If you plan to operate the business, open a bank account, hire an employee, hold an asset, etc., in any state other than the state of incorporation, you may be required to foreign qualify.  By failing to do so, you may be jeopardizing the protection of the company that you have worked so hard to ensure by incorporating in Delaware.

Other states understand that Delaware’s corporate laws provide greater asset protection and because of that, many choose to incorporate in Delaware.  A common misconception we hear is, by incorporating in Delaware, one can avoid taxation and other obligations in their home state.  Generally, this is just not true. In most cases, if a company generates revenue of any kind, there will be an inherent tax liability.  States require that businesses that are operating within their jurisdiction are registered and pay taxes.  Qualifying your Delaware LLC or corporation in the states of operations will make it both legal and taxable.

Another common misconception that we often hear is if a company operates 100% online and there is no “brick and mortar” operation, clients feel that foreign qualification doesn’t pertain to them.  In most cases, again, this is untrue.  It often comes down to where the servers are located and where banking is done, which is considered one of the primary activities of a company’s operations.

You’ve taken a positive first step by incorporating in Delaware. Now, you’ll want to meet all compliance obligations in your home jurisdiction.

As Delaware company formations specialists, we are familiar with the foreign qualification process for each and every state.  The documents required, the application, the fees and time frames, will vary on a state-by-state basis.  We can take care of all this for you in a timely manner.  We have it down to a science. To get started on your foreign qualification or to learn more about the process, please visit our foreign qualification informational page. If you have any questions regarding the foreign qualification of your Delaware LLC or corporation, please reach out to us via live chat or phone (800-345-2677)!

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12
Aug
2014

When yreviewsou want to buy something online, how do you know if the company is legit? Typically, you read reviews of their services and products.

Within the past few years, several companies have sprung up that act as independent collectors of customer comments about merchants. Since these companies are not affiliated with the merchants, their findings and reviews are typically considered more trustworthy.

From the merchant’s point of view, having an independent company monitor and archive comments about them online provides them with valuable unbiased information to improve their customer experience and maintain a high quality reputation online.

That’s why we’ve teamed up with Trustpilot, the industry’s most trusted source for independent customer service data. We invite all of our clients to write a review on Trustpilot of their experience with us, both to help us better serve you in the future and educate others about our great service!

Whether you’re a new client or have worked with us for years, we’d love for you to share your experience with us! To do so, simply click the image below and write a review. The process is fast and easy!

rate Harvard Business Services on Trustpilot

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11
Aug
2014

StockBack in February, our chairman wrote one of his first blog articles on shares of stock entitled, Demystifying Stock. In it he defines “stock” and some of the terms commonly associated with stock, like authorized shares. Reading his article should give you a better understanding of the definition of stock, but it may still leave you wondering, “How many shares of stock should I authorize for my corporation?” And some of you may still wonder further, “At what par value do I authorize the stock for the corporation?” Just as a quick refresher, authorized shares are the total number of shares that a corporation may sell or trade, and are defined at the time of filing the certificate of incorporation. When authorizing shares, the corporation must define the quantity, the par value, and the classes for the authorized shares.  Though not an exact science, here are some general considerations when deciding how many shares to authorize for a Delaware corporation.

Quantity – When authorizing shares for a Delaware corporation, one should consider that the annual Delaware franchise taxes will be based on the number of shares; Therefore, when possible, it is best to keep the number of authorized shares low.  A good rule of thumb is to authorize only what the corporation will need. Corporations with 5000 or less authorized shares are considered “minimum stock” and will pay the minimum Delaware franchise tax each year. If you must exceed 5,000 authorized shares your corporation will be classified as a “maximum stock”  and you will be afforded the opportunity to recalculate the company’s franchise tax using a complicated formula called the “assumed par value capital method”  that will consider the company’s gross assets and the number of issued shares at the end of the year.

Par Value and Share Valuation – If you decide that you need more than 5,000 authorized shares for your corporation, the Delaware franchise tax calculation is no longer a matter of consequence, and now the focus should shift to the par value assigned to the shares. If you must exceed 5,000 shares, the next threshold for you to consider is a share valuation of $75,000. Share valuation is simply the number of authorized shares multiplied by the par value. Par value is only relative to the bottom value of the share, and has no bearing on the “market value” or “stock price” of the share.   As with the number of authorized shares, generally it will be better to keep the par value as low as possible because the initial filing fees will be calculated based on the share valuation. “Minimum stock” corporations may consider a zero par value, but corporations in excess of 5,000 authorized shares will want to assign a par value to the shares to avoid additional filing fees levied by Delaware Division of Corporations. Delaware law will allow a par value as small as $0.000001, thus making it very easy to manipulate your company’s share valuation to remain below the $75,000 threshold. For example, if you decide you need 1,000,000 authorized shares, you can assign a par value of $0.001 which will result in a share valuation (1,000,000 shares x $0.001 par value) of $1,000. Because the share valuation is less than $75,000, the corporation will not experience any additional filing fees at the time of incorporation.

Classes of Stock – Though the classes of shares have no direct influence on the Delaware franchise tax, it is still important to mention.  For most corporations, the share class will be “common” but the scope of authorized shares includes all classes (i.e. common and preferred). Therefore, it is important to remember that when you are considering the quantity of authorized shares or calculating the share valuation that the authorized shares are all shares combined, both common and preferred.

Want more information? Please visit our page on understanding your company’s stock.

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04
Aug
2014

Head in HandsThere are many daily, monthly and yearly tasks and responsibilities that go into running a successful company.  Everyone gets busy and can lose track of time or forget to take care of every little business detail.  Perhaps you have not kept up with the annual Delaware filings for your company for several years.  Now you realize that your company is not in good standing—it’s in a void, forfeit or cancelled status.  What exactly does this mean, and what do you do now?

If your company has not paid or filed the annual franchise taxes and/or registered agent fees for consecutive years, then your company may be in a delinquent status.  This means that the company charter is no longer in good standing with the state of Delaware.  In order to maintain full asset protection, your company must be in good standing with the state of Delaware at all times.

If you find yourself in one of these types of situations, what options do you have?  You will need to decide whether it is best to renew your existing company or start fresh with a brand new company.  Here are some factors in making the choice on how to proceed:

  • How long have you been incorporated?  Banks, lenders, investors, etc. feel more comfortable working with a company that has been in existence for a long time.  If your delinquent company has been incorporated for many years, then it may be better to consider filing a renewal so you can keep the original incorporation date.  However, if your company was just recently formed and doesn’t have much (if any) history, then you can think about forming a new company instead, often times while using the same original company name.
  • Does your delinquent company have any outstanding loans, contracts, bank accounts, federal or state tax issues, etc?  Forming a new company does not “erase” any of these pending items.  Since every company situation is unique, you will need to speak with your bank representative and/or accountant to determine what would need to be done to transfer these matters into a potential new entity.
  • Did your company obtain an EIN (Employer Identification Number)?  The IRS issues a distinct EIN for each individual company, which stays with the entity for its lifetime. Therefore, when a company files a renewal, typically the EIN will not change.  However, under special circumstances, the IRS will allow an existing EIN to be transferred to a brand new company.  Otherwise, a new EIN will have to be obtained when forming a new entity.
  • Did you file a foreign qualification (or certificate of authority) for the company in your home state? If you are filing a renewal for the company in Delaware, then you may want to check with your home state too, and see if there are any outstanding filings due. The foreign qualification would have been filed based on details from the original company formation; Therefore, starting a new company would also result in filing a new foreign qualification.

These items will help you get started in determining if your company should be renewed or if you should simply start over with a new business entity.  Either way, Harvard Business Services, Inc. can provide the necessary details to restore your company back into a good standing status.  We will also gladly assist with the formation of a new company, obtaining a new EIN, and filing a foreign qualification in your home state.  We are available to help you get through the process as quickly and efficiently as possible. Please call (800-345-2677 ext. 6900), email, or live chat with us for help.

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