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.  Or we will 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.

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!

Answer: The ITIN number or “Individual Taxpayer Identification Number” is similar to that of the Social Security number. The ITIN is for individuals that cannot acquire the SSN but have tax filing requirements with the IRS. The ITIN is 9 digits in length just like a SSN, but it will always start with a 9. The number was created 13 years ago to assist individuals without a SSN to comply with Federal tax law. The thought process is if income is earned here, then filings need to be made with the IRS, whether you are here legally or not. Not just anyone will receive an ITIN number, the IRS stipulates that the individual requires a filing of a federal return in order for it to be issued. Possession of an ITIN does not indicate permission to work in the US or obtain benefits from the Social Security Administration, it is simply a number to identify an individual to the US tax system.

I was surprised to learn that the IRS is not allowed, by Federal Law, to share any of this information with any of the other US Agencies. This was enacted to encourage filings with the IRS without the fear of retribution, such as deportation. The goal of the legislation was to allow illegal immigrants to pay their fair share of taxes. More than 1.5 million applications for the ITIN were processed in 2008. A recent study by the Treasury Inspector General for Tax Administration took a sampling of 510 ITIN applications and found that 78% of these contained errors, but they were processed anyway. In addition, the government also admitted that more than 55,000 ITIN’s were used multiple times on different returns within a year, with refunds totaling over $202 Million!

If you need an ITIN don’t let the lengthy application deter you from proceeding, as the statistics above show, even if you mess up the application they will still issue the number…..

If you would like information on how to obtain the ITIN number visit http://www.irs.gov/individuals/article/0,,id=96287,00.html

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.

What specific tip would you give your fellow innovators to improve their innovation efforts during tough economic times?

Some answers to this question from the survey:
• Hang in there and keep pushing forward, because it’s innovation that will turn this
economy around.
• Be open, be critical and never stop trying.
• Difficult times create opportunity.  Try to focus on where things are going, not where they are
• Focus on all three types of innovations- Product, Process and Management….Then assign priority to innovations based on expected tactical and strategic results

Support your fellow innovators by sharing your own tips, let us know your answers to this question in the comments, we would love to hear from you!