The Delaware Corporate law structure does not impose restrictions on foreign ownership or management, and it does not require a Delaware LLC to have any presence in Delaware except for a registered office and registered agent such as Harvard Business Services, Inc.

The only document required to be filed in Delaware to create the LLC, is the Certificate of Formation. Unlike other states, Delaware requires very little information to be made public in order to form an LLC. The Certificate of Formation filed with the Delaware Secretary of State is required to contain only two articles: the name of the Delaware LLC and the address of the Delaware LLC’s registered office and the name and address of the Delaware LLC’s registered agent in Delaware. At Harvard Business Services, Inc. we serve as registered agent for 30,000 companies.

In Delaware, your anonymity is maintained because members and managers are not required to be named in or to execute the Certificate of Formation. Preparation, execution and filing of the Certificate of Formation must be handled by an authorized person or entity such as Harvard Business Services, Inc. An authorized person is an individual or entity that forms an LLC on behalf of the members by filing the necessary formation documents with the Secretary of State and returning them to the members. Normally, the authorized person is the LLC’s registered agent or attorney. The powers of the authorized person are just to execute the filing of the document with the Division of Corporations. Once the document is filed the authorized person will release the LLC to the initial member(s). The legal instrument that releases the LLC to the initial member(s) is called the “Statement of the Authorized Person”, this statement is prepared and signed by your agent and is not provided to the State of Delaware. It is NOT required to be filed publicly in Delaware.

Why would someone from outside the U.S. file in Delaware? The advantages to our non U.S. clients bear considering. When all the LLC’s income is “Non-United States Source Income” (as defined by the IRS), the non U.S. members of the LLC are typically not subject to U.S. federal income taxation. Our non U.S. clients can take advantage of Delaware’s freedom of Contract and strong U.S. legal infrastructure, without having to provide any member information for public record, and the ability to operate anywhere in the world they choose, without being subject to filing U.S. tax forms.

For help determining if there is US source income, view the helpful Summary of Source Rules for Income of Nonresident Aliens provided by the IRS http://www.irs.gov/businesses/small/international/article/0,,id=96459,00.html

For detailed information regarding US Source income the 2nd chapter of the publication 519 from the IRS is very helpful http://www.irs.gov/publications/p519/ch02.html

For more information or questions regarding the benefit of the Delaware LLC for non U.S. clients please feel free to call or email us at 1-800-345-CORP or info@delawareinc.com!

In the 28+ years that we have helped entrepreneurs form their companies one of the most frequently asked questions is “How do I open a bank account for my new company?” We will address this process in this informational blog post.

First of all, if you are forming a Delaware company but intend to operate your company in another U.S. State we recommend that you open your bank account in your home State rather than Delaware. This is for your convenience in making deposits and managing your bank account in the future.

Keep in mind that banks are private businesses and the account opening requirements may vary from one bank to another. Your local bank will require some or perhaps all of the following documents:

•    A Certified Copy of your Certificate of Incorporation (Inc.) or Certificate of Formation (LLC). This document comes directly from the Delaware Secretary of State’s office and proves that your company was duly filed in Delaware. HBS can provide this document for you if you do not have one for a reasonable fee.

•    A Certificate of Good Standing (AKA Certificate of Legal Existence). This document states that your company is in good standing with all Delaware taxes and fees paid as of the date it is generated. Usually, this document is required to be fresh, within the past 30 days. Once again, HBS can provide this for you.

•    A copy of your company’s “bylaws” (Inc.) or Company Agreement (LLC). This document will specify the governance of your company and may specify who the Director and Officers are (Inc.) or who the Members and Managers are (LLC). This document is provided for you when you form a company through HBS (using our Standard or Premium Service) and can be emailed to you if you have misplaced your original copy.

•    A federal Tax I.D. Number (AKA: EIN) for your company. This number must be obtained from the IRS by filing form SS-4. The fastest and easiest way to get this is to have HBS do it for you. In one day we can obtain this for you without any hassle or wasted time on your part holding on the phone with the IRS.

•    A “Banking Resolution”. This document is a record of the meeting of the Board of Directors (INC.) or Members (LLC) which specifically empowers the company to open a specific bank account with a specific bank. Your bank may be able to provide this for you or once again a quick call to HBS is all you need.

•    A “Certificate of Authority” from your home State. This document proves that your Delaware Company is registered to do business in your home state. This requires a filing with the Secretary of State’s office in your home State, which HBS can handle for you, again for a reasonable fee, which varies from State to State.

•    A picture I.D. of the person opening the bank account such as a driver’s license or passport.

•    A “Business License” from your local state, city or county government.

Also, don’t forget your initial deposit usually of $100 or more. This can be a check from another account made out to your new company or it can be in cash. Some banks may require more than $100.

Knowing what you need before you walk in the bank will get the best and most expedient results.  A phone call to the bank will alleviate any confusion and assure you that you will be able to open your bank account in one visit.

The two questions below are from clients and they illustrate the power of the LLC. One client wants to change his C-corp to an LLC. He must file a conversion with the State of Delaware and then notify the IRS. The other wants to change his LLC to be taxed like an S-corp. He doesn’t need to change his company filing with the State of Delaware. He simply files two forms with the IRS electing S-corporation tax status, and remains an LLC in structure.

Mitch’s Question:

I currently have a C-corp with HBS.  There are only 1,000 shares of stock and I own them all.  No employees and my wife is the corp. secretary.  Can I convert my C-corp into an LLC? Can Harvard do it?  Is it easy to do? Cost? Do I need to change the name?  I assume I need to revise the Fed. EIN.

Thanks,
Mitch
Maryland

Answer: Mitch, if you have a Delaware C-corp we can easily convert it to an LLC for you, officially, with the State of Delaware and the IRS. The filing is called a “conversion”. Our service includes all document preparation, filing, Delaware filing fees, a new LLC minute book with seal and membership certificates and filing the IRS notice. Even includes shipping! The “ending” of your company name will change to LLC. Call for a quote.

Tyrone’s Question:

I formed an LLC with HBS and now my accountant wants me to be an S-corp. Can I do this? Can Harvard do this for me?
Let me know.

Tyrone
Colorado

Answer: Tyrone, the federal government does not recognize the LLC as an entity for tax purposes; therefore LLCs have the opportunity to elect their desired tax classification. By default, a single member LLC is classified as a “disregarded entity” or the LLC is ignored for the purpose of filing a federal tax return.  Multiple member LLCs will be considered partnerships for filing purposes by default. Bear in mind, these designations are for federal tax purpose and do not change the fact the business is a Limited Liability Company. An LLC not accepting its default status must file Form 8832 to elect the entity’s classification. This form allows an LLC to be recognized as a corporation for the purposes of filing taxes. Once an LLC files form 8832 with the IRS and elects to be recognized as a corporation, it becomes eligible to file Form 2553 and elect sub-chapter S tax status. Ideally, an LLC seeking S-corp status will file Form 8832 and Form 2553 with the IRS, simultaneously.

If you have questions about CHANGING your company from one entity type to another, or electing different tax status, give us a call or drop us an email. We can’t advise you on what to do, but we can help you change from one form of entity to another, if you want to.