Limited Liability Company vs Limited Partnership
When partnering with a company or an individual, it is often important to know exactly what your roles, duties, and liabilities may be. There are two common types of partnerships that often get confused: general partnership and limited partnership.
General Partnership vs Limited Partnership: What’s the Difference?
A general partnership is the most common type of partnership. It refers to a relationship in which all partners contribute to the day-to-day management of the business. Each partner will have the authority to make business decisions and even legally bind the company in contracts. The liabilities, contributions, and responsibilities of the partners are often equal unless stated otherwise. Typically, a partnership agreement will describe which partners have certain authorities and responsibilities.
A limited partnership is a relationship where the limited partner may not be involved in the day-to-day management of the business. This partner may have just contributed funds to the business, and often the funds that they contribute are the extent of their liability. Limited partnerships will still have at least one general partner to man the day-to-day operations of the business. The general partner may also be personally liable for the debts of the company, while the limited partner is not. A general partner’s liability is not limited to their investment. Their personal assets can come into play when it comes to paying off the company’s debts.
A common purpose of a limited partnership is for real estate. There may be several limited partners for the purpose of raising additional funds to purchase the real estate, as long as there is at least one general partner. The benefit of being a limited partner is so your liability is limited, while the downside is that a limited partner will not have the decision-making powers that a general partner would.
There have been cases where a limited partner has given up his limited liability status by being too involved in the organizations management. Often clients will work with an attorney to ensure their limited liability is protected as a limited partner. For clients who wish for all members to have limited liability protection, the popular choice is the LLC.
Harvard Business Services, Inc. is not a law firm and any information contained in this blog shall not be construed as legal advice. For more information on your formation options, call Harvard Business Services at 1-800-345-2677.
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Unfortunately, not all businesses are successful. Maybe the initial funding did not come through. Possibly there was too much competition for the business to survive. Or perhaps the business owner just got tired of dealing with all the headaches and is ready to close up shop. Every day clients contact us because they no longer want their company and they want to know how to close a business.
In order for an entity to be formally closed with the state of Delaware, a certificate needs to be filed with the secretary of state’s office. For a corporation, it is called a certificate of dissolution. For a limited liability company, it is known as a certificate of cancellation. Just as a certificate of incorporation/formation was filed when the entity was formed, an official filing needs to be submitted to the Delaware secretary of state to legally close the entity.
In addition to filing the certificate of dissolution/cancellation, all outstanding and current franchise tax fees must be paid. This means if the entity owes any past due franchise tax fees, these amounts must be brought up to date. Also, the state of Delaware will require the current year’s franchise tax assessment be paid when the entity is formally closed. The current year’s franchise tax fees are not pro-rated within the year; so the same amount of franchise tax fees will be imposed regardless if the entity closes in January or December.
The actual amounts due will vary depending on the company type (Inc versus LLC), the stock structure (minimum stock versus maximum stock) and such. Therefore, if you are curious how much it would cost to close your entity, simply contact our office and we will gladly provide a price quote.
You should also discuss the situation with your accountant and your attorney to determine your entity’s internal details that will need to be attended to upon termination. Also, you’ll need to contact the IRS and send them a copy of the filed certificate to end your tax liability. Of course, closing your business can be disappointing, but we will help make the process as quick and simple as possible.
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By now, most entrepreneurs know that Delaware is, hands-down, the best place to form a limited liability company (LLC). You may be familiar with the numerous benefits and protections offered by Delaware’s strong corporate law structure from personal experience. It may have been recommended by your attorney or tax professional, or maybe you’ve done your own extensive research online. The fact is, Delaware is well-known as the “Incorporation State” for both small businesses and large corporations alike. The state of Delaware offers the strongest corporate law structure, bar none. The question is, who can form an LLC in Delaware?
“I don’t live in Delaware, can I form a Delaware LLC?” This is, by far, THE most frequently asked question we hear. The answer is, YES, anyone in the world can form a Delaware LLC! The state of Delaware does not restrict non-U.S. residents from owning or managing Delaware LLCs, nor do they require any physical presence in the state of Delaware, or even within the U.S., for that matter. Delaware simply requires that you maintain a registered agent, such as Harvard Business Services. As the registered agent, we are responsible for all official correspondence from the Division of Corporations, as well as service of process. Harvard Business Services currently acts as the registered agent for more than 40,000 Delaware companies.
When forming an LLC in Delaware, there is only one document that needs to be filed with the state—the certificate of formation. Delaware is unique when compared to most other states, as the information required (and available for public record) is minimal. The certificate of formation must include the name of the Delaware LLC and the name and office address of the registered agent. The names of the members or managers are not required to prepare, execute, or file the certificate of formation. However, this must be handled by an authorized individual or company, such as Harvard Business Services. Upon your authorization, we’ll prepare and file the certificate of formation with the Secretary of State. Once the filing is approved by the state of Delaware, we’ll release the LLC to the initial member(s) or manager(s) via the “Statement of the Authorized Person.” We will prepare and execute this document for you. It is not provided to the state of Delaware and is not part of public record.
From this point on, traditionally, any membership or management changes in the LLC are handled within the LLC operating agreement. If the company opens a bank account or has U.S. source income, clients will work with a tax professional to determine their tax filing requirements in the U.S.A.
Reach out to one of our top-notch customer services representatives today via phone (800-345-2677), email, or live chat if you have any questions about setting up your Delaware LLC. We’re ready to help.
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Everyone is in the middle of the hustle and bustle with the end of the year fast approaching, and we’re all looking for a good deal in order to save money during this time. While being surrounded by all things jolly, it is also time to buckle down and make sure the Delaware franchise tax fees are filed and paid. You don’t have to think of the Delaware franchise tax as the Grinch, as HBS can help you get everything filed as quickly and easily as possible. Since we know saving is important, especially during the holiday season, we’re offering a Delaware franchise tax fee discount!
HBS offers a service to all our clients and non-clients to assist with the franchise tax filing process. From now until Dec. 31, 2014, this filing fee is reduced to only $29 plus the actual amount of franchise tax fees due. All you need to do is visit our secure website at www.delawareinc.com/payft and complete the online form. To start the process, you will just need your exact company name and Delaware state file number. Please contact our office if you need help obtaining either of these details.
If you have a Delaware corporation, the 2014 franchise tax fees will be due by March 1, 2015. This does not apply to Delaware limited liability companies or limited partnerships, which have a June 1, 2015 deadline.
Earlier this year, the state of Delaware increased the minimum amount of franchise tax fees due. Every domestic corporation that has 5,000 authorized shares or less will now owe a minimum $175 per year. This is an increase of $100 over the previous amount of $75 annually. Plus there is an annual report fee of $50, so the total amount due to the state of Delaware is now $225.
If you are no longer using your entity, we can also help you file formal dissolution documents. You will need to file a dissolution to legally close the entity with the state of Delaware. If you need to dissolve your entity, please consider taking action before Dec. 31, 2014, as additional franchise tax fees will be imposed by the state of Delaware after this date.
We would be glad to help with any questions you may have about the franchise tax or dissolution filing processes. Please send us an email at email@example.com or call our office at 1-800-345-2677 or 1-302-645-7400, extension 6901.
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Clients from all over the world form Delaware corporations every day. This is attributed to the popularity of Delaware’s corporate law structure, which has been ranked No.1 in the world. By forming a company in Delaware, business owners are able to benefit from this corporate law structure.
When operating in Illinois, a Delaware corporation will be labeled as a foreign entity. While a Delaware company can operate all over the world, there are often additional steps to make sure your Delaware corporation is compliant in the state in which it is operating—in this case, Illinois. This process is called foreign qualification. It is another way of saying that Illinois is giving you permission to operate there with a Delaware corporation.
Let’s discuss this process, and the requirements to register as a foreign entity in Illinois. Illinois, like most states, will have an application process and a state fee. Along with the Application for Authority and the state fee, Illinois will also require a certified copy of your Articles of Incorporation, along with any mergers and amendments from Delaware. These documents from Delaware can be no more than 90 days old.
An authorized officer will need to sign the application, however the signatures do not need to be original. Harvard Business Services would be happy to prepare the application for you. We would prepare the documents, obtain the certified copy from Delaware, and email the package to you for signature. We would then file it with Illinois along with the state fee. The typical turnaround time is 10 business days. Harvard Business Services can also act as the registered agent in Illinois for $99/year.
Once you register your Delaware corporation as a foreign entity in Illinois, you will be responsible for their annual reporting requirements. The Illinois annual report is due the day before the first day of your anniversary month. There will also be a minimum franchise tax due of $25.
For assistance in registering your Delaware corporation in Illinois, please call 1-800-345-2677 ext. 6130 or email firstname.lastname@example.org.