Doing business in Illinois with a Delaware LLC is very common. Since Delaware is known for having a favorable corporate law structure, it is often the most popular domestic choice for filing an LLC. If your Delaware LLC will operate or have a physical presence in Illinois, you will need to register as a foreign entity in the state. Here’s how the process works.
Illinois will require an Application for Admission to Transact Business form, a certificate of good standing from Delaware, and a filing fee. Two copies of the application, the good standing certificate, and filing fee must be submitted at the same time to ensure the filing is not delayed. The time frame to receive the approved documents can vary and will often take more than a month. Please be aware that the application cannot be filed online. Once approved, a stamped copy of the application form will be returned to you by mail.
Keep in mind that the certificate of good standing must be no more than 60 days old or the application will be rejected. Illinois does require that you have a registered agent in that state, however clients will often act as their own registered agent if they have a physical address in that state. If you would prefer not to act as your own registered agent, Harvard Business Services Inc. offers registered agent service in every state. A member or manager of the LLC will need to sign the application, but the signature does not have to be an original.
Publication of the application is not necessary unless specifically required by the county where your registered agent resides.
Once registered in Illinois, the state will require you to file an annual report. This report is due the day before the first day of your anniversary month. For example, if your filing date is May 5, you will need to file your annual report to Illinois by April 30. The cost of this report is $250.
In addition to the Illinois annual report, a Delaware LLC must also pay the annual Delaware franchise tax and Delaware registered agent fee to remain in good standing.
If you would like our assistance in handling the entire foreign qualification, we would be happy to help! Harvard Business Services will prepare the application, obtain the certificate of good standing, pay the state fee, and even walk it in to ensure it is approved in a timely fashion. Often we get the documents approved and returned to our clients in seven to 10 days.
For assistance in registering your Delaware LLC to operate in Illinois, please call 1-800-345-2677 x6130 or email email@example.com.
This is a question we hear quite often: “In my Delaware LLC, what’s the difference between a member, a manager, and a managing member?”
Related to this question, people also ask, “Do the members own the company?” “Do the members run the company?” “Is my LLC going to be member-managed or manager-managed?”
A member, by definition, is an owner of an LLC with a vested interest in the company. Members can be people or entities from anywhere in the world. Typically, the rights and responsibilities of members are listed and explained in the LLC’s operating agreement. It is not required that all members have the same rights. The operating agreement may spell out different rights for specific members if this is desired.
Also, there may be different classes of members with specific rights for each class if that is desirable for the members and stated in the operating agreement. Remember, once the operating agreement is finalized and ratified by all the members, it cannot be changed without the unanimous vote of the members. The amended operating agreement must be signed by all the members.
A member may also be a manager, but members can run the company on their own, without a manager. As for managing member vs member classifications…when a member is also a manager, he is usually referred to as a “managing member.”
A manager is an individual or entity chosen by the members of an LLC to manage the daily operations of the LLC. A manager can be, but does not have to be, a member. Typically, managers are in charge of overseeing day-to-day activities but don’t have ownership interest in the company. In some cases, when the LLC is 100% manager-managed, the manager is in charge of everything.
Members of a Delaware LLC don’t own stock, like corporate shareholders. Members usually split the company into percentages of ownership, or membership units. Members are typically issued membership certificates rather than stock certificates which indicate the percentage owned, or the number of membership units they own.
If you are considering forming a Delaware LLC and have further questions about the role and responsibilities of members you can call (800-345-2677), live chat, or email Harvard Business Services and speak with a specialist on these matters.
Family business succession planning can be one of the most emotional and difficult business deals you may ever take on.
What makes a family business unique is also what makes these business transitions the hardest. Business owners are less likely to wear their “business hat” and more likely to wear the hat of “dad” or “aunt,” when family is involved.
Which means sometimes, the business depends more on trust, care, and family dynamics than on solid legal structures.
And that’s lovely, but if you don’t have the same legal structures in place that other businesses have, your trusting and caring family business may eventually hit some speed bumps that may not only hamper your business success, but could also ruffle your family ties.
One area where I often see ruffled family ties and suffering businesses is when it’s time for family business succession planning and the transition itself.
To plan properly for this type of transition, it’s important to start early. By planning ahead, you can map out responsibilities, maintenance, customer and vendor relationships, and internal relationships, too.
Even if you aren’t planning on letting go of the reins just yet, you want to make sure you have something in place should the unexpected occur, or should you change your mind.
To help make this transition (current, or projected) easier, I have outlined my top 10 suggestions to help you streamline the process.
1. Think realistically about your expectations and goals.
As a business owner, you have put more sweat, blood and tears into your business than anyone else. Owning a business is like having a baby and watching it grow, but at a certain point, you might want to (or need to) let your business move on without you.
- How long do you want to continue running your business?
- What will happen to the business if the unexpected happens?
- Who would I want to take over my business should I no longer want to, or be able to, run it myself?
Once you have a better handle on these questions, you will want to have a buy-sell agreement drafted by an attorney, which addresses ownership and control.
**If your business isn’t organized as a corporate entity, you will want to make sure to do so. This will make it easier to have formal structures in place and to plan for transitions.
2. Have honest conversations with those who you feel would be good for the role, and those who express an interest.
Just because you think that one of your next generation family members would or would not be a good match to run your business, does not necessarily mean that they are also game for your plans. Make sure to have candid conversations with those who show an interest, and those who you feel would be the right fit for your business.
And even though you’re speaking to a family member or someone who has worked with you for years, be careful not to assume that they have the same vision for the future of your business as you. Include in these discussions the need for commitment and your long-term business goals, to gauge whether everyone is on the same page.
**One more important step to these conversations: Have all potential and interested parties sign a non-disclosure/confidentiality agreement, even family members, to protect any trade secrets.
3. Think carefully and critically about whom you will pass your business on to.
Make sure you weigh all the odds when deciding who will take over the family business. You want to make sure that the person who you select truly understands what it takes to run a business.
Before making a decision, you may want to consider whether they. . .
- Love the business model
- Are capable of being a boss
- Understand the need for potentially working long hours
- Are comfortable with managing relationships
. . . and more.
**Have an operating agreement drafted, which documents the scope of the transition. You should include all key issues in this agreement, including who will manage the business, when and how distributions will be made to the owner(s), and how disputes will be resolved, to name a few.
4. Be a teacher.
You will want to teach your successor family member the ins and outs of your business – and sooner rather than later.
Introduce them to your customers, employees, and vendors so that everyone has a chance to get to know one another before the transition occurs. Gradually allow the next generation to start managing those relationships and easing their way into their new role.
Additionally, make sure that the next generation is aware of their fiduciary responsibilities as owners. It is important to speak with an attorney about what fiduciary duties business owners must adhere to and how to document and handle any abuses of such duties.
5. Learn to let go.
After you have trained the next generation for a year or so, allow yourself time away from the business, whether it is a vacation, time home with family, or practicing a hobby you were too busy to enjoy before.
Make sure that you have delegated duties and responsibilities to the next generation and then give them some time to implement your teachings on their own. Refrain from checking in until you return. This will give you an opportunity to evaluate whether your successor family member is able to do the job without having you around.
Once you feel comfortable that the next generation is ready to take over the business, continue to include outside professionals, such as attorneys, accountants, bookkeepers and financial advisors, in the decision-making process. Make sure to introduce the next generation to your trusted outside professionals, so that they can reach out to them if you are not available.
6. Include the next generation in decision-making and implementation.
Ask the next generation for their input, especially when you feel stuck. This will allow for fresh ideas and new energy to seep into your business, and also gives the next generation a larger stake in the company.
If the next generation is asked for input, they will feel more connected and valued, and will in turn become more invested in the company, too.
**Make sure to keep written records of any new ideas, decisions and implementations, and incorporate them, as necessary, in your operating agreement.
7. Think about the business’ long-term financial plans.
If you are in a position to do so, set aside financial resources for the business. This will provide a nest egg for the next generation – and will also put your mind at ease should your business take an unexpected turn.
**Have an estate plan for your business drafted, which might include setting up a trust or other vehicle for your business.
8. Walk away – gradually.
Just because you have started the transition to the next generation, does not mean that you must immediately move on from your position as business owner. In fact, it makes most sense for you to walk away gradually, easing yourself out slowly so that the transition is smoother.
You want to make sure that your customers, employees and vendors feel comfortable with the next generation before you leave, and so slowly hand over those relationships to your successor family member.
9. Make yourself available.
Make yourself available, not only to the next generation, but to your customers, employees and vendors, just in case there are questions or concerns that you might be best able to deal with. You don’t want anyone to feel like they have been left in the dark.
10. Get your legal house in order.
Aside from the emotional and practical side of handing over a family business, you want to make sure that all of your legal documents are properly drafted and executed.
Speaking with a financial advisor and a business attorney will help you make sure you have the proper legal structures in place for a smooth transition.
Moving on is never easy, but planning for the future makes the transition so much easier. Even if you aren’t planning to pass on your business anytime soon, thinking about how and when you will pass on your family business to the next generation is powerful for all family-owned businesses.
For more information, please contact Elena Volkova of Roizin & Volkova Law Group, a corporate and trusts and estates law firm that focuses on business succession planning for family-owned businesses.
We often get the following question: “What is a resale certificate… and do I need one?”
So, what is a resale certificate? The purpose of a resale certificate is to allow you to buy goods through your business without paying local sales tax. When doing this, it’s your responsibility to collect the tax from the customer when you sell the item. The wholesaler that you purchase the goods from will request to see your resale certificate as proof that the property is being purchased for resale. A resale certificate will typically state the name and address of buyer, the reseller’s permit number, a description of the property being purchased, and a statement that the property is being purchased for resale.
Without a resale certificate, a business or individual is typically required to pay sales tax. This
certificate can be beneficial to your business by allowing you to avoid this tax and pass it on to your consumer. It can also allow you to buy more product to grow your business. Please note that if you intend to make multiple purchases from the same vendor, you may provide one resale certificate to that vendor to keep on file.
You would typically apply for a resale certificate with your state tax department. Once you get your certificate, the state will start sending you monthly/quarterly statements. The physical location of your business is what determines where you apply for the retail certificate, not the state where you form the company. Therefore, if you sell in more than one state, you will need to apply for retail certificates in all states where you operate—it does not matter where you have incorporated. Delaware is the popular choice for many companies to be formed, however the tax rate that your consumer will pay will depend on the state where you are doing business.
One of the requirements for a resale certificate is to be qualified in your state to do business. If physically operating in a state outside the state of formation, clients will explore the process of foreign qualification, which enables a company to transact business in a jurisdiction other than where it was formed.
Should you require foreign qualification assistance, Harvard Business Services will be glad to give you a personalized quote.
For more information on resale certificates, or specific tax questions, consult your local state department.
For questions on forming a corporation or LLC, or getting your business foreign qualified, contact Harvard Business Services, Inc. via phone (1-800-345-2677) or live chat, or visit us online at www.delawareinc.com.
If you’re like me, you’re probably thinking, “Where did summer go, and what do I do now?” I don’t know about you, but the idea of starting a business comes to mind. We understand this can be a major undertaking and cost can be a factor. So to help you get started, we’re offering a special September 2014 discount of $40 off all company formations!
That’s right, starting at 12:01 a.m. EST on Sept. 1, 2014 and ending at 11:59 p.m. EST on Sept. 30, 2014, all of our Delaware LLC, corporation, and limited partnership packages will be discounted by $40.
All you need to do to apply this discount is to mention it to our staff or enter the code “DE2014″ on the company formation order form on our website.
As a reminder, we now offer four formation packages! Each one includes the following:
- Name Check & Clearance
- All Delaware Filing Fees
- Preparation of Articles
- Same Day Electronic Filing
- Registered Agent Fee – 12 Months
- Lowest Agent Fee! Only $50/Year
- Certificate of Formation (LLC)
- Certificate of Incorporation (INC)
- Email with Approved Documents
- FREE Lifetime Customer Support
- All Delaware Compliance Notices
- FREE Shipping & Handling
- And much more!
To view and compare all four of our formation packages, please visit our Our Services page.
Ready to start your Delaware company today? Go to our easy-to-use online order form or call 1-800-345-2677. You can also reach us via email, Skype, or live chat.