Professional Documents
Culture Documents
Delaware Incorporation Handbook (14th Edition)
Delaware Incorporation Handbook (14th Edition)
UNDERSTANDINGNEWCOMPANYFORMATION,MADEEASY..........................................................................................5
INTRODUCTION:...........................................................................................................................................................................5
HOWTOSELECTTHEBESTSTATETOBEYOURCOMPANYSLEGALHOME................................................................................................6
Privacy.................................................................................................................................................................................6
MultipleStateRegistration.................................................................................................................................................7
SELECTINGENTITYTYPE.................................................................................................................................................................8
LLCs(Briefly).......................................................................................................................................................................8
StockCorporations(Briefly)................................................................................................................................................9
BEFOREYOUORDER...................................................................................................................................................................10
SelectingaName..............................................................................................................................................................10
OpeningaBankAccountandtheFederalEmployerIdentificationNumber(EIN)............................................................10
NEWCOMPANYREGISTRATION.....................................................................................................................................................11
RegisteredAgentServices.................................................................................................................................................11
CorporateKitsandOperatingAgreementKits..................................................................................................................11
DelawareVirtualOffice.....................................................................................................................................................11
SelectingaPackage..........................................................................................................................................................12
PlacingYourOrder............................................................................................................................................................13
PaymentOptions...............................................................................................................................................................15
REGISTERINGYOURNEWCOMPANY..............................................................................................................................................15
ProcessingTime................................................................................................................................................................16
Whattodowiththedocumentsyoureceive....................................................................................................................17
ADMINISTRATIONOFYOURNEWCOMPANY.....................................................................................................................................18
AnnualResponsibilities.....................................................................................................................................................18
AmendmentsandOtherChanges.....................................................................................................................................19
FORFEIT&VOIDStatusandRenewal&Revival................................................................................................................20
INFORMATIONFORINTERNATIONALANDOFFSHORECOMPANIES.................................................................................23
WHYISDELAWARESOPOPULARWITHOFFSHOREENTREPRENEURSANDINVESTORS?...............................................................................23
HOWTODETERMINEIFYOUHAVEUSSOURCEINCOME.....................................................................................................................24
25REASONSTOFORMADELAWARECOMPANY...................................................................................................................26
LIMITEDLIABILITYCOMPANIES(LLCS)...........................................................................................................................30
HowareLLCsManaged?..................................................................................................................................................30
HowareLLCsTaxedbytheIRS?.......................................................................................................................................30
HowareLLCsTaxedbytheSecretaryofStateofDelaware?...........................................................................................30
AdvantagesofDelawareLLCs..........................................................................................................................................31
WhataretheadvantagesofoperatingasanLLCfornonresidentnoncitizens?............................................................31
TheLLCasanalternativetoaPartnership.......................................................................................................................31
TheLLCasanalternativetoanSCorporation..............................................................................................................32
Isthereadownside?.........................................................................................................................................................32
CERTIFICATEOFFORMATION........................................................................................................................................................33
ThefollowinginformationwillbeincludedontheCertificateofFormation:...................................................................33
WhatistheOperatingAgreement?..................................................................................................................................33
SERIESLLC................................................................................................................................................................................34
HowareSeriesLLCsManaged?.......................................................................................................................................35
ThefollowinginformationwillbeincludedontheCertificateofFormationofaSeriesLLC.............................................35
SeriesAgreement..............................................................................................................................................................36
CORPORATIONS.............................................................................................................................................................37
HowareCorporationsmanaged?.....................................................................................................................................37
HowisaCorporationTaxed?............................................................................................................................................37
WhatisthebenefitofformingaDelawareCorporationfornonresidentnoncitizens?..................................................39
HowisaCorporationTaxedbytheSecretaryofStateofDelaware?...............................................................................39
2
CertificateofIncorporation...............................................................................................................................................43
WhataretheByLaws?.....................................................................................................................................................44
CLOSECORPORATIONS................................................................................................................................................................45
HowareCloseCorporationsManaged?............................................................................................................................45
NOTFORPROFITCORPORATIONS.................................................................................................................................................45
HowareNotforProfitCorporationsManaged?..............................................................................................................46
HowareNotforProfitCorporationsTaxedinDelaware?................................................................................................46
CertificateofIncorporation...............................................................................................................................................46
SCORPORATIONS......................................................................................................................................................................47
HowisanSCorporationtaxedbytheIRS?.......................................................................................................................47
HowisanSCorporationtaxedbytheSecretaryofStateofDelaware?...........................................................................47
WhomayelectSStatus?...............................................................................................................................................47
TheSCorporationasanalternativetotheCCorporation................................................................................................48
HOLDINGCOMPANIES...................................................................................................................................................51
HowareholdingcompaniestaxedinDelaware?..............................................................................................................51
MARINEHOLDINGCOMPANIES.....................................................................................................................................................51
Wherethevesselshouldberegistered?............................................................................................................................52
AIRCRAFTHOLDINGCOMPANIES...................................................................................................................................................52
PERSONALHOLDINGCOMPANY....................................................................................................................................................53
NAMINGYOURCOMPANY.............................................................................................................................................54
NAMINGCONVENTIONS..............................................................................................................................................................54
RESERVINGANAME....................................................................................................................................................................55
DBASDOINGBUSINESSASNAMES.........................................................................................................................................55
REGISTEREDAGENT.......................................................................................................................................................57
QUALIFICATION.............................................................................................................................................................59
HowdoIknowifIneedtoQualifyinastateIdobusinessin?.........................................................................................59
WhatistheproceduretoQualifyinanadditionalstate?.................................................................................................60
WhathappensaftermycompanyisQualifiedinanadditionalstate?.............................................................................61
OPENINGABANKACCOUNT..........................................................................................................................................62
SummaryofRequirementstoOpenaBankAccountintheUS.........................................................................................62
SummaryofRequirementstoOpenaBankAccountOutsidetheUS................................................................................62
ContactingYourBank........................................................................................................................................................62
EMPLOYERIDENTIFICATIONNUMBER(EIN)...................................................................................................................63
USCitizensandResidentAliens.........................................................................................................................................63
NonResidentNonCitizens................................................................................................................................................63
ITININDIVIDUALTAXIDENTIFICATIONNUMBER..........................................................................................................65
WhatisanITIN?................................................................................................................................................................65
HowdoIapplyforanITIN?...............................................................................................................................................65
WhatisanAcceptanceAgent?.........................................................................................................................................66
CERTIFICATES,APOSTILLES,LEGALIZATIONANDAUTHENTICATIONOFDOCUMENTS......................................................67
CertificateofGoodStanding.............................................................................................................................................67
CertifiedCopy....................................................................................................................................................................67
NotarizedTrueCopy..........................................................................................................................................................67
CertificateofIncumbency.................................................................................................................................................68
Apostilles...........................................................................................................................................................................68
LegalizationofDocumentsbyForeignConsulates............................................................................................................68
CONVERSIONS...............................................................................................................................................................68
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
3
ENTITYTYPECONVERSION.............................................................................................................................................69
Domestication...................................................................................................................................................................69
TaxStatusConversion.......................................................................................................................................................69
THEUNITEDSTATESPATRIOTACT..................................................................................................................................70
GOODSTANDINGPROTECTIONSERVICE.........................................................................................................................71
Corporations.....................................................................................................................................................................71
LLCs...................................................................................................................................................................................71
GLOSSARY......................................................................................................................................................................72
INDEX............................................................................................................................................................................80
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
4
SECTION ONE:
UNDERSTANDING NEW COMPANY
FORMATION, MADE EASY
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
5
Introduction:
Forminganewcompanyrequiressomeadvancedpreparation,butthatdoesn'tmeanithastobedifficult!This
informationisintendedtofamiliarizeyouwiththeprocessofcharteringanewcompany,inotherwords,howto
incorporateabusinessorhowtoformanLLC.Whenwesay"charteringanewcompany""incorporatingabusiness"
or"forminganewcompany"wearereferringtotheprocessoffilingtherequireddocumentsandregisteringthe
nameofthecompanywiththestateauthoritywhichcontrolsandoverseescorporations.Whenthisprocessis
complete,thenewcompanyisgrantedanofficialcharterauthorizingittooperateasabusinessinthestatewhereit
isregistered,enablingittotransactinterstatebusinessintheUS,andtoberecognizedasabusinessentityinforeign
countries.Youcouldthinkofthe"charter"asbeingsimilartoalicense.DBIcanhelpwitheverystepofthisprocess;
infact,we'lldomostofitforyou!
InthissectionoftheDelawareIncorporationHandbookwewilldiscusshowtocreateandregisteranew
DelawareLLCorDelawareCorporationingeneralterms.ThisinformationwillbedividedintoTopicalSections.Each
sectionwillbeginwithanintroductionofthebasicsineasytounderstandlanguage.FrequentlyAskedQuestions
(FAQs)alsoappearattheendofeachsection.MostofthisinformationappliestobothUSbasedclientsandclients
locatedoutsidetheUS;wehavemadeanefforttoidentifyinformationwhichmaybeofparticularinterestto
InternationalclientsandinformationwhichmaybeprimarilyofinteresttoUSbasedclients.
Ifyouareinterestedinreadingfurther,youwillfindthepagenumbersofarticleswithmore
indepthinformationlistedattheendofeachsection.
Q: IsitnecessarytohireanattorneytoIncorporateintheStateofDelaware?
A: TheservicesofanattorneyarenotrequiredtoIncorporateinDelawareorformanLLCin
?
Delaware.DBIwillcompleteandfilethedocumentsnecessarytoregisterthenew
companyintheStateofDelaware(and/orotherdesiredstates)andofferskitsforBy
LawsandOperatingAgreements.Pleasefamiliarizeyourselfwiththeprocessbyreading
thishandbookandaskingourIncorporationSpecialistsanyquestionsyoumayhave.If
youfeelyouneedlegaladvicewesuggestyoucontactanattorney;pleasecontactan
IncorporationSpecialistifyouwouldlikeareferral.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
6
HowtoSelecttheBestStatetobeYourCompanysLegalHome
Whenyoudecidetoformanewcompanyyouhavealotofoptionstochoosefrom.Oneofthefirstdecisions
youwillmakeiswhatstateyouwanttobethe"legalhome"ofyourcompanycharter.Youcouldform(charter)your
companyinthestatewhereyourheadquartersorhomeofficewillbelocated,oryoucouldformyourcompanyina
statewithareputationforbeingmoreadvantageous.Thedecidingfactorsareusuallywhatcorporatelawsand
taxesapplyforagivenstate.
Youhavemostlikelyalreadyheardabouttheadvantagesofformingyourbusinessorholdingcompanyin
Delaware.AsofJanuary14,2013,morethan900,000USbasedandoffshorecompanieshadchosenDelawareas
theircorporatehome.Over60%oftheFortune500firmsandmorethan50%ofthecompaniestradedontheNew
YorkStockExchangeandNASDAQareCharteredasDelawareCorporations.
IfyouwouldliketolearnmoreabouttheadvantagesofforminginDelaware,pleaseseethe
25ReasonstoFormaDelawareCompanysectiononandthepublicationWhy
CorporationsChooseDelaware.
Privacy
ThissectionappliestobothUSbasedbusinessesandInternational/OffshoreCompanies,butmaybeofparticularinterestto
International/OffshoreCompanies.
OnefactorwhichisstronglyinfluentialinselectingthestateinwhichtobaseyourcompanysCharterisprivacy.
Manyofourclientsareveryconcernedabouttheprotectionoftheirsensitiveinformationandwishtokeep
informationsuchasownershipdetailsandhomeaddressesoutofthepublicrecord.WhetheryouareaclientofDBI
oraprospectiveclientdiscussingyourplansfortheorganizationofanewcompany,allofyourinformationis
completelyconfidential.Thepossibilityoftotalprivacyisapowerfulmotivatorandmovesmanyofourclientsto
selectDelawareasthelegalhomeoftheircompany.ADelawareLLCorDelawareCorporationisnotrequiredto
nametheDirectors,Officers,Owners,Shareholders,Members,orManagerswhenitisIncorporatedorOrganized.
PrivacyinDelawarestartswithdraftingtheCertificateofFormation(orCertificateofIncorporation).AllDBI
NewCompanyRegistrationpackagesincludethedraftingoftheCertificateofIncorporationorCertificateof
Formation.Next,theCertificateisfiledwiththeDelawareSecretaryofStateandthenewLLCorCorporationis
registeredintheDivisionofCorporationsInformationSystem.Thenamesoftheshareholders,Directors,Members
andManagersarenotrequiredtoappearontheCertificateofFormationofanLLCorCertificateofIncorporationof
aforprofitCorporationandthereforedonotenterthepublicrecordatincorporation.DBIhasadirectcomputer
connectiontotheregistrationsystem;whenweenterthenewLLCorCorporationintotheregistrationsystemthe
onlyinformationwegivewillbeourown,asRegisteredAgentandIncorporator(Organizer).
Ifyouelectnottohavethenamesoftheprincipalsappearinthepublicrecordwewillfurnishyouwithaprivate
documentwhichnamestheInitialDirectorsorInitialMembers,andwhichcanbeusedforpurposessuchasopening
bankaccountsandenteringcontracts.Thisdocumentwillbegiventoyoudirectlyandwillonlybeseenbythoseyou
personallyshowthedocumentto.OtherdetailsregardingOwners,Shareholders,Members,andManagerswillbe
recordedbyyouinyourownprivatecompanyrecordsandwillnotbefiledwithanyDelawareagencyormade
publicinanyway.
IfyouformaDelawareStockCorporationorNotforProfit,youwillberequiredtonametheDirectorsandone
OfficeroftheCorporationwhentheAnnualReportisdue.YouwillnotberequiredtonametheShareholders
(owners)oftheCorporation.Bearinmind,aDirectorisnotrequiredtobeanowneroremployeeofthe
Corporation.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
7
IfyouformaDelawareLLC,youwillnotberequiredtofileanAnnualReportinDelawareandthenamesofthe
Members(owners)andManagersofthecompanywillnotenterthepublicrecord.
IfyouattempttoQualifyyourDelawareLLCorDelawareCorporationtotransactbusinessinanadditionalstate,
theForeignstatemayrequireyourecordownershipormanagementdetailsinthepublicrecordsofthatstate.
SomestateswhichrequiredisclosurebyDomestic(local)companiesdonotrequiredisclosureiftheapplicantisa
DelawareLLCorCorporation.
IfyouwouldprefertohavethenameandaddressoftheInitialMemberorInitialDirectorprintedonthe
CertificateofIncorporationorCertificateofFormation,youmayselectthisoptionwhenyouplaceyourorder.
Q: DoesDBIofferNomineeDirectors?
A: No,DBInolongeroffersthisservice.YoumaycontactanIncorporationSpecialistfora
referral.
Q: IfmynameisntprintedontheCertificateofIncorporation,howdoIprovethatIown
?
thecompany?
A: DBIwillprovideaResolutionbyIncorporatornamingtheperson(s)authorizedtoopen
bankaccountsandenterintocontractsastheInitialDirectororInitialMember,butthis
documentshouldbesupplementedbyproperlymaintainedcompanyrecords.Proofof
ownershipisrecordedintheprivateCorporaterecordsmaintainedbythecompanyin
theformofStockCertificatesorMembershipInterestCertificatesplustheShare
TransferLedgerorRegisterofMembers.
MultipleStateRegistration
ThissectionappliestoclientswhowillhavebusinessactivitieswithintheUnitedStates
WhenyoudecidetoIncorporateorformanewLLCyouhavealotofoptionstochoosefrom;thestateyou
selectasthehomeofyourCharterwillcontrolwhichoptionsyouhave.IfyouarelocatedintheUS,oneofthefirst
decisionsyouwillmakeiswhatstateyouwanttobethelegalhomeofyourCorporateCharterorLLCCharter.You
couldIncorporateinthestateyourbusinessislocatedin,oryoucouldformyournewLLCorCorporationinastate
withareputationforbeingmoreadvantageous,suchasDelaware.
ADelawareLLCorCorporationinGoodStandingwiththeSecretaryofStateofDelawarehastheConstitutional
righttotransactInterstateCommerce;meaningcommercethatoccursbetweenpartiesintwoormorestates.A
KentuckyresidentwithaDelawareLLCsellinghisproducttoacustomerinNewYorkisanexampleofInterstate
Commerce.Ifyouareregularlyconductingbusinesstransactionsbetweenyourselfandanotherpartywithinthe
bordersofthesamestate,youmayberequiredtoobtainthepermissionofthatstatetodobusinessthere.This
doesnotmeanyouhavetocreateanewcompanyineverystateyoudobusinessin.YoucanchooseDelawaretobe
thelegalhomeofyourcompanyCharter,andcanthenapplyforpermissionforyourDelawareLLCorDelaware
Corporationtodobusinessinadditionalstates.
TheprocessofapplyingforpermissiontodobusinessinanadditionalstateiscalledQualification.Qualification
inanadditionalstatemaynotberequiredineverycase;inadditiontotheexemptionforInterstatecommerce,
thereareotheractivitieswhichareoftenexemptfromrequiringQualificationinaparticularstate.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
8
SeeQualificationsectionformoreinformationaboutregisteringyourDelawareLLCor
corporationasaforeignentityinanotherstate.
OfalltheadvantageousreasonstoformyourLLCorCorporationinDelaware,ifyouryoungUSbasedbusiness
haslimitedcashflowandcapital,youmaybeconsideringformingyourcompanyinanotherstate.Thisoptionis
popularwiththosewhofeelthattheywouldbenefitmorefromtheeconomyofsinglestateregistrationthanfrom
theprotectionsandbenefitsofregisteringasaDelawarecompany.AlthoughwespecializeinregisteringDelaware
Charters,ourIncorporationSpecialistsareexperiencedinperformingregistrationsandbusinessfilingsalloverthe
US.Wewouldbehappytoprovideyouwithaquoteifyouarethinkingofforminginanotherstate.
Q: DontIhavetohaveanaddressinDelawaretohaveaDelawareLLCorDelaware
Corporation?
?
A: No,youonlyneedtohaveaDelawareRegisteredAgent.DBIwillbeyourDelaware
RegisteredAgentandyourheadquarterscanbelocatedanywhere;evenoutsideofthe
stateoroutsideofthecountry.SeeRegisteredAgentsectionformoreinformation.If
youwishtopurchaseaDelawareaddresswhichyoumayuseforroutinebusiness
correspondenceweofferMailForwardingServicepackages,pleaseseeDelawareVirtual
OfficeunderNewCompanyRegistrationsection.
SelectingEntityType
ThenextoptionstoconsideraretheavailableoptionsforEntityType.StockCorporations,LLCs,Limited
PartnershipsandSoleProprietorshipsareallexamplesofdifferentEntityTypes.Letssubstitutetheword
companyforEntitytomakeiteasier.Differentrules,lawsandtaxesmayapplytoeachtypeofcompany.When
wecreateyournewcompany,wewillidentifywhattypeofcompanyweareformingwhenweregisterwiththe
state;sowewillneedtodecidewhichtypeofcompanyisthebestfitforyoubeforeweattempttoregister.The
decidingfactorsareusually:thetypeofliabilityprotection,themethodoftaxation,andthecomplexityof
administration.
LLCs(Briefly)
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.
ThecompanytypeourclientsselectmostoftenistheLimitedLiabilityCompany(LLC).Herearesomefeatures
oftheLimitedLiabilityCompany:
ADelawareLLCisnotrequiredtofileanAnnualReportorholdannualmeetings.
DelawareLLCsoffermultipleoptionsformanagementstructureanddistributionofprofitsandlosses.
AnLLCmaybeeligibletoelecttobetaxedbytheIRSasanIndividual,Partnership,SCorporationorC
Corporation.Thisdoesnotchangetheentity(company)type.AnLLCwhichhaselectedtobetaxedasan
IndividualorasaCCorporationisstillanLLC.
TheliabilityofallMembers(owners)islimitedtotheirinvestmentsintheLLC(unlesstheypersonally
guaranteeotherdebtincurredbytheLLC).
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
9
Nonresident,NoncitizensareeligibletoformanLLCinDelaware.
TheDelawareLLCTaxiscurrently$250ayearandisaflatratenotdependentincome,assetsoractivity.
StockCorporations(Briefly)
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.
ThesecondmostpopulartypeofcompanyselectedbyourcustomersistheStockCorporation.Herearesome
featuresofaStockCorporation:
StockCorporationsprovidethemeanstolimitanownerspersonalliabilitytothemoneytheyhaveinvested
inthecompany.
Ourcustomersoftenselectthistypewhentheyplantohavemultipleinvestorsortoraisemoneyfromthe
publicbythesaleofstockshares.
NonresidentnoncitizensareeligibletoformstockCorporationsinDelaware(butarenoteligibletoelect
SCorporationtaxstatus).
TheDelawareFranchiseTaxiscurrentlyaminimumof$75forCorporationsauthorizinglessthan5,000
sharesplusa$50AnnualReportfilingfee.
Q: Iamnotafranchise,whyshouldIpayafranchisetax?
?
A: ThewordFranchiseasusedhereinDelawareFranchiseTaxmeansaspecial
privilegegrantedtoanindividualorgroup;especially:therighttobeandexercisethe
powersofaCorporationanddoesnotmeanachainofbusinesseslicensedbythe
originalstoreandoperatedpertheoriginalstorespatternundertheoriginalstores
tradename.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
10
BeforeYouOrder
Nowthatyouhavedecidedwhatstate(s)toregisterinandwhatentitytypeyouwouldliketoform,youare
almostreadytoplaceyourorder.Thereareonlythreethingsleftforyoutodoandtwoofthemarediscussedinthis
Topic.
SelectingaName
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.
Wait!Dontregisterthatdomainnameyet!Beforeweregister,DBIwillchecktoseeifthenameyouwouldlike
foryournewcompanyisavailableinDelaware(oranyotherstate).Thereisnochargeforthisservice.Westrongly
cautionyouagainstregisteringadomainname,applyingforaTaxIDorsubmittinganapplicationforabusiness
licensebeforeithasbeendeterminedthatthenameyoudesireisavailableinthestate(s)inwhichyouintendto
register.
Thecompanynameconsistsoftwoparts:theTitlepartandtheSuffixpart.Forexample,inDBIGlobal,Inc.
theunderlinedDBIGlobalistheTitlepartandInc.istheSuffix.TheSuffixidentifieswhattypeofEntity
(company)thisis.Inc.andCorp.aretwowellknownSuffixesforCorporations;LimitedLiabilityCompanies
usuallyusetheSuffixLLC.TheSuffixpartisnotconsideredwhendeterminingifanameisavailable.Trytothinkof
twoorthreenamesyouwouldliketochecktheavailabilityof,bearinginmindthattheonlypartthatmakesa
differenceintheavailabilityistheTitlepart.
SeeNamingYourCompanyformoreinformationaboutNamingConventions(rules)and
tipsonhowtogetthenameyouwant.
OpeningaBankAccountandtheFederalEmployerIdentificationNumber(EIN)
ThissectionappliestobothUSbasedbusinessesandInternational/OffshoreCompanies,butmaybeofparticularinterestto
International/OffshoreCompanies.
Wewouldlovetobeabletotellyouexactlywhatdocumentationyourbankwillrequestwhenyougotoopen
anaccountinthenameofyourbusiness,butitvariesfrombankbranchtobankbranch.Somebranchesevenleave
thisdecisiontothediscretionoftheindividualbankrepresentatives.Ifyouplanonopeningabankaccountinthe
nameofyournewDelawareLLCorDelawareCorporationitisagoodideatocontactthebankyouwishtouseto
findoutwhatdocumentationtheyrequirebeforeyouplaceyourorderfornewLLCformationorIncorporation.
WecantellyouitwouldbetypicaltobeaskedforacopyofyourCertificateofIncorporation(orCertificateof
Formation),aCertificateofGoodStandingandphotoidentification.AndallUSbankswillrequireanLLCor
CorporationtohaveaFederalEmployerIdentificationNumber(EIN)toopenabankaccount.ThisisrequiredforUS
bankaccountsregardlessofwhetherthecompanywillactuallyhaveanyemployeesornot.DBIcanobtainanEIN
foryouatthesametimeweareregisteringyournewcompany.
SeetheOpeningaBankAccountsectionformoreinformation.Youllalsofindaworksheet
youcanrefertowheninterviewingthebanktofindoutwhatdocumentstheywillrequire.
SeetheEmployerIdentificationNumbersectionformoreinformationaboutEINs.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
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NewCompanyRegistration
ThefollowingsectionpertainstoDelawareformation,otherprocessesandtimeframesmayapplyforother
states.IfyouareinterestedinforminginastateotherthanDelaware,contactanIncorporationSpecialistformore
details.
RegisteredAgentServices
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.
DelawarelawrequiresbothLLCsandCorporationstomaintainaRegisteredAgentinDelaware.TheRegistered
AgentreceivesanylegalnoticesdeliveredbyServiceofProcessonyourcompany.DBIwillbeyourDelaware
RegisteredAgentandthefirsttwelvemonthsofDelawareRegisteredAgentservicearefreewithyourpurchaseofa
NewCompanyRegistrationpackage.ThisishowyoucanbepermittedtohaveaDelawareLLCorCorporation
withouthavingabusinesslocationinDelaware.
AfterthefirstyearyouwillbechargedanAnnualRegisteredAgentRenewalfeeof$100forUSclientsand$120
forclientsoutsidetheUS.FailuretomaintainaRegisteredAgentwillresultinyourcompanyCharterbeingdeclared
FORFEITbytheDelawareSecretaryofState;thismeansyourcompanywouldbeinvalidandwouldloseitsrightto
functionasanLLCorCorporation.
SeeRegisteredAgentsectionformoreinformation.
CorporateKitsandOperatingAgreementKits
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.
IfyourecallthesectiononPrivacy,thenyoualreadyunderstandhowimportantitistomaintaincompany
recordswithappropriatedocumentation.Insomecasesthecompanyrecordsyoumaintainaretheonlysourceof
proofavailabletosatisfytherequirementsofbanks,agenciesandotherswhowishtoverifythelegitimacyor
ownershipofyourcompanybeforeenteringintoarelationshipwithyou.Thesedocumentsarealsocrucialwhen
bringing,settlingordefendinglawsuitsandinsomecasesinsatisfyingIRSinquiriesintoelectedtaxstatus.
Butdontbeintimidated,weofferkitswhichsatisfyDelawarelawsandappropriatelyrecordtheownershipand
leadershipstructureofyournewcompany.InsideyourkityouwillfindStockCertificatesorMembershipInterest
Certificates,yourCorporateSealandamodelOperatingAgreementorByLawsinyourchoiceofaWordtemplateor
fillintheblankdocument.
DelawareVirtualOffice
ThissectionappliestobothUSbasedbusinessesandInternational/OffshoreCompanies,butmaybeofparticularinterestto
International/OffshoreCompanies.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
12
ByservingasyourRegisteredAgentinDelawareyourDelawareLLCorDelawareCorporationisexemptfrom
beingrequiredtomaintainanyotherpresenceinDelawareforthepurposesofobtainingandretainingaDelaware
Charter;butyourRegisteredAgentsfunctionsarelimitedtoreceivingServiceofProcessandTaxNotices.Manyof
ourclientsdesireaDelawareaddresstheycanuseforbusinesspurposes.DBIoffersmultiplelevelsofservicefor
thosecompanieswhichdesireabusinessofficeormailforwardingserviceinDelaware.
Virtual Office
IncludestheBasicMailForwardingservicewithDelawareStreetAddressplusaDelawaretelephonenumber
withvoicemailandDelawarefaxnumber.Callscanbeforwardedanywhereintheworld.
Delaware Office Space (Time-Shared) with Signed Lease Agreement
IncludesaphysicalofficelocatedatCapitolOfficeCenter,3422OldCapitolTrail,Wilmington,DE19808,
USA.Youwillhaveaccesstophone,computer,conferenceroom,andreceptionarea.ThisDelawareoffice
spacefulfillstherequirementstoopenabankaccountaswellassecuritycompaniesregisteredinDelaware
needingaphysicallocation(DelawareCode1226).
DBIcannotforwardmailwithoutacompleted,notarizedandsignedUSPSForm1583:AppointmentofMail
ForwardingAgent.Theformwillbeprovidedtoyouattimeofpurchase.PleasecontactanIncorporationSpecialist
formoreinformation.Contactusifyouwouldlikeaquoteforhighvolumeservice.
SelectingaPackage
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.
WeofferseparatepackagesforUSbasedclientsandforclientsoutsidetheUS.Ifyouhaveofficesbothinthe
USandoutsidetheUS,youmaycontactanIncorporationSpecialistandwewillhelpyouputtogetherthebest
optionsforacustompackage.Ifyouarenotsurewhichfeatureswouldbebestforyou,contactoneofour
IncorporationSpecialistsbyphone,chatoremailforhelp.Wewillbehappytoreviewtheavailableoptionswith
you.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
13
Inselectingapackagethereareseveralcriteriatoconsider:
1. DoyouneedanOperatingAgreementKit(orCorporateComplianceKit)?
Theonlyreasonyoushoulddeclinethisoptionisifyoualreadyplanonmakingyourownarrangements
todocumentyourcompanyownershipandstructure.Theonlypackagesweofferwhichdonotincludea
KitaretheUSEconomypackages.
2. DoyouneedtoregisteryourDelawareLLCorDelawareCorporationinanadditionalUSState?
ThisonlyappliestocompaniesthatwilldobusinessinsidetheUS.SeeQualificationformore
information.ThisservicecomesstandardwiththeUSExecutivePackageandisavailableasanaddon
featureforotherpackages.StateQualificationFilingFeesareadditional.
3. DoyouneedaDelawareMailingAddress?
ThisoptioncomesstandardwiththeInternationalPlatinumPackageandtheUSExecutivepackageoris
availableasanaddontootherpackages.
4. DoyouneedanApostilleorGoldSealCertifiedCopyforyourCertificate?
Thisonlyappliestocompaniesthatwilldobusiness,bankingorinvestmentsoutsidetheUS.AnApostille
orGoldSealCertifiedCopycomesstandardwithallInternationalPackagesorcanbeorderedasanadd
onforUSpackages.
5. DoyouneedBusinessLicenseApplicationService?
ThisappliesonlytocompaniesthatwillhaveaphysicalbusinesslocationorhomeofficewithintheUS
andcomesstandardwiththeUSExecutivePackageorasanaddontootherUSPackages.
6. DoyouneedtoapplyforanEIN(FederalTaxID)?
IfyouareopeningabankaccountintheUS,oremployingwageearningemployeesintheUS,youwill
needanEIN.TheapplicationserviceisincludedintheUSEssentialPackage,theUSExecutivePackage,
theGoldInternationalPackagesandthePlatinumInternationalPackages.Youmayalsoaddtheservice
toyourorderseparately.
PlacingYourOrder
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies
Foryourconvenience,youmayplaceyourorderthroughourwebsite,byfax,byphone,byemailorbymail.If
youdonotplaceyourorderthroughourwebsitewewillprovideyouwithanorderformtocompleteandsignthen
returntouswithpayment(theorderformsarefoundintheappendix).Youarewelcometoreturntheorderform
byfax,email,mailorcourier.
Tohelpyouprepare,belowyouwillfindalistoftheinformationwewillcollectwhenyouplaceyourorder.If
youareable,youarewelcometocompletethisinformationontheorderformandsenditin.Ifyouneed
assistance,IncorporationSpecialistsareavailabletoansweryourquestionsandhelpyouplaceyourorder;wewill
evenfillouttheorderformforyouifyoulike.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
14
1. WhichEntityTypehaveyoudecidedtoform:LLC,Inc.,etc.?
2. HaveyoudecidedtoIncorporateinDelawareorformaDelawareLLC?Doyouneedtoregisteryour
Delawarecompanyinanyadditionalstates?
3. Ifyouhavenotalreadycontactedustochecknameavailability,bereadytosuggest23namesforyour
company.
4. DidyoudecidetohavethenameoftheInitialDirectororInitialMemberprintedontheCertificate,ordo
youpreferforthenamesoftheprincipalsnottoappearontheCertificate?
5. YouwillbeaskedtoprovidethenameandaddressoftheInitialMemberorInitialDirectorofthecompany.
IfyouelectednottohavethenameoftheprincipalappearontheCertificate,thisinformationwillgoona
privateresolutionnamingthepersonwiththeauthoritytoopenbankaccountsandentercontracts.You
mayprovideanyaddressforthispurpose,althoughwesuggestprovidingtheaddressontheInitialMember
orDirectorsphotoidentification.Ifyouwish,youcanpurchaseoneofourVirtualOfficepackageswhich
includeaDelawareStreetaddressthatcanbeusedforthispurpose.
6. Wewillneedthename,phonenumber,alternatephonenumber(ifany),emailaddressand/orfaxnumber,
andmailingaddressofthepersonwemaycontactwithquestionsaboutyourorder.Ifyouareorderinga
packagewhichcomeswithacompliancekit,wewillneedyourshippingaddressifitisdifferentfromthatof
yourcontactperson.WecannotshipacompliancekittoaPOBox.Ifyouwantyourrenewalbillingtogoto
theattentionofsomeoneotherthanthecontactpersonortoadifferentmailingaddress,pleasebeready
withyourbillingcontactsinformationaswell.Likewise,ifthereisaspecificpersonoraddresstowhichwe
shouldforwardtaxnoticesorlegaldocumentsdeliveredbyServiceofProcess,pleaseletusknowthefull
contactdetails.
7. DelawareBusinessIncorporatorswillbeyourRegisteredAgentinDelawareunlessyouinstructotherwise.
8. LLCswillbeformedwithPerpetualExistence(noexpirationdate)unlessyouspecifythatyouwanttheLLC
toexpireonaspecificdate.
9. StockCorporationswillbeformedwiththeGeneralPurposeStatementunlessyouinstructotherwise.The
GeneralPurposeStatementis:ThepurposeoftheCorporationistoengageinanylawfulactoractivityfor
whichCorporationsmaybeorganizedundertheGeneralCorporationLawofDelaware.Ifyouwishtousea
specificPurposeStatement,youwillneedtoprovideuswiththeexactlanguageofthestatementyouwishto
substitute.
10. StockCorporationswillauthorize1,500sharesofcommonstockwithoutparvalueunlessyouinstruct
otherwise.Authorizingmorethan5,000sharesofstockmayincreaseyourAnnualFranchiseTaxdueand
mayresultinanincreasedfilingfee.Authorizingmorethan1500sharesatzeroparvaluewillresultinan
increasedfilingfee.PleasecontactanIncorporationSpecialisttocalculatethefilingfeeifyouwillauthorize
morethan1,500shares.
11. YouwillbeaskedtoselectaNewCompanyRegistrationpackage.IfyouareIncorporatingorforminganew
LLCinastateotherthanDelaware,pleasecontactanIncorporationSpecialistforaquoteaspricevariesby
state.
12. YouwillhavetheopportunitytoselectadditionalservicessuchasaCertificateofGoodStanding,Business
LicenseApplicationService,EINApplicationService,CertifiedCopies,MailForwardingandApostillesatthe
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
15
timewhenyouplaceyourorderforaNewCompanyRegistrationPackage.Someoftheseserviceswill
requiretheprovisionofadditionalinformation.Pleaseseethecorrespondingpagefordetails.
Q: HowmanyofficersanddirectorsarerequiredformyDelawareCorporation?
?
A: OnepersoncanbebothanofficerandaDirector.Delawarecorporatelawfacilitates
settingupaonepersonCorporation.NeitherOfficersnorDirectorsneedtobelistedin
theCertificateofIncorporation,butthenamesandaddressesofallDirectorsmustbe
listedontheDelawareAnnualReport.DelawareLLCsneedaminimumofoneMember
oroneManager.DelawareLLCsarenotrequiredtofileanAnnualReport.
Q: MustanofficerofthecompanysigntheCertificateofIncorporationor
CertificateofFormation?
?
A: No;DBIwilldesignateamemberofitsstaffastemporaryIncorporatororOrganizer,
whosedutiesandfunctionsareautomaticallyterminatedfollowingthefilingofyour
Incorporationdocuments.Thereisnoextrachargeforthisservice.Ifyouprefertohave
anOfficer,DirectororMemberofthecompanysigntheCertificate,pleaseadviseusof
yourpreferencewhenyouplaceyourorder.
PaymentOptions
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies
IfyouwillbeorderingonlineyouwillhavetheoptiontopaybyCreditCardorPayPal.Foryourconvenience,we
acceptVisa,MasterCard,DiscoverandAmericanExpress.Ifyouprefertoorderbysubmittinganorderformviafax,
emailormail,youmaycompletethecreditcardpaymentauthorizationoftheorderform,includingthesecurity
codeofthecreditcardandthesignatureoftheaccountholder.Alternately,youmayencloseapersonalor
companycheck,oramoneyorderbymailorcourier.IfyouwishtomakepaymentbyWesternUnionorbankwire
transfer(includeanadditional$35.00fee),pleaseforwardthetransmittaladvicefromthemoneytransferagent
withyourorderformandallow310daysforthemoneytobedepositedinouraccount.Paymentinfullisrequired
beforeyourordercanbyfulfilled.
RegisteringyourNewCompany
Oncewereceivepaymentforyourorder,wewillbetakingcareofallthedocumentationrequiredtoformand
registeryournewDelawareLLCorCorporation.ItwillnotbenecessaryforyoutosignorpreparetheDelaware
incorporationdocuments.Ifyouorderqualificationinanadditionalstateitmaybenecessaryforyoutosignand
returnanapplicationformafterweprepareitforyou;wewillletyouknowifthisisrequiredforyourstate.Ifyou
ordermailforwardingserviceyouwillberequiredtosignandreturnaUSPostalServicemailforwarding
authorizationwhichwewillprepareforyou.IfyouareanonresidentnoncitizenandyouorderEINobtainment
servicewewillprepareanapplicationforyoutosignandreturnbyemailorfax.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
16
ProcessingTime
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies
OurhoursofoperationareMondaythroughFriday,8:30a.m.to5:00p.m.USEasternStandardTime.Youare
welcometoplaceyourorderwheneveritisconvenientforyou.Whetheryousubmityourorderonlineoronan
orderform,anyinformationyousubmitwillbekeptstrictlyconfidential.
IfyourorderforanewDelawareLLCorDelawareCorporationisreceivedduringnormalbusinesshours,wewill
registeryourcompanyintheDelawareCorporateInformationSystemassoonaswereceiveyourpaymentand
reviewyourorder.YournewcompanylegallyexiststhemomentwetypeyourregistrationintotheDelaware
CorporateInformationSystem.Thisprocessisoftencompletewithinlessthananhour,buteveninthecaseof
extremelyhighordervolume,weguaranteethatyournewDelawareLLCorCorporationwillberegisteredwithin24
hours(excludingweekends,holidaysanddeclaredemergencies).
WedontadvertisethatyournewcompanywillberegisteredwithinthreeminutesbecauseatDBIyourorder
willbereviewedbyatrainedIncorporationSpecialistbeforeyourcreditcardischarged.Ifoneofourexperienced
IncorporationSpecialistsseesapotentialproblemyouwillbenotifiedrightawaybyphoneoremail.
AfterweregisteryournewDelawareLLCorCorporationintheDelawareregistrationsystem,theDivisionof
CorporationswillreturnacopyoftheCertificateofIncorporationorCertificateofFormationbearingastampstating
thefilingdateandtimeplusthefilenumberassigned;thisisknownasaplaincopyandisincludedwithyour
purchaseofaNewDelawareregistrationpackageatnoadditionalcharge.(TheInternationalPackagesincludea
CertifiedCopyofyourCertificateofIncorporationorCertificateofFormationwithanApostilleorandGoldSeal.)
ForUSorderswetypicallyreceivethestampedCertificateofIncorporationorCertificateofFormationfromthe
CorporationsDivisionwithinapproximately24hours.Ifyourorderwasreceivedbefore12:00PMESTwewilloften
receiveyourstampedCertificatebackfromtheCorporationsDivisionthenextmorning,butthesetimeframesare
subjecttotheCorporationsDivisionsworkvolumesoweadviseyoutoallow13businessdays.Ifyouneed
guaranteed24hourprocessingorsamedayserviceyourordercanbeupgradedtoexpeditedserviceforan
additionalfee.
ForinternationalorderswetypicallyreceivetheApostilleorGoldSealCertifiedCopywithin35businessdays.If
youneedthedocumentfastercontactusforaquoteonexpeditedservice.
WewillemailthestampedCertificateofIncorporationorCertificateofFormationtoyouassoonaswereceiveit
fromtheState.BecauseCorporationsandLLCsareregisteredelectronicallyinDelaware,thescannedimagewe
emailyouislegitimateforuse.ScannedimagesofCertifiedCopiesandCertificatesofGoodStandingarealso
legitimateandbearauthenticationnumberswhichtherequestormayverifybycontactingtheDelaware
CorporationsDivisionverificationsectionoftheirpublicwebsite.
ForUScustomersthehardcopyofyourdocumentswillalsobesentbyUSFirstClassMailatnoadditional
charge;lookforyourdocumentstoarriveinaDBIenvelope.Yourdocumentsmaybeenclosedinaplasticsleeve
behindacoverletter,dontthrowthemaway!CorporateKitsandOperatingAgreementkitsareshippedseparately
toUSaddressesbyUPSandareusuallyreceivedwithinthreetofivebusinessdaysorless.ShippingtoUSaddresses
isfree!
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
17
CorporateKitsshippedoutsidetheUSaretypicallyreadyforshipmentbyFedExInternationalorDHLwithin57
daysandtimeintransitandshippingcostvarybydestination.Shippingfeemustbepaidinadvanceforshippingto
nonUSdestinations.AlldocumentsincludedwiththeDelawareInternationalIncorporationorLLCPackageswillbe
enclosedinthesameshipmenttoreduceshippingcost,unlessyouinstructotherwise.
Q: DoIhavetowaitfortheoriginaldocumentsbeforemynewcompanysignsacontractor
opensabankaccount?
?
A: ThestateofDelawaredoesnotreturnoriginaldocumentsafterfiling.Scanned
documentsareaslegitimateasanoriginaldocument,soyoucanopenabankaccount
orenteracontractassoonasyoureceiveyourscanneddocumentsbyemail.Iftheparty
youareworkingwithrefusestoacceptyourscanneddocumentitispossibletoordera
CertifiedCopyfromtheStatewhichwillbearanauthenticationnumber.Various
expeditedservicelevelsareavailable.ContactinIncorporationSpecialistforassistance.
Whattodowiththedocumentsyoureceive
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies
IfyouordertheGold,PlatinumorExecutivepackage,yourcompliancekitwillarriveassembled.Itwillonlybe
necessaryforyoutoprintyourOperatingAgreementorByLawsandyourMinutesofFirstMeetingandfilethemin
theappropriatetabsoftherecordsbinder.
Otherwise,youwillreceiveyourCertificateofIncorporationorCertificateofFormation,togetherwiththe
resolutionnamingtheInitialDirectororInitialMember,plusanyadditionaldocumentsyouorder,inawhite9x12
envelopedeliveredbyFirstClassUSMail.Insidetheenvelopeyouwillfindasleeveprotector.Yourdocumentsare
insidethesleeveprotectorbehindacoverletter;dontthrowthemaway!FilethesedocumentsinyourCorporate
ComplianceKitorOperatingAgreementKitbehindtheprovidedsectiondividers.Completeinstructionsare
providedwiththecoverletter.
Yourcompliancekitisimportant!IfyoudidnotorderakitpleaseSeetheAppendixformoreinformationabout
theCorporateCompliancekitandtheOperatingAgreementkit,orcontactanIncorporationSpecialisttolearnabout
therisksofnotproperlydocumentingtheorganizationandownershipofyourcompany.
TheStateofDelawaredoesnotkeeprecordsofwhotheMembersorShareholdersofyour
companyare(notever,notanywhere).Thispreservesyourprivacybutitalsorequiresyour
vigilantupkeepofyourowncompanyrecords.AlthoughDBIwillhaveanindicationofwho
theInitialDirectororInitialMemberofyourcompanyis,thisisnotproofofownership!Ifa
disputeweretoariseregardingtheownershipordistributionrightsofanownerofyour
company,yourowncompanyrecordsmaybetheonlysourceofevidencetosupportyour
claim.WestronglysuggestthatyoustoreyourCorporateKitorOperatingAgreementKitina
safeorsafetydepositboxandobservethesameprecautionsthatyouwouldindefending
againstpersonalidentitytheft.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
18
Q: IpresentedthedocumentyougavemewhichnamesmeastheInitialDirector,butthe
bankwantsadditionaldocumentation.
?
A: Ifyouareworkingwithabankoragencywhichdoesnotaccepttheevidenceofyour
companyrecords,DBIcanprepareaStatementbyIncorporator(alsoknownasa
BusinessStatementorCertificateofIncumbency)whichisanotarizedstatement
attestingtotheorganizationofyourcompanyandisusuallyacceptedbymost
authoritieswhohaverequestedadditionalinformation.PleasecontactanIncorporation
SpecialistforanEstimate.
Administrationofyournewcompany
DelawareCompaniesareamongsttheeasiestintheworldtoadminister.TheDelawareStateLegislaturestrives
togiveyouasmuchflexibilityaspossibleandDBImakesiteveneasier!Pleasetakeamomenttofamiliarizeyourself
withthefewresponsibilitiesyouwillhaveafterIncorporatingorOrganizinganLLCinDelaware.
AnnualResponsibilities
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies
Corporations
FileAnnualReportwiththeDivisionofCorporationsbeforeMarch1steachyear.
PayDelawareFranchiseTaxtoDiv.ofCorporationsbeforeMarch1steachyear.
PayDBIAnnualRegisteredAgentServiceRenewalfeeonanniversaryofformation.
PayStateandFederalCorporateIncomeTax,ifany.
IfyourCorporationisregisteredinadditionalstatesyoumayhaveadditionalreportsandortaxesdueeach
year.
Holdannualshareholdersmeeting*.Meetingsmaybeheldonlineorbyphone.
o ScheduletheMeeting
o SettheAgenda
Resignationand/orAppointmentofDirectors,ifany
Approvalofauditedaccounts
Approvaloftheannualbudget
Majorbusinessitemstobeconsidered
o SendoutAnnualMeetingNoticesandProxyCardstoallshareholders.
o HavetheSecretarykeeptheMinutesoftheMeeting.FiletheminutesintheCorporaterecords
binderanddistributecopiestoshareholders.
*ExcludingCloseCorporationsandSoleShareholder/SoleDirectorCorporations
Thereareunscrupulouscompaniesinseveralstatesthatsendoutsolicitationswhichlooklikeofficial
noticesinstructingyoutofiletheMinutesofyourAnnualMeetingwithastateagency.YourAnnual
MeetingNoticesandMinutesarenotfiledwiththeSecretaryofStateoranyotheragency.Theyare
maintainedbyyouinyourprivatecorporaterecords.(CorporationsdohavetofileanAnnualReport
eachyear,thisisnotthesameasMinutes.Ifyoureceivesomethingthatlookslikeanofficialnotice
andyouhavequestionsaboutitsauthenticity,pleasefaxoremailittoyourIncorporationSpecialist.
Wewilladviseyouifthenoticeislegitimateandifyouneedtocomplywithit.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
19
LLCs
PayannualDelawareLLCTaxbeforeJune1steachyear.
PayDBIAnnualRegisteredAgentServiceRenewalfeeonanniversaryofformation.
PayStateandFederalCorporateIncomeTaxorPersonalIncomeTax,ifany.
IfyourLLCisregisteredinadditionalstatesyoumayhaveadditionalreportsandortaxesdueeachyear.
DBIofferstheGoodStandingProtectionProgramtobothLLCsandCorporationssoyouwont
havetoworryaboutfilingyourtaxontimeormissingaRegisteredAgentRenewal.
Q: Ihaventstarteddoingbusinessyet;doIstillhavetofileareportandpaytaxes?
A: Yes.YouarepayingfortheprivilegeofhavingacompanyCharteredin
? Delaware;theDelawareFranchiseTax(orDelawareLLCTax)isnotanincometax.Ifyou
dontwantyourDelawareChartertobecancelled,youwillhavetopaytheFranchiseTax
orLLCTaxwhetheryourcompanyisactivelyconductingbusinessornot.Thetaxisdue
everyyearuntilyoufileaCertificateofDissolutionoraCertificateofCancellation.
AmendmentsandOtherChanges
IfyouneedtomakeachangetoyourCertificateofIncorporationorCertificateofFormation,anAmendment
mustbefiledwiththeDivisionofCorporations.DBIoffersthisservice.YoumayamendyourByLawsorOperating
AgreementyourselfandarenotrequiredtofilethatamendmentwiththeState.
ChangesthatrequireanAmendmenttobefiledwiththeState:
NameChange
Authorizemoreorlesssharesofstock(forCorporationsonly)
AuthorizeanewClassofStock(forCorporationsonly)
AnychangetothewordsprintedontheCertificateofFormationorIncorporation
ChangeofRegisteredAgent(forLLCs)
ChangesthatdonotrequireanAmendmenttobefiledwiththeState:
ChangestotheOperatingAgreementorByLaws
ChangestotheOfficers,Directors,Shareholders,MembersorManagers
AuthorizemoreorlessLLCMembershipunits
Q: OurCertificateofIncorporationnamessomeonewhoisnolongera
Director;dowehavetofileanAmendment?
? A: ItisnotnecessarytoamendthecertificatetochangeaDirectororMember;although,if
youwishtodoso,youmayamendthedocumentforafee.ContactanIncorporation
Specialistformoreinformation.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
20
Q: DoIhavetonotifyyouorthestateofDelawarewhenthereisachangeintheofficers,
directors,membersormanagersofthecompany?
A: TheDirectorsandprincipalofficerofaDelawareCorporationarereportedonan
AnnualReportfiledannuallywiththeDelawareSecretaryofState(SoS);itisnot
necessarytoreportthechangeuntilthenextAnnualReportisdue.TheDelawareSoSis
notnotifiedofchangesoftheMembersorManagersofanLLC.Allchangestothe
principalsandOfficersshouldberecordedintherecordsthecompanymaintainsatits
headquarters(mainoffice).Ifachangeofownershipwillresultinachangeofcontact
informationitisnecessarytonotifyDBIASAPsothatthetransmissionofyourtaxnotices
andServiceOfProcessisnotinterrupted.Thebestwaytonotifyusofachangeincontact
informationisbyemail.
FORFEIT&VOIDStatusandRenewal&Revival
FORFEITandVOIDStatus
akaAdministrativeDissolution,InvoluntaryWithdrawal
IfacompanyfailstopayforRegisteredAgentServicerenewal,DBIwillresignasRegisteredAgentinDelaware.
IfaDelawareCorporationorLLCfailedtomaintainaRegisteredAgentinDelaware,thecompanyCharterwillbe
declaredFORFEITbytheSecretaryofState.
IfaDelawareLLCorDelawareCorporationfailstopayDelawareFranchiseTaxorDelawareLLCTaxin
consecutiveyears,thecompanyCharterwillbedeclaredVOIDbytheSecretaryofState.
IfacompanyisdeclaredVOIDorFORFEIT,thecompanywillbecomeinvalidandwilllosetherighttotransact
businessasanLLCorCorporation.TheLLCorCorporationwillalsolosetherighttoExclusiveUseofthecompany
name.IfanothercompanyregisterswithyournamewhileyourcompanyisVOIDorFORFEIT,youcannothavethe
namebackevenifyoufileforRenewalandRevival.Ifanothercompanyhastakenyournamewhileyourcompany
wasVOIDorFORFEITDBIcanhelpyouRenewwithanewname;youwillbepermittedtokeepyouroriginal
IncorporationDate.PleasecontactyourIncorporationSpecialistsifyouhavequestionsaboutthis.
RenewalandRevival
akaRestoration
IfyourcompanyisdeclaredVOIDorFORFEIT,thecompanyChartercanberestoredtoGoodStandingbyfilinga
CertificateofRenewalandRevivaltogetherwithanydelinquentDelawareLLCTaxesorFranchiseTaxes(andAnnual
ReportsforCorporations).ContactanIncorporationSpecialistforacalculationofdelinquenttaxdueand/orunpaid
RegisteredAgentServiceRenewalfees.DBIwilldrafttheCertificateofRenewalandRevivalandpreparethe
necessaryAnnualReportsforCorporationsusingtheAuthorizedSharesMethodofFranchiseTaxCalculationatno
additionalcharge.CorporationsthatfileusingtheAssumedParValueCapitalmethodmayeitherpreparetheirown
delinquentAnnualReportsorpayDBIsAnnualReportPreparationandfilingfee.LLCsdonotfileannualreports.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
21
IfyourcompanywasIncorporatedinDelawareoryourLLCwasformedinDelawareandyour
businessislocatedinanotherstateinwhichyouQualifiedasaForeignCorporation,you
cannotallowyourDelawareCorporationorDelawareLLCtogoVOIDorFORFEIT.Ifyour
CorporationorLLCisVOIDorFORFEITinDelawarethenyourcompanyhasnorighttodo
businessinanystateuntilitisrestored.IfyounolongerwishtoberegisteredinDelaware,
contactanIncorporationSpecialistaboutthepossibilityofConvertingyourDelawareLLCor
Corporationtoanotherstate.
Dissolution&Cancellation
AkaWindingUpBusiness,Closing
IfyounolongerintendtoconductactivitywithyourCorporation,itisnecessarytolegallydissolvethe
CorporationbyfilingtheappropriatedocumentswiththeDelawareSecretaryofState;thisprocedureisknownas
Dissolution.ShareholdersarenotlegallyentitledtotheirshareoftheCorporation'sremainingassetsafterclose
ofbusinessuntilithasbeenlegallydissolvedbyfilingtheCertificateofDissolutionwiththeSecretaryofState.
Furthermore,youdonotwanttaxliabilitytocontinuetoaccrueonacompanyyoudonotplantouseanymore.For
LimitedLiabilityCompaniestheprocessisthesame,butisreferredtoasCancellation.
Thefinaltaxliabilityforanypreviousoutstandingyearsplusthecurrentyearmustbepaidatthesametimethat
thecompanyfilesitsCertificateofDissolutionorCertificateofCancellation.Taxwillnotbeprorated.Contactan
IncorporationSpecialistforacalculationoffinaltaxdue.DBIwilldrafttheCertificateandprepareAnnualReports
forCorporationsusingtheAuthorizedSharesMethodofFranchiseTaxCalculationatnoadditionalcharge.Annual
Reportsmustbespecialorderedforcurrentyearfiling;yourIncorporationSpecialistwilldothisforyou.
CorporationsthatfileusingtheAssumedParValueCapitalmethodmayeitherpreparetheirownfinalAnnualReport
orpayDBIs$55AnnualReportPreparationandfilingfee.LLCsdonotfileannualreports.
Toavoidadditionaltaxliability,youmustcontactDBItofileyourCertificateofDissolution(or
CertificateofCancellation)bynolaterthanthelastbusinessdayofDecemberofthecalendar
yearinwhichyourcompanyresolvedtoclose,regardlessofyourFiscalYearend.
Disclaimer:ThishandbookisintendedtoprovidegeneralinformationabouthowtoincorporateinDelawareorformanew
DelawareLLCandisintendedforinformationalpurposesonly.Itisnotintendedtoreplacetheadviceofanattorneyortax
accountantanddoesnotconstituteindividualizedlegaladvice,legalservice,ortaxadvice.Norepresentationsorwarranties,
expressorimplied,aregivenregardingthelegal,taxorotherconsequencesresultingfromtheuseofourservices,includingbut
notlimitedtoinformationand/orforms.TheinformationsuppliedbyDBIissuppliedonlywiththeunderstandingthatDBIand
itsemployees,agentsand/orrepresentativesarenotengagedinrenderinglegalservices,legaladvice,ortaxadvice.DBI
expresslydisclaimsanyliability,lossorriskincurredasaconsequence,directlyorindirectly,oftheuseandapplicationofanyof
thecontentsofthisinformation.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
22
SECTION TWO:
INFORMATION FOR INTERNATIONAL
AND OFFSHORE ENTREPRENEURS
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
23
WhyisDelawaresopopularwithoffshoreentrepreneursandinvestors?
TherearemanyadvantagestoformingaDelawareLLCorCorporation.Herearejustafew:
WiththehelpofDBI,youcanformaDelawareUSALLCorCorporationwithoutevercomingtotheUnited
Statesevenifyouarenotaresident,andevenifyouarenotacitizen.
Ifyouareanonresidentnoncitizen,andhavenoOperations(businessactivity,employees)intheUSand
noUSSourceofIncome(suchasrentalproperty)youcanlegallyavoidallUSFederalIncomeTaxesand
DelawareStateIncomeTaxes.Seebelowformoreinformation.
ThereisnoStateSalesTaxinDelaware.
Delawarehasnoadvaloremorvalueaddedtaxes(VATs),andnotaxesonbusinesstransactions(TBTs).
Delawarehasnousetax,inventoryorunitarytax.
ThecontractualflexibilityofaDelawareLLCisunmatchedbyanyotherU.S.statesLLCstatute,andoffers
benefitstypicalofmanyoffshorejurisdictions,i.e.theGermanGmbH.
DelawareLLCsdonotrequirethenameoftheMembersorManagerstobedisclosedontheCertificateof
FormationandarenotrequiredtofileanAnnualReport.TheownersoftheLLCwillnotberecordedinthe
publicrecord.
DelawaresCourtofChanceryisaworldleaderinUSandInternationalbusinesslaw.
Delawarescorporatelegalsystemstrivestoprovideacorporatelegalclimateconducivetothegrowthand
profitabilityoftheover900,000companiesCharteredasDelawareCorporations.Ourstatelegislative
philosophyistogivecompaniesfreedomtodefinetheirownpracticesofoperationswheneverpossible,
withsensitivitytotheprioritiesofcompanyownersandofficers.
SeenextpageforachartonHowtoDetermineifyouhaveUSSourceIncome.
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
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How to determine if you have US Source Income
ItemofIncome FactorDeterminingSource
Salaries,wages,othercompensation Whereservicesperformed
Businessincome:Personalservices Whereservicesperformed
Businessincome:Saleofinventorypurchased Wheresold
Businessincome:Saleofinventoryproduced Whereproduced(Allocationmaybenecessary)
Interest Residenceofpayer
Dividends WhetheraU.S.orforeigncorporation*
Rents Locationofproperty
Royalties:naturalresources Locationofproperty
Royalties:patents,copyrights,etc. Wherepropertyisused
Saleofrealproperty Locationofproperty
Saleofpersonalproperty Seller'staxhome(butseePersonalProperty,inChapter2
ofPublication519,forexceptions)
Pensions Whereserviceswereperformedthatearnedthepension
Scholarshipsfellowships Generally,theresidenceofthepayer
Saleofnaturalresources Allocationbasedonfairmarketvalueofproductatexport
terminal.Formoreinformation,seesection1.8631(b)of
theregulations.
*Exception:PartofadividendpaidbyaforeigncorporationisU.S.sourceifatleast25%ofthecorporation'sgross
incomeiseffectivelyconnectedwithaU.S.tradeorbusinessforthe3taxyearsbeforetheyearinwhichthedividends
aredeclared.
YouwillfindagreatdealofinformationabouthowtoformanewDelawareLLCor
CorporationinthesectionoftheHandbooktitledUnderstandingNewCompanyFormation
MadeEasy.
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Q: Howisitpossibleforanonresident(alien)noncitizentoformaUSAcompany?
A: DelawarelawpermitsnonresidentnoncitizenstoformDelawareLimitedLiability
Companies(LLCs)andCCorporations.Youdonotneedtoshowusyourpassportand
youdonothavetocometotheUSA.
Q: DontIneedtohaveabusinesslocationinDelawareUSA?
A: No;youonlyneedtohaveaRegisteredAgentintheStateofDelaware.DBI
willbeyourRegisteredAgentinDelawareandthefirst12monthsofourRegisteredAgent
ServiceisfreewiththepurchaseofoneofourNewCompanyRegistrationPackages.
? Q: CanyouprovidemewithaDelawareaddress,telephonenumberand
FaxnumberthatIcanputonmywebsite?
A: Yes;wecanprovideyouwithaDelawareaddress,asuitenumberatthe
CapitolOfficeCenterinWilmingtonDelawareUSA,whichyoucanputonyourwebsite,
orderformsandbusinesscards,andwhichyoucanuseinyourroutinebusiness
correspondence.ThisserviceisnotthesameasRegisteredAgentService.OurVirtual
OfficeisavailableforpurchaseseparatelyandBasicMailForwardingisincludedwiththe
PlatinumNewCompanyRegistrationPackage.Wecannotforwardmailuntiltheapplicant
returnstheUSPSform1583authorizingustoserveasyourMailForwardingAgent.Our
LegalOfficeIdentitypackagealsoincludesaDelawaretelephonenumberandfax
numberwhichcanbeforwardedtoyouanywhereintheworld.PleaseseeMail
ForwardingServices/VirtualOfficeformoreinformation.
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25 REASONS
TO FORM A DELAWARE COMPANY
1. YoucanformaDelawareLLCorCorporationbyinternet,fax,ormailWITHOUTEVERCOMINGTO
DELAWARE.DBIcanelectronicallyregisteryournewCorporationorLLCinDelawarewithinaslittleasanhour
fromreceiptofyourinternetorderorsignedorderformwithpayment(onordersreceivedduringbusiness
hours).
2. Delawarescorporatelegalsystemstrivestoprovideacorporatelegalclimateconducivetothegrowthand
profitabilityoftheover900,000companiescharteredasDelawarecorporations.DelawaresCourtof
Chanceryisanequitycourtoflimitedjurisdictionwhichexistssolelytoadjudicatecorporatelitigation.For
morethan220yearstheChanceryCourthasbeendecidingcorporatedisputesinvolvingmanyofthelargest
corporationsintheworld,andhasdevelopedafullyestablishedcorpusofcaselawandlegalprecedentwhich
arecitedbybusinessscholarsandattorneysalloverthecountryandaroundtheworld.DelawaresCourtof
Chanceryisoneofthemostimportantcorporatelawcourts,secondonlytotheSupremeCourtoftheUnited
Statesinitsimpactoncorporatelaw.InadditiontotheinfluentialroletheDelawareCourtofChanceryplays
inshapingthecorporatelegallandscape,Delawarescorporatelawsareregularlyreviewed,revisedand
simplifiedbytheDelawareStateBarAssociationandtheDelawareLegislature.KnownasTheFirstStatefor
itsroleasthefirststatetoratifytheU.S.Constitution,Delawareremainsonthevanguardoflegalinnovation
beingamongthefirststatestoadoptlegislationallowingforthecreationofLimitedLiabilityCompanies(LLCs)
andSeriesLLCsandtheconvenienceofelectronicsignatures.
3. Delawarecompaniesmayberegisteredwithoutdisclosingthenamesoraddressesoftheownersinthe
publicrecord;CorporationsarenotrequiredtoidentifyShareholdersontheCertificateofIncorporationand
DelawareLLCsarenotrequiredtoidentifyMembersontheCertificateofFormation.DelawareCorporations
arerequiredtoidentifyDirectorsonanAnnualReport,DelawareLLCsarenotrequiredtofileanAnnual
Report.
4. ADelawaredirectorshieldlawpermitsDelawarecorporationstosheltertheirdirectorsliberallyfrom
personalliabilityinconnectionwiththeiractionsasboardmembers.
5. Delawareiswidelyregardedbyinternationalentrepreneursandinvestorsasafavorabletaxclimate:
ThereisnosalestaxinDelaware.
ThereisnostatecorporateincometaxinDelawareongoodsorservicesprovidedbyDelaware
corporationsoperatingoutsideofDelaware.
ThereisnostatecorporatetaxoninterestorotherinvestmentincomeinDelaware,whenearnedbya
DelawareHoldingCompany.
Delawarehasnopersonalpropertytax.TherearenoStaterealpropertytaxes,andthelocalrealproperty
taxesareverylow.
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Delawarehasnoadvaloremorvalueaddedtaxes(VATs).
Delawarehasnotaxesonbusinesstransactions(TBTs).Delawarehasnousetax,inventoryorunitarytax.
ThereisnoStateofDelawareinheritancetaxonstockofDelawarecorporationsoperatingoutsideof
DelawareheldbynonresidentsofDelaware.
TherearenoDelawarecapitalsharesorstocktransfertaxes.
Delawaredoesnottaxincomefromintangibleproperty.
6. Thedirector(s)ofaDelawarecorporationarepermittedtosetthesalespriceonanystockthecorporation
issuesanddesirestosell.
7. Delawarecorporationsmaypurchasesharesoftheirownstock,hold,sellandtransferthem.
8. ThereisnominimumcapitalinvestmentrequiredtoformaDelawareCorporationorLLC.Yourinvestment
maybeaslowaszero.
9. TheliabilityofashareholderofaDelawarecorporationislimitedbytheamountofhisinvestmentinthe
corporationplusthecorporatetaxliabilityprovidedthatthecorporationhasconducteditsbusiness
accordingtoallapplicablestateandfederallaws.
10. Thedirector(s)ofDelawarecorporationsmaydeterminewhatpercentageoftheconsiderationreceived
fromtheissueoftheirstockistobeconsideredcapital.Thisisimportantbecauseitgivesthedirectors
greaterflexibilityregardingtheuseoffundsobtainedinapublicoffering,sothatlargeamountsarenottied
upinthecapitalaccount.
11. TheByLawsorOperatingAgreementofyourDelawareCorporationorLLCmaybeformulatedoraltered
anytimebyitsDirectorsorMembers.
12. YourDelawarecorporationmayownwithoutlimitationsastoamountorvaluestocks,bondsor
securitiesofothercorporationslocatedinDelawareoroutsideofDelawareaswellasrealandpersonal
property.ThismeansthatyournewDelawareCorporationcanbesetupas,orlaterbecome,acorporate
holdingcompanyorrealestateholdingcompany.
13. YourDelawarecorporationcanbesetuptobeanallpurposecorporationtoconductmultipletypesof
business,tomanufactureand/ormarketanyproducts,toofferallkindsofservices,simultaneouslyor
sequentially.AllyouhavetodoisincludeabroadstatementofpurposeinyourDelawareCertificateof
Incorporation(CorporateCharter)suchas:Thepurposeofthiscorporationistoengageinanylawfulactor
activityforwhichCorporationsmaybeorganizedundertheGeneralCorporationLawofDelaware.This
permitsyourDelawarecorporation,forexample,tostartoutasarealestateholdingcompany,addyour
spousesretailbusinesstoitsactivitiesandlaterbecomeamanufacturerofpackagedgoodsallwithout
havingtoalteryouroriginaldocumentationorfilenewcorporatedocuments.
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14. Quarterlyorannualmeetingsmaybeheldanywhereorifyouprefer,meetingsmaybeheldentirelyonline,
attheoptionoftheboard.Inlieuofsuchformalmeetings,director(s)and/orshareholdersmayactby
unanimousconsent.DelawareLimitedLiabilityCompaniesarenotrequiredtoholdannualmeeting.
15. YourDelawarecorporationstockcanbeprivatelyownedorpubliclytradedonanystockexchangeanywhere
intheworld,whenproperlyregistered.
16. YoudonothavetomaintainaDelawarebusinessofficeaddressasidefromtheaddressofyourDelaware
RegisteredAgentwhichisrequiredforserviceofprocess.However,ifyouwouldliketohaveaDelaware
businessaddresswhereyoucanreceivebusinessmail(otherthanserviceofprocess),DELAWAREBUSINESS
INCORPORATORS,INC.offersaVirtualOfficepackagewhichincludesaDelawareMailingAddresswithmail
forwardingplusaprivateDelawarephonelineandfaxservice.
17. DelawarehasahighlyspecializedandexpertcorporatebarthatisveryfamiliarwithDelawarecorporatelaw
andwhichappearsregularlybeforejudgesoftheCourtofChancery.Studentsinlawschoolsnationwide
typicallystudyDelawarecorporationlawstatutesandDelawarecorporatecaselawintheircorporatelaw
courses.
18. NonCitizenNonResidentsoftheUSAmayformDelawareCCorporationsandLLCs.Noncitizenresidentsof
theU.S.mayalsoformSCorporations.(CanonlybedoneifthenoncitizenshasanITIN.)
19. DelawarepermitsSCorporations,which,withthefederaltaxlawsof1986,canbeveryadvantageous.
20. WithDBIasyourDelawareRegisteredAgent,yourDelawareCorporationorLLCmaybeheadquarteredin
anystateorterritoryoftheUnitedStatesorinanycountryintheworld.
21. OnesingleindividualmaysimultaneouslyholdalloftheexecutiveofficesandtitlesofaDelawarecompany,
suchasPresident,CEO,Director,etc.DelawarepermitsyoutobeaonepersonCorporationoronemember
LLC.(CanonlybedoneifnoncitizenshasanITIN.)
22. TheDelawareDivisionofCorporationsistheleaderinprovidingservicebasedonitsmanyyears
experienceanditsphilosophyofdeliveringcustomerserviceonparwiththebestprivatefirms.
23. Delawarecorporationsarepermitted,underappropriatecircumstances,topaydividendsoutofnetprofitsif
thereisnosurplus.
24. TheDelawarecorporatefranchisetaxisminimalandquitecompetitivewithotherstates(only$75/yearfor
Delawarecorporationswith5,000sharesorless).Thereisanadditional$50filingfee.Allfeeschargedbythe
StateofDelawaretocorporationsarekeptdeliberatelylowtoattractincorporationbusinessamajorsource
ofrevenuefortheState.
25. 50%ofallU.S.publiclytradedcompaniesand63%oftheFortune500arecharteredinDelaware.
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SECTION THREE:
REFERENCE INFORMATION
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Limited Liability Companies (LLCs)
ALimitedLiabilityCompany,orLLC,isaTypeofEntity(company)whichisoftendescribedasahybrid
betweenaCorporationandaPartnership.TheLLCfeaturestheliabilityprotectionofaCorporation,inthatthe
liabilityofallmembersislimitedtotheirinvestmentsintheLLC(unlesstheypersonallyguaranteeotherdebt
incurredbytheLLC),butismoreflexibleinrespecttomanagementstructureandisusuallyconsideredtooffer
greatereaseofadministration.
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Advantages of Delaware LLCs
AsofDecember1997,allstates,plustheDistrictofColumbia,havepassedlawsgoverningtheadministration
andoperationofLLCswithintheirjurisdictions.ButDelawareLLCsdopossesssomeuniquebenefits:
OnepersonLLCsarepermittedbyDelawarestatute.
DelawareLLCsmayhaveperpetuallife,thismeansthecompanysCharterdoesnotexpire.
DelawareLLCsmayberegisteredwithoutincludingthenamesoftheMembers/Managersandarenot
requiredtofileanAnnualReport.
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The LLC as an alternative to an S-Corporation
InDelaware,SCorporationisataxstatus,notanEntityType.Infact,anLLCcanbetaxedasanS
Corporation.Forthepurposesofthisdiscussion,wewillfocusonthedifferencesbetweenanLLCtaxedasa
DisregardedEntityandaStockCorporationwhichelectsSCorporationstatus.SeeourarticleaboutSCorporations
foradetaileddescriptionoftheSCorporation.BecauseanLLCisbydefaultaPassThroughentityfortax
purposes,theMembersofanLLCautomaticallyenjoytheliabilityprotectionofaCorporation,withtheavoidanceof
doubletaxationthataSoleProprietororPartnershipenjoys,withouthavingtoelectSCorporationstatusasa
CorporationseekingPassThroughstatuswouldhavetodo.Furthermore,theLLCcanenjoyPassThroughstatus
withouthavingtocontinuouslypasstheteststhataCorporationelectingSCorporationstatusmustpassto
qualify.ThisisonereasontheLLCisapopularalternativetoCorporationselectingSCorporationstatus;hereare
someothers:
MembershipisnotlimitedtoNaturalPersonsasisthecasewithSCorporations.Corporations,Limitedor
GeneralPartnerships,estates,charitableorganizationsandpensionplansareallpermittedtobeMembers
ofanLLC.
UnlikeanSCorporation,anLLCdoesnotlimitthenumberofMembersto100.
UnlikeanSCorporation,anLLCdoesnotbarforeignpersonsfromMembership.
ThelawallowstheinclusionofliabilitiesoftheLLCinordertoincreasebasisfortaxpurposes(asinthecase
ofapartnership).
PaymenttoaretiringMembermaybestructuredsoastoallowpartofthepaymenttobedeductedasan
expensetotheLLC.
AnLLCmayown100percentofthesharesofStockofanotherCorporation,whereastheSCorporationis
limitedtoowning80percent(withtheexceptionthatoneSCorporationmayown100percentofa
subsidiarySCorporation).
AnSCorporationislimitedtooneshareclass,whileanLLCmayformseparateandmultipleclassesof
Memberswithdissimilarvotingordistributionrights.
LLCownersmayobtainadditionaltaxlossesfromtheirallowableindividualpercentagesofcertaincompany
liabilities,ratherthansolelythroughdirectloans,asrequiredinthecaseofSCorporations.
Is there a downside?
Thebenefitsforowneremployees,suchashealthcareorlifeinsurance,areonlypartiallydeductiblefrom
theseMembersindividualfederalincometaxreturns,iftheLLCistaxedasaPassThroughentityorS
Corporation.ThisistypicallynotaprimaryconcernforentrepreneurswhoareconsideringanLLC.
UnlikesharesofStock,MembershipunitsofanLLCcannotbepubliclytraded.
IfyouaretryingtoraiseCapital,somepotentialinvestorsmaybelessfamiliarwithLLCsandtheLLCs
MembershipInterestShareversustheCorporationsStockShare.
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Certificate of Formation
LimitedLiabilityCompanieswillbecreatedbyfilingtheCertificateofFormation.Thisdocumentissometimes
calledtheArticlesofOrganizationorArticlesofFormation.DBIwilldraftthisdocumentforyou.Anyinformation
neededfromyouwillbeobtainedfromyourinternetorderororderform.
Management,FreeTransferabilityofInterest,orLimitedLiabilitymayresultintheIRStaxing
yourLLCasaCorporation.Pleasecontactaqualifiedtaxprofessionaland/orattorneyifyou
havequestionsregardingtheseprovisions.
Series LLC
ASeriesLLCisaLimitedLiabilityCompanythatallowsformultiplesubcompaniesunderoneumbrella.
ThesesubcompaniesaresometimescalledminiLLCsorunits,butthetechnicaltermwouldbeSeparate
Series.Wellcontinuetousesubcompanies;itsalittlelessconfusing.
EachsubcompanyorSeparateSeries,properlyformed,hasallthefeaturesofaregularLLC,andeachis
independentoftheother.Thedebts,liabilitiesandobligationsofonesubcompanyareenforceableonlyagainstthe
assetsofthatsubcompany,andnotagainsttheumbrellaLLCoranyothersubcompanyintheSeries.Letsreview
thatinplainEnglish,welluseanexamplewhilewereatit:
TomJonesplanstopurchasethreeapartmentbuildings.HeregistersaSeriesLLCwellcallTJ
PropertiesLLC.HisCertificateofFormationcontainsthenecessaryclausestoinvoke
separateliabilityprotection.TomcompletesanOperatingAgreementforTJPropertiesLLC
andaSeparateSeriesAgreementforeachofthethreesubcompanies.Thesubcompanies
areCloverleafApartments,SeriesAofTJPropertiesLLCLamplighterPatioHomes,SeriesB
ofTJPropertiesLLCandMainStreetEfficiencies,SeriesCofTJPropertiesLLC.Each
propertyistitledinthenameofitscorrespondingsubcompany.
Afteraflood,thefirstfloorunitsofMainStreetEfficienciesdevelopadangerousmold
problemandseveralsicktenantssue.ThejudgefindsagainstMainStreetEfficienciesandthe
rulingexceedstheassetsoftheMainStreetsubcompany.FortunatelyforTom,heproperly
setupaSeparateSeriesAgreementforeachsubcompany,eachcompanysassetswere
separatelyheldandhemaintainedseparateanddistinctrecordsforeachsubcompany.The
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assetsofLamplighterPatioHomesandCloverleafApartmentsaresafe,asaretheassetsofTJ
PropertiesLLC;theyareprotectedfromtheliabilityofMainStreetEfficiencies.
IfTomJoneshadheldalloftherentalpropertiestogetherinonetraditionalLLC,hispersonalassetswouldbe
protectedfromthemoldjudgment,buttheassetsoftheothertworentalpropertieswouldbeenforceabletosatisfy
thejudgment.TomcouldformthreetraditionalLLCs,onetoholdeachproperty;butthenhewouldhavethe
expenseofregisteringandmaintainingthreeLLCsinsteadofone.
Whichbringsustoanimportantpoint,thesubcompaniesunderyourSeriesLLCumbrellawillnotbe
individuallyregisteredinDelaware.Thisofferstremendoussavingsbecausesetupandmaintenancefeesarepaid
onlyfortheUmbrellaLLCandnoteachsubcompany.However,thisalsomeansyoudonothaveexclusiverightto
thenamesofthesubcompaniesunlessyouregisterthemastrademarksorregisterthemasanalternatenameina
jurisdictionwhichgrantsexclusiverightstouseofaregisteredalternatename.Manyjurisdictionsdonotgrant
exclusiverightstoalternatenames.ThisisnottypicallyanissueofconcernforapropertyholdingSeriesLLC,butif
yourintentionistoholdbusinessenterprisesinyourSeries,itisasubjectforconsideration.
SeriesLLCsarerelativelynewlegalcreatures.SomeUSstatesandforeigncountriesdonotrecognizethe
DelawareSeriesLLC,whileotherStates,suchasCalifornia,recognizeeachsubcompanyasaseparateLLCandthus
subjecttoseparateregistrationandstatetaxation.Becausetheyareamorerecenttypeofentity,theDelaware
SeriesLLCdoesnothavethevastbodyofcaselawaDelawareCorporationorTraditionalLLCenjoys.Thismeans
thattherearepotentiallyareasoflawwhichremainundefined;thecourtwillruleonthesesituationsastheyoccur.
Asaconsequence,whiletheyoffertremendousopportunity,theymaynotbetheappropriatevehicleforall
entrepreneursandinvestors.Forquestionsbearingonfederalandstatetaxliability,bankruptcy,creditorsrights
andenvironmentalliabilityyoushouldconsultaqualifiedtaxprofessionaland/orattorney,andbeasspecificas
possiblewhendescribingtheparticularsofyourbusinessorinvestments.PleasecontactanIncorporationSpecialist
ifyouwouldlikeareferral.
1. ThenameoftheUmbrellaLLC
2. TheaddressoftheRegisteredOffice
3. ThenameandaddressoftheRegisteredAgentinDelaware
4. ThenoticethattheLLCisaSeriesLLCandtheclauseinvokingseparateliability
5. ThesignatureoftheAuthorizedPerson(Organizer)
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Series Agreement
LikethetraditionalLLC,aSeriesLLCisdefinedbyanOperatingAgreementandeachsubcompanyhasitsown
SeparateSeriesAgreement.SeetheOperatingAgreementsectionofthetraditionalLLCformoreinformation
aboutLLCOperatingAgreements.
ASeparateSeriesAgreementistheOperatingAgreementofthesubcompany,andeachsubcompanymust
haveitsown.TheSeparateSeriesAgreementcontainsthefollowing:
1. ThenameoftheUmbrellaLLCandofthesubcompany
2. ThenamesoftheMembersofthesubcompany
3. Statementthatthenewsubcompanyiscreated
4. Separateliabilityclause
5. TheindividualtraitsofthesubcompanysuchasBusinessPurposeandInvestmentGuidelines,andany
distinctManagementguidelinesoranyotheritemfoundinatraditionalLLCOperatingAgreementwhichis
uniquetothissubcompany.
6. Thesignaturesofallthemembersofthissubcompany
Ifthefollowingcriteriaarenotmet,theLLCwillnotberecognizedasaSeriesLLCandthesub
companieswillnotberecognizedasseparateentitiesandwillnothaveseparateliabilityprotection:
1. TheCertificateofFormationmustidentifytheLLCasaSeriesLLCandmustinvokeaseparate
liabilityclause,ormustbeamendedtodoso.
2. TheOperatingAgreementmustidentifytheLLCasaSeriesLLCandmustdefinetheprovisions
oflimitedliabilityandseparateorganizationtobeenjoyedbyeachSeparateSeries(sub
company).TheOperatingAgreementoftheUmbrellaLLCmustbesignedbythemembersofthe
UmbrellaLLC.
3. EachsubcompanymusthaveitsownSeparateSeriesAgreementwhichmustbesignedbythe
membersofthatsubcompany.
4. Eachsubcompanymustmaintainitsownseparateanddistinctrecords.
5. Theassetsofeachsubcompanymustbeheldseparatelyinthenameofthesubcompanyand
inthesubcompanysownaccount.
Q: CanIgetanEINforeachSeparateSeriesinmySeriesLLC?
A: IRSPrivateLetterRuling200803004establishedthateachSeparateSeriesinaSeriesLLCmay
obtainitsownseparateEIN.ItisbestpracticeforeachSeparateSeriestohaveitsownbank
?
accountorbrokerageaccounttosatisfythebelowcriteriaforestablishingseparateliability:
1. EachSeparateSeriesmustmaintainitsownseparateanddistinctrecords.
2. TheassetsofeachSeparateSeriesmustbeheldseparatelyinthenameofthesubcompany
andinthesubcompanysownaccount.
Therefore,ifaSeparateSerieswillholdassetsinabankaccountorbrokerageaccountitwillbe
necessarytoobtainanEINforthatSeries.
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Corporations
ACorporationisabusinessentity(typeofcompany)whichisregisteredwithastategovernmentandentitledto
treatmentasanartificialperson,bywhichrightitmaysueorbesuedinacourtoflawwithprotectionforthe
shareholdersandofficersfrompersonalclaims,unlesstheycommitfraud.Thismeansthat,unlessashareholder
personallyguaranteesadebtoftheCorporation,orcommitsfraud,herriskoflossislimitedtotheamountof
moneysheinvestedintheCorporation;herpersonalassetsareprotectedfromliability.CorporationsandLLCsare
similarintheliabilityprotectionofferedtoownersandofficers.
ACorporationwhichisnotaCloseCorporationandisnotanSCorporationmaybecalledaCCorporationora
GeneralCorporationwhenitisnecessarytodistinguishit.TodistinguishbetweenaforprofitCorporationanda
notforprofitCorporation,aforprofitCorporationmayalsobecalledaStockCorporation.Thefollowingsection
willfocusonForProfitCCorporations.
HowareCorporationsmanaged?
InsmallercompaniestheownertendstowearmanyhatsandinDelawarethisisperfectlylegal;theownermay
beasoleshareholderandDirectoraswellasservingasthetitularPresident,SecretaryandTreasurerallatthesame
time!Thatsaid,theorganizationoftheCorporationismorerigidthanthatoftheLLC.Inthecaseofanew
Corporation,theexpectedseriesofeventswouldbeasfollows:
ApersonrepresentinganewcompanythatwishestoincorporatecontactsDBI.UponpurchasingDBIsservices,
DBIbecomestheIncorporator.DBIdrafts,signsandfilestheIncorporationdocumentsactingasanagentonbehalf
ofthenewCorporation.WhentheIncorporationiscomplete,DBIsservicesasIncorporatorareautomatically
terminated.ThelastthingDBIdoesinitsroleasIncorporatorisofficiallyappointtheInitialDirector.Theperson
whowillserveasInitialDirectorwillbeindicatedbythepersonplacingtheorderforIncorporationservices.
TheInitialDirectorisoftenthefounderoftheCorporation,although,theInitialDirectordoesnothavetobean
ownerorofficer;theInitialDirectorcouldbeamanager,CPAorattorneyforexample.ItistheInitialDirectorsduty
tofinishsettinguptheorganizationofthenewCorporationafterithasbeenIncorporated.TheInitialDirectorhas
theauthorityissuestockcertificatestotheownerstorecordtheirownershipshareandtocallameetingofthe
shareholderstoelecttheBoardofDirectors.TheInitialDirectormayremainaDirectororhisservicesmayendafter
otherDirectorsareappointed.InmanycasestheInitialDirectorstaysonandbecomestheChairmanoftheBoardof
Directors.
OncetheBoardofDirectorsisappointed,theBoardratifiestheByLawsandappointstheOfficersofthe
Corporation.MostroutineoperationaloversightisdelegatedtotheOfficers,butmajorpolicymustbedecidedbya
resolutionoftheBoardwhichiseitherapprovedbyamajorityofthevotingshareholders,orinthecaseofaSole
Owner/SoleDirectorbyUnanimousDecision.ACloseCorporationisexemptfromformalBoardMeetingand
Resolutions,asareLLCs.
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personalincomeoftheShareholders(owners),andistaxedataCorporaterate.ACCorporationmustfileitsown
incometaxreturneveryyearonform1120.InadditiontotheincometaxtheCCorporationmustpay,any
distributionsmadetothestockholders(alsoknownasdividends)aretaxedonthepersonalincometaxreturnsof
theshareholdersattheshareholderspersonalincometaxrate.ThisiswhatiscommonlyknownasDouble
Taxation.BecausetheCorporationmaydeductreasonablesalariesbeforecalculatingincometax,alargeportionof
theincomepaidtoOwneremployeesisnotsubjecttodoublefederalincometax,however,boththeCorporation
andtheEmployeemustpayFICAtaxonthesewagesearned.Asidefromliabilityprotection,lowercorporaterates
ofincometaxationareoneofthebenefitstoIncorporatingaSoleProprietorshiporPartnership.Anotherdifference
tobearinmindbetweenCorporatetaxationandpassthroughtaxationisthatundistributedprofitsofa
Corporationmaybeaccumulateduntaxediftheyarerelatedtothereasonableneedsofthebusiness.
2010CorporateIncomeTaxRates
$TaxableIncome CCorp.
$0$50,000 15%
$50,000$75,000 25%
$75,000$100,000 34%
$100,000$335,000 39%
$335,000$10,000,000 34%
$10,000,000$15,000,000 35%
$15,000,000$18,333,333 38%
$18,333,333+ 35%
2010MarginalPersonalIncomeTaxRates
$TaxableIncome Married/Joint $TaxableIncome Single
$16,750$68,000 15%+$1,675 $8,375$34,000 15%+$837.50
$68,000$137,300 25%+$9,362.50 $34,000$82,400 25%+$4,681.25
$137,300$209,250 28%+$26,687.50 $82,400$171,850 28%+16,781.25
$209,250$373,650 33%+$46,833.50 $171,850$373,650 33%+41,827.25
$373,650+ 35%+$101,085.50 $373,650+ 35%+$108,421.25
IftheIRSdeterminesthatretainedearningsarenotrelatedtothereasonableneedsof
thebusiness,thoseaccumulatedearningswillbetaxedat39.6%.
IfyourCorporationisprofitable,butpaysnodividendsandpayssalariessignificantly
higherthanindustrystandards,theIRSmaydeterminethatyourCorporationis
disguisingdividendsassalaries;andwillconsequentlydisallowaportionofeligible
salarydeductionsandapplypenaltieswithinterest.
PersonalServiceCorporations(thosewhoseemployeesspendatleast95percentoftheir
timeinthefieldofAccounting,ActuarialScience,Architecture,Consulting,Engineering,
Health,LaworPerformingArts)aretaxedataflatrateof35percentofnetprofits.
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What is the benefit of forming a Delaware Corporation for non-resident
non-citizens?
ACCorporationwithnoemployees,owners,propertyoroperationsintheUnitedStates,andnoUSsource
incomewillpaynoFederalUSCorporateIncomeTax.SeeAppendixAformoreinformationaboutdetermining
sourceofincome.
notice,youmaycontactDBIbeforeJune1stforareplacement.Itisveryimportantthat
younotifyDBIifyouraddressorcontactinformationchanges.
IfyourcompanyfailstopayDelawareFranchiseTaxfortwoconsecutiveyears,your
companyCharterwillbedeclaredVOIDforfailuretopaytaxes.Thismeansthatyour
companyCharterisinvalidandyoudonothavetherighttotransactbusinessasa
Corporation.
Notethat,underDelawarelaw,thesharesofanypersoninanyCorporationwithallthe
rightstheretobelongingoranypersonsoptiontoacquirethesharesorhis/herrightor
interestinthesharesmaybeattachedfordebtorotherdemands.Somanyoftheshares,
orsomuchoftheoption,rightorinterestthereinmaybesoldatpublicsaletothe
highestbidderasshallbesufficienttosatisfythedebtorotherdemand,interestand
costs,uponanorderissuedthereforebythecourtfromwhichtheattachmentprocess
issued,andaftersuchnoticeasisrequiredforsalesuponexecutionprocess.Whileyour
personalliabilityislimitedtoyourinvestmentinthecompany;youcanloseyour
investmentinthecompany.
Q: WhatisthedifferencebetweenParValueandNoParValuestock?
A: ParValuestockcertificatescarryastatedmoneyvalueontheirface.In
Delaware,parvaluestockmaybeissuedonlyinreturnforconsiderationssuchas
money,propertyorservicesofvalueatleastequaltothevalueofthesharesissued.Ifpar
valuesharesarepurchasedwithproperty,thevalueofthepropertymustbeestablished
byanindependentlicensedappraiserandthevalueofthesharesexchangedforthe
propertymaynotexceedtheamountoftheappraisal.Iftheparvaluesharesare
exchangedinreturnforservices,suchservicesmustalreadyhavebeenperformed,and
theymustbevaluedatthegoingrateforsuchservices.Suchvaluemustthenbetreated
asserviceincomebytheserviceprovider.NoParValuestockhasnostatedvalue.Such
sharesmaybesoldforwhatevertheinvestoriswillingtopay.NoParValuemayalsobe
?
expressedasZeroPar($0.00)andWithoutParValue.Theactualmarketvalueofan
establishedCorporationthathasbeenoperatingforsometimehas,ofcourse,norelation
tothefaceamountofthestock,whetheritisparvalueornoparvaluestock.Themore
profitablethecompanyandthemoreassetsitaccumulatesandthebetteritsprospects,
themoreeachshareofcommonstocktendstobeworthinthemarketplace.
Q: Doesonestockcertificateequaloneshareofstock?
A: No; One stock certificate can represent any number of shares up to the amount
authorized, as stated on the Certificate of Incorporation. The Certificate has a
blank space to be filled in with the number of shares it represents by the
corporate officer issuing the stock. If you purchase one of our New Company
Registration Packages that comes with a Corporate Kit you will receive Stock
Certificates with the name of your company printed on them. The kit comes
with a template so you can print the name of the shareholder and the number
of shares on the Stock Certificate using your printer.
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Certificate of Incorporation
StockCorporationsandNotforProfitCorporationswillbecreatedbyfilingtheCertificateofIncorporation.This
documentissometimescalledtheArticlesofIncorporation.DBIwilldraftthisdocumentforyou.Anyinformation
neededfromyouwillbeobtainedfromyourinternetorderororderform.
NamingYourCompany
RegisteredAgent
Glossary:AuthorizedShares,ParValue
OurgoalistoincludetheminimumamountofinformationnecessaryontheCertificateofIncorporation.Any
additionalprovisionscanbeindicatedintheByLaws.ByincludingadditionalprovisionsintheByLawsratherthan
theCertificateofIncorporation,wecanavoidthenecessityoffilinganAmendmenttotheCertificateof
Incorporationifanyoftheadditionalprovisionschange.Wecanalsoavoidcostlyperpagechargeswhichaddup
whenyoufileamultiplepageCertificateofIncorporation.Andfinally,byincludingthemajorityoftheinformationin
theByLawsratherthanthepubliclyfiledCertificateofIncorporation,theinformationregardingtheorganizationof
yourCorporationremainsprivate.Filingtheminimumprovisionsallowsmaximumflexibility,privacyandeconomy.
AlthoughmostDelawareCorporationsprefertofollowtheminimumprovisionsmodel,itispossibletoinclude
additionalprovisionsontheCertificateofIncorporation.Ifyouwantadditionalprovisionsincludedonyour
Certificate,pleasesupplytheexactlanguageoftheadditionalarticlestobeincluded.Followingaretheadditional
provisionswhichcanbeincludedontheCertificateofIncorporation:
8. Theperiodofitsduration,whichisusuallystatedasperpetual.
9. Whetherornotcumulativevotingofsharesisauthorized.
10. ProvisionsregardingByLaws.
11. ProvisionsregardingthesaleorpurchaseoftheCorporationsstock.
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12. Provisionsspecifyingspecialvotingrightsandpreferences.
13. Provisionslimitingordenyingtoshareholdersthepreemptiverighttoacquireadditionalortreasuryshares
oftheCorporation.
14. ProvisionsfortheregulationoftheinternalaffairsoftheCorporation.
15. Anyotherprovisionsrequiredtodefineorplaceparametersontheinternalorexternalorganization,
financialstructureoractivitiesoftheCorporation.
IfyouaredraftingyourownCertificateofIncorporationandwishforDBItoserveasyour
DelawareRegisteredAgentyoumustcontactusbeforetheCertificateofIncorporationis
filed.
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Close Corporations
ACloseCorporationisaCorporationwhichsetscertainlimitationsonthesale,holdingandtransferofitsshares
ofstock.InDelaware,aCloseCorporationislimitedtothirtyshareholders.TwocommonreasonstoformaClose
CorporationaretoseekandmaintainSCorporationtaxstatusfromtheIRSand/ortoeaseadministrationfora
smallbusiness,frequentlyafamilybusiness.Restrictionsonthetransferofstockarefrequentlyemployedasaway
ofmaintainingSCorporationtaxstatus;forexample:Atypicalrestrictionprohibitsthetransferofrestricted
securitiestononresidentaliens.Anothertypicalrestriction,knownasFirstRefusalrequiresapotentialsellerto
offerthestocksharestotheCorporationanditsexistingshareholdersbeforeofferingthestocksharesforsaleto
anyoneelse.FirstRefusalcanpotentiallyprotectsharesofafamilybusinessfrombeingsoldtosomeoneoutsidethe
familyorsharesofanSCorporationfrombeingsoldtoapartythatwouldcausetheCorporationtoloseitsS
status.
Not-for-Profit Corporations
Alsoknownas:NonProfit,NonStockCorporationor501(c)3
WhenweusethetermNotforProfitCorporationwearetypicallyreferringtoaCharteredCharitableor
ReligiousOrganization.ANotforProfitCorporationisnottaxexemptuntilithasbeengrantedTaxExemptstatus
bytheIRSafterfilingform1023.TobeTaxExempt,theCorporationmustmeetspecificrequirements:
1. Typically,theCorporationdoesnotauthorizeorissuesharesofstock.
2. TheCorporationisorganizedandoperatedexclusivelyforReligious,Educational,Charitable,Scientificor
Literarypurposes,orforTestingforPublicSafety,toFosterNationalorInternationalAmateurSports
Competition,orforthePreventionofCrueltytoChildrenorAnimals
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3. Nopartofthenetearningsofasection501(c)(3)organizationmay,bypracticeorcustom,benefitaperson
havingapersonalandprivateinterestintheactivitiesoftheorganization,suchasthecreatorofthe
Corporationorthecreator'sfamily.
4. Theorganizationisrestrictedinhowmuchpoliticalandlegislative(lobbying)activitiestheymayconduct.
PoliticalOrganizationsusuallyfileunderanexemptionotherthan501(c)3.
DBIwilldraftyourCertificateofIncorporationwiththeappropriatelanguage(seebelow)andfileyour
CertificateofIncorporationinthesamemannerthataForProfitStockCorporationisfiled.AftertheNotforProfit
Corporationisregisteredbyus,youwillthenneedtoapplytotheIRSforTaxExemptStatus.Contactan
IncorporationSpecialistifyouwouldlikeareferraltoaqualifiedtaxprofessional.FormoreinformationaboutTax
ExemptStatusseetheIRSpublicationTaxExemptStatusforYourOrganizationathttp://www.irs.gov/pub/irs
pdf/p557.pdf.
Certificate of Incorporation
ThefollowinginformationwillbeincludedontheCertificateofIncorporationofaNotforProfitCorporation:
1. ThenameoftheCorporation
2. ThenameandcompleteaddressoftheDelawareRegisteredAgent
3. ThePurposeStatementsettingforthpurposesinkeepingwiththoselistedaseligibleby501(c)3andbarring
thoseactivitiesorpracticesrestrictedunder501(c)3
4. AstatementthattheCorporationshallhavenosharesofstock
5. ThenameandaddressoftheIncorporatorandthenameandaddressoftheInitialDirector.NotforProfit
CorporationsarerequiredtoincludethenameandaddressofatleastoneDirector;theydonothavethe
optionofomittingthisinformation.
6. ThesignatureoftheIncorporator
FormoreinformationabouttheOrganizationandAdministrationofNotforProfitssee
http://www.idealist.org/info/Nonprofits
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S-Corporations
AnSCorporationisanentitythatmakesavalidelectiontobetaxedunderSubchapterSofChapter1ofthe
InternalRevenueCodebyfilingform2553withtheIRSwithinthetimeaffordedandbypassingtheeligibilitytests.
AlthoughwecommonlyrefertothemasSCorporationsnotallsuchcompaniesareCorporations;LLCscanelect
SStatustoo!InDelaware,anSCorporationisnotanentitytype,itisataxstatus(insomestatesanS
Corporationisbothanentitytypeandataxstatus).AcompanytypicallyelectsSStatustoavoidthepenaltyof
DoubleTaxationthatwouldoccurifthecompanyweretaxedasaregularCorporation(CCorporation).
DoubleTaxationoccurswhenCCorporationincomeissubjected,first,tocorporateincometax,andisthen
taxedasecondtime,aspersonalincome,whencorporateearningswhichhavealreadybeentaxedarereturnedto
theshareholdersintheformofdividends
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5. TheCorporationmusthaveonlyoneclassofstock,althoughthatclassmaybedividedintoVotingandNon
Votingshares.InthecaseofanLLC,allownermembersmusthaveidenticalrightstodistributionand
liquidationproceeds.
6. TheCorporationmustnotbeaSection585bank,asubchapterLinsurancecompany,asection936
possessionSCorporation,noraDomesticInternationalSalesCorporationorformerDISC.
7. TheCorporationmustfollowacalendartaxyearunlessitcanjustifyareasontodootherwise,suchas
seasonalbusiness.
8. EachshareholdermustconsenttotheSStatuselection.
9. TheCorporationmusthavelessthan100shareholdersorLLCMembers.Inthiscase,amarriedcouplewho
holdstockasTenantsinCommon,JointTenants,orCommunityPropertyarecountedasone
shareholder;unlessbothspousesalsoholdsharesofstockindividuallyinadditiontojointly,inwhichcase
theyarecountedastwoshareholders;ifonlyonespouseholdsadditionalsharesindividuallytheyareonly
countedasoneshareholder.Twounmarriedshareholdersholdingstockjointlyarecountedastwo
shareholders.
AnexistingSCorporationwillloseitstaxstatusifanyoftheaboverulesarebroken.
FollowingaresomeexamplesofactionsthatcouldresultinacompanylosingitsS
Corporationstatus;thisisnotintendedtobeacompleteorcomprehensivelist.
AnSCorporationmayloseitsSCorporationstatusif:
Stockissoldortransferredtoanonresidentalien.
AnotherCorporationpurchasessharesoftheSCorporation,withtheexceptionof
oneSCorporationholding100percentofasubsidiarySCorporation.
Thenumberofshareholdersexceeds100.
Asecondclassofstockisissued.NotethatifyourSCorporationsshareholderslend
toomuchmoneytotheCorporation,ratherthaninvestingthemoneyinstockas
capitalatrisk,theIRSmayneverthelessdeemtheloantobeaninvestmentinstock
andrulethatstocktobeofadifferentclassthantheoneoriginallyissued.
ACloseCorporationisformedwithstipulationsintheCertificateofIncorporationandBy
LawswhichmaypreventunintentionallossofSstatusduetosaleortransferofstock,see
theclosecorporationsectionformoreinformation.
Q: Improbablynotgoingtomakeanymoneymyfirstcoupleofyearsinbusinessdueto
startupcosts,doIstillhavetopaytaxes?
A: AcompanyregisteredinDelawaremustpayanannualtaxtotheSecretaryof
StateofDelawaretomaintainitsCharterissuedbythisstate;thistaxisnotdependenton
youractivitylevelorprofits.Ifyouregisteredinanyadditionalstatesyoumayowea
similartaxand/orannualfilingfeeinthosestates.IfyourLLCorCorporationisbeing
taxedasaDisregardedEntity,PartnershiporSCorporationthenyourlosseswillpass
throughandmaybeclaimedonyourpersonalincometaxreturnasanoffsettoother
sourcesofincomeyoumayhave.Theselossesmayevenbecarriedforwardtofuture
returns.
Q: InwhatcircumstancesisitparticularlydesirabletoconsiderelectingS
Corporationstatus?
A: Ifyoualreadyhaveorplantostartaonepersonorcloselyheldbusinessorprofessional
activity,withprobablelossesduringthefirstyear/secondyearstartupperiodresulting
frominitialinvestmentsinequipment,doingbusinessmaterialsorinventory,heavy
operatingexpenses,lowsalesorotherincome,etc.TheSelectionpermitsthepass
throughofoperatinglossestoshareholderswhomayhaveincometooffsetsuchlosses.If
youalreadyhaveabusinesswithahightaxableincomethatdistributesthemajorityofits
earningsasdividendsandthathaslowcapitalspendingrequirements.Note:Any
companythatchangesitscorporatestatusgenerallyispreventedbyFederaltaxlawfrom
switchingbackforfiveyears.
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Holding Companies
WhenwesayHoldingCompanyweareusuallyreferringtoacompanywhichdoesnotproducegoodsor
servicesitself,ratheritsonlypurposeisowningsharesofothercompaniesorcertainassetssuchasYachtsand
PrivateAircraft.
Anexcellentreferencethatprovidescomprehensiveguidanceforthebusinessuseofyachts,
includingthegeneralrulesforentertainmentfacilities,personaluse,depreciationand
recordkeepingforyachts,aretwomanuals,entitledTaxGuidefortheBusinessUseofYachts,
VolumeIandVolumeII:CharterOperations,byMikeKimball,CPA,RogerA.Smith,CPA,Dr.
KarenS.Lee,J.D.,CPA,whichareavailablefromDelawareBusinessIncorporators,Inc.
PersonalHoldingCompany
IntheUnitedStates,apersonalholdingcompanyisdefinedinsection542oftheInternalRevenueCode.A
Corporationisapersonalholdingcompanyifbothofthefollowingrequirementsaremet:
1. PersonalHoldingCompanyIncomeTest.Atleast60%oftheCorporation'sadjustedordinarygrossincome
forthetaxyearisfromdividends,interest,rent,androyalties.
2. StockOwnershipRequirement.Atanytimeduringthelasthalfofthetaxyear,morethan50%invalueof
theCorporation'soutstandingstockisowned,directlyorindirectly,byfiveorfewerindividuals.
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ThefollowingsuffixesareavailableforusebyLLCsinDelaware:
LimitedLiabilityCompany,LLC,L.L.C.
ThefollowingsuffixesareavailableforusebyDelawareCorporations:
Inc.,Incorporated,Corp.,Corporation,Co.,Company,Ltd.,Limited,Association,Assoc.
ANotforProfitmayuseanyofthesuffixeslistedaboveforaCorporation,oritmayuseoneofthefollowing
suffixestraditionallyusedbyNonStockandNonProfitOrganizations:
Club,Foundation,Fund,Institute,Society,Union,Syndicate.
YoucannotusethewordsBankorTrustinthenameofyourcompanywithoutprior
writtenapprovaloftheDelawareStateBankingCommissioner.Youcannotusethewords
UniversityorCollegewithoutthepriorwrittenapprovaloftheDelawareStateEducation
Commissioner.Mostotherstateshavesimilarlaws.ContactanIncorporationSpecialistfor
detailsregardingobtainingapproval.
Ifyouareinterestedinregisteringanamethatmaybesimilartothenameofacompanythatalreadyexistsin
Delaware(oryourhomestate)youmaymakethenameuniquebyaddingadistinguishingword.InDelaware
thedistinguishingwordmaybeaddedtothebeginningorendofthename.
John Smith owns a street sweeper manufacturing plant in Florida. He is interested
in registering his company in DelawareHis first choice, Smith Sweepers, Inc. is
already registered in Delaware by another company. John can add words to
Smith Sweepers to make his company name unique.
For example, he may be able to register his company as Smith Street Sweepers,
Inc. or Smith Sweepers of Florida, Inc.
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Changingthesuffixwillnotmakeanameavailableifitisalreadytaken.Forexample,ifthere
isalreadyacompanyregisteredasSmithSweepers,Ltd.Johnwillnotbeabletoregister
thecompanyasSmithSweepers,Inc.
ContactanIncorporationSpecialistifyouneedhelpnamingyourcompany.
Reserving a Name
TheofficeoftheDelawareSecretaryofStatemaintainsrecordsofthenamesofallCorporations,LLCsandother
entities,whichhavebeenreservedorregisteredasadomesticorforeignentityunderthelawsofDelaware.The
nameyouselectmustbecheckedagainsttheserecordstobecertainthatitisdistinguishablefromthem.DBIwill
checkyournameavailabilityinDelawareorotherstatesforfree.TheSecretaryofStateofDelawarenowcharges
$75foranamereservationwhichisvalidfor120days.Ifthedesirednameisavailable,DBIcanplacethename
reservationforyouthroughourdirectconnectiontotheDelawareCorporationsInformationSystem.
IfyoureserveacompanynameyourselfonthestateswebsiteitwillcauseDBItobeUNABLE
toregisteryourCorporationorLLCthroughourdirectconnectiontothestateinformation
system.IfyoufilethenamereservationyourselfDBIwillbeUNABLEtooffer13business
dayservice.Processingtimewilltakeapproximately3weeksunlessyoupayanadditional
feeforexpeditedservice.
Thisissuecanbeavoidedbyoneoftwomethods:1)DBIcanfilethenamereservationfor
youthroughourdirectcomputerconnectiontothestateinformationsystem.2)Youcan
saveexpenseandhasslebysimplyallowingDBItoregisteryournewcompanyinsteadof
makinganamereservation.Thiswayyourcompanynamewillbeprotectedfromuseby
othersbutyouwillnothavetopayanadditional$75.DBIcanactinthecapacityof
IncorporatororOrganizerandholdyourcompanyinanunusedstateuntilyouarereadyto
nameyourofficersorstartyourbusinessactivities.Whenyouarereadytobeginusingthe
companyDBIsdutiesasIncorporatororOrganizerwillendandDBIwillissuetheresolution
namingyourInitialDirectororInitialMember.
If Delaware Business Incorporators, Inc. wanted to do business in Wilmington
Delaware under the name Del Bus Inc Global, we would register a Fictitious
Name with the Clerk of Courts of New Castle County. Our checks would read
Delaware Business Incorporators, Inc. DBA Del Bus Inc Global.
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Asidefromthedesiretouseanothernameforyourownreasons,yourcompanymayberequiredtodobusiness
inanotherstatebyadifferentnameinafewcircumstances:
Ifyournameisnotpermissibleinthatstatebecauseitbreakstheestablishedcompanynaminglaws.For
example:IfDelBusIncLLCwantedtoqualifytotransactbusinessinNewJersey,wewouldhavetoapply
forauthorityinNJunderanalternatenamebecauseNewJerseylawdoesnotallowLLCstousethe
abbreviationIncintheirname.SoourApplicationforAuthoritywouldread:DelBusIncLLCDBAinNew
JerseyasDelBusIncorporatorsLLC
IfyournameisalreadyregisteredinthatstatebysomeoneelsewhohasExclusiveUserightstothatname.
ExclusiveUsemeansnooneelseinthatjurisdictionmayuseyourname.Forexample,IfDBI,Inc.wanted
toregisterasaForeignCorporationwithAuthoritytoTransactBusinessinOhio,andtherewasalreadya
companyregisteredinOhioasDBI,Inc,wemightregisterinOhioasDBI,Inc.DBAinOhioasDBI,Inc.of
Delawareorperhaps,DBI,Inc.(USA)oranyothernamethatisnttakeninOhio.
Somestatesrequireyoutoincludetheappropriatesuffixafteryourotherpermissiblename(DelBusIncDBA
DBIInc)andothersrequirethatyoudonotincludeasuffix(DelBusIncDBADBI)!AnIncorporationSpecialistwill
helpyouwiththedetailsifyouwishtouse,orarerequiredtouseanothername.
InmanyJurisdictionsyourotherpermissiblenameisnotaffordedExclusiveUse
rights,unlikethelegalnameyouregisteredunderwhenthenewCorporationwas
IncorporatedorLLCwasformed.Followingouraboveexample,thiswouldmean
that,whilenoothercompanycoulddobusinessinDelawarewiththename
DelawareBusinessIncorporators,Inc.anothercompanycoulddobusinessinNew
CastleCountyDelawareunderthenameDelBusIncGlobal.Ifwewantedtoprotect
thatnamefromuse,ouroptionswouldincluderegisteringDelBusIncGlobalasa
newDelawareCorporation,orpossibleapplyingforTrademarkrights.
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Registered Agent
AkaResidentAgent
DelawarelawrequiresthatyourcompanymaintaininthisstateaRegisteredAgentandRegisteredOffice.
Mostotherstateshavesimilarlaws.DBIisoneofDelawaresleadingCorporationservicecompanies,withadirect
computerlinktotheDelawareDivisionofCorporations.TwelveMonthsoffreeDelawareRegisteredAgentservice
comeswithanypurchaseofaNewCompanyRegistrationPackage.
ARegisteredAgentisapersonorcompanywhoactsasyouragenttoreceiveanylegaldocumentsthatmaybe
deliveredonyourcompanybyServiceofProcess.TheRegisteredOfficeistheaddresswheretheRegistered
Agentislocated.TheRegisteredOfficemustbeopenduringnormalbusinesshourstoreceiveServiceofProcess
andmustbelocatedwithinthestateofDelaware.
ServiceofProcessmeansthedeliveryoflegalnoticeofanactionofthecourt.Forexample,ifyourcompanyis
beingsued,aProcessServerwillcometoourofficeanddeliveraSummons.Thisdocumentisissuedbythe
courtandcontainsthecasenumber,thenamesoftheDefendant(s)andPlaintiff(s)andthedateandlocationat
whichyouaresummonedtoappearbeforethecourt.Itwouldthenbeourresponsibilitytoacceptthedocumenton
yourbehalfandthenforwardthisdocumenttoyou.IfwereceiveadocumentbyServiceofProcessonyourbehalf,
andyourRegisteredAgentServiceiscurrent,wewilltrytocontactyouimmediatelybyphone,emailorfaxbefore
weforwardthedocumenttoyou.
ItisalsotheRegisteredAgentsdutytoforwardstatetaxnotices,buttheSecretaryofStatewillnotwaivethe
penaltyifyournoticewaslostinthemail;sowesuggestthatyoumarkyourcalendaraccordingly.
BecauseyourRegisteredAgenthassuchcrucialresponsibilities,youdontwantaflybynightRegistered
Agent.Youneedanagentyoucancountontobeavailableaslongasyourcompanyremainsinbusiness,whichwill
hopefullybemanyyearstocome!DBIhasservedasRegisteredAgentforthousandsofDelawareLLCsand
Corporationssince1986.WeowntheCapitolOfficeCenterinWilmingtonDelawareandbusinesshasneverbeen
better!Youcancountonustohandleyourcompanysneedsreliably,confidentially,efficientlyandwithgenuine
enthusiasm.Wereconstantlylookingfornewwaystoofferinnovativeservicesourclientswant,liketheGood
StandingProtectionServiceprogramthatwedevelopedin2009inresponsetocustomerfeedbackandthe
CustomerAlert!programtonotifyyouimmediatelyifalegalnoticeisservedonyourcompany.
DBIoffersRegisteredAgentserviceinall50UnitedStates.
Q: HowdoIchangemycurrentRegisteredAgenttoDelaware
BusinessIncorporators?
? A: Orderonlineatwww.dbiglobal.comorcontactanIncorporation
Specialist.WellcollectyourcontactinformationandpaymentandsendyouaChangeof
Agentformtosign.Justreturnthesignedformbymail,faxoremailandwelltakecareof
therest.
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Q: DoestheaddressofDELAWAREBUSINESSINCORPORATORS,
INC.(3422OldCapitolTrail,Suite700)becomethelegaladdressorheadquartersofmy
newDelawarecompany?
A: No;withoutaMailForwardingAgentappointmentformfromthe
UnitedStatesPostalService,theonlydocumentswecanlegallyreceiveonyourbehalfat
?
ouraddressarelegalnoticesfromthecourtdeliveredbyServiceofProcessandtax
noticesfromtheSecretaryofStateofDelaware.Ifyouwantabusinessaddressin
Delawarewhichyoucanputonyourwebsiteandbusinesscardsasyourcompanys
mailingaddressandtowhichyoucanreceivesalesordersandroutinebusiness
correspondenceweofferVirtualOfficepackageswhichincludeaDelawareMailing
AddresswithMailForwarding.IfyoupurchaseoneofourVirtualOfficepackagesitwill
notbelegalforustoforwardyourmailuntilyoureturntheMailForwardingAgent
appointmentform,whichwewillprovidetoyouatthetimeyoupurchasetheservice.
Failingtorespondtoanoticefromthecourtwithintherequiredamountoftimecouldhave
disastrouslegalconsequences.Itisextremelyimportantthatyoucontactusimmediatelyif
youraddress,phonenumber,faxnumberoremailaddresschangessothatwecangetany
legalnoticestoyouassoonaspossible.
IfyoufailtopayyourRegisteredAgentRenewalFeeyourcompanyCharterwillbedeclared
FORFEITbytheDelawareSecretaryofState.Yourcompanywouldbecomeinvalidandyou
wouldlosetherighttodobusinessasanLLCorCorporation.Dontletthishappentoyou!
Markyourcalendar:YourRegisteredAgentRenewalfeeisduethefirstdayofthemonth
yourcompanywasformedin.
Manyofourclientseveryyearcallustosaythattheirtaxislatebecausetheymisplacedtheir
taxnotice,ormistookitforaRegisteredAgentRenewalFeethattheyalreadypaid.Dontlet
thishappentoyou!Ifyouneedtopayyourtax,youcancallustorequestareplacement
notice,orwecangiveyoutheinstructionsonhowtopayonlinewithoutyournotice,oryou
canorderourTaxPreparationandPaymentservicebyphone,internet,fax,mailoremail.
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Qualification
Qualificationistheprocessofapplyingforpermissiontodobusinessinastatethatisnotthehomeofyour
companyCharter.ADelawareCorporationorLLCisconsideredaforeigncompanyinotherUSstatesandis
consideredadomesticcompanyinsideDelaware.
TheCommerceClauseoftheU.S.ConstitutionprohibitsUSStatesfromregulatingCorporationsinvolvedin
interstatecommerce.Interstatemeansbetweenpartieslocatedintwoormorestates.Intrastatemeanswithin
onestate.Muchoftodaysinternetdrivenbusinessactivityisinterstateorinternationalcommerce.Inthecaseofa
multiplestepbusinessprocessinwhichonestageintheprocessconsistentlyoccurswithinaparticularstate,a
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companymustdetermineifitneedstoregisterinthatstate.Indeterminingifthebusinessbeingtransactedis
interstateorintrastate,thecourtwouldtypicallyconsiderthefrequencyofthebusinessbeingtransacted,andthe
levelofinvolvement.
Thelawsvarybystate,butmoststatesprovidealistofactivitieswhichdonotrequireQualification.The
followinglistisnotintendedtobecompleteorcomprehensive,andisnotintendedtoreplacetheadviceofan
attorney,butforyourgeneralinformation,moststateswouldnotrequireQualificationforthefollowingactivities:
EngaginginLitigation,HoldingBoardMeetingsandotherInternalCorporateActivities,MaintainingBankAccounts,
MaintainingOfficesfortheTransferofSecurities,SellingthroughIndependentContractors,SolicitingOrdersby
MailorotherChannels,CreatingorAcquiringIndebtednessandSecuringorCollectingDebts,OwningRealor
PersonalProperty,andIsolatedTransactions.SomestatesdorequireQualificationforsomeoftheseactivities,soit
isnecessarytoreviewonacasebycasebasis.
Inmostcases,acompanywouldnotberequiredtoregisterasaforeignentityinastatesolelybecauseanowner
orinvestorliveswithinthatstate,ifthatownerorinvestorisnottransactingbusinesswithpartieswithinthatstate.
ABC Cotton, LLC has two Members (owners). Bob owns a 60% membership
interest in the company. Bob lives in Mississippi and directs the operation of the
company within Mississippi and nationwide. Jane owns a 40% share and is a silent
partner living in Florida. Jane contributed start-up capital to the LLC but is not
involved in directing the operation of the company and she does not transact any
business of the company. ABC Cotton, LLC does not have any employees or offices
in Florida. Any sales to customers in Florida are handled by Bob from Mississippi.
In this scenario, the business transactions described are INTER-STATE commerce,
and as such, would not require ABC Cotton, LLC to register in Florida.
Q: Isellmyproductsorservicesovertheinternetanddontreally
haveaphysicallocation.DoIhavetoqualifymycompanyineverystate?DoIhaveto
qualifymycompanyinanystate?
A: No;itisunlikelythatyourcompanywouldneedtoqualifyineverystate
becausemostofyourinternetbusinessactivitywillconsistoftransactionsbetween
partiesintwodifferentstatesandwillthereforebeexemptundertheInterstate
CommerceprotectionsoftheUSConstitution.Astoqualifyinginanystate:Ifyoupay
wagestoanemployeeyouwillmostlikelyneedtoqualifyyourbusinessinthestate
wheretheemployeeworks.Ifyouregularlytransactbusinesswithcustomerslocatedin
thesamestatewhereyourbusinessislocated,youwillmostlikelyberequiredtoregister
inthatstatebecausethesetransactionsarenotprotectedbytheInterstateCommerce
clause.Ifyourunaninternetbusinessandyoudonothaveanoffice,yourhomeisusually
consideredyourbusinesslocation.Ifyourbusinessislocatedandoperatedentirely
?
outsidetheUS,itisunlikelythatyouwouldneedtoQualifyyourDelawarecompanyin
anyotherUSStates.
Q: MybanksaystheycantopenanaccountformycompanyuntilI
provideaCertificateofAuthority.Canyouprovidethisdocumenttome?
A: Thetruthis,moststatelawsdonotrequireacompanytoQualifyfora
CertificateofAuthoritytojusttoopenabankaccount;butmanybanksrequestone
anyway.Banksmaketheirownpoliciesregardingwhatdocumentationisrequiredto
openacompanyaccount.Ifyouarelivinginthesamestateyouarebankingin,youmay
needtoQualifyyourbusinessinthatstatebecauseyouwillbecompletingfrequent
businesstransactionsthereinadditiontobanking.Ifyouwillnothaveroutinebusiness
transactionsotherthanbankinginthatstate,youmayinquirewithanotherbanktoseeif
theywillallowyoutoopenabankaccountwithoutprovidingaCertificateofAuthority.If
youdoneedtosatisfythisrequirementforyourbank,DBIcanprovideyouaquoteonthe
costofapplyingforaCertificateofAuthority(akaQualifying)andanestimateofthetime
requiredtocompletetheprocess.
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Opening a Bank Account
Manyofourcustomerswanttoknowwhatstepsareinvolvedinobtainingabankaccountinthenameoftheir
company.Procedurevaries,butthefollowinginformationcanfamiliarizeyouwiththeprocess.Pleasedonot
hesitatetocontactanIncorporationSpecialistifyouhavequestionsabouthowtoopenabankaccountforyour
DelawareLLCorDelawareCorporation.
Formoreinformationaboutthedocumentsmentionedinthissection,includingtheApostille
andlegalizationofdocumentsbyforeignembassies,seetheCertificates,Apostilles,
LegalizationandAuthenticationofDocumentssection.
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USCitizensandResidentAliens
ForcompaniesphysicallylocatedinsidetheUSheadedbyaUSCitizenorResidentAlien,DBIcanelectronically
fileanapplicationforanEINwiththeIRSandobtaintheEINforyournewDelawareCorporationorDelawareLLC.
ThisprocesswouldbeinitiatedafterthenewcompanyisregisteredwiththeDelawareDivisionofCorporationsand
beforethebankaccountisopened.Youwillreceiveyourconfirmationletterbyemail;theprocesscanusuallybe
completedinlessthan24hours,oftenasquicklyas12hours!
OneMemberorPrincipalShareholderwillberequiredtogivehisorhersocialsecuritynumberaspartofthe
applicationprocess.Ifthecompanyisasubsidiary,itmayprovidetheEINofitsparentcompanyforapplication
purposesinsteadofthesocialsecuritynumberofanowner.Youmustalsoprovidethephysicaladdresswherethe
businessisactuallylocated,butyoumayhaveyourtaxrelatedcorrespondencemailedtoadifferentmailing
address.Onlythemailingaddresswillappearontheconfirmationletter.Wewillalsoneedtoknowifyouexpectto
haveanyW2wageearningemployeeswithinthenext12months,howmanymemberswillbeinyourLLC,andthe
natureofyourbusinessactivity.AdditionalinformationmayberequestedbyanIncorporationSpecialistafteryour
orderisreviewed,ifneededtocompleteyourapplication.
NonResidentNonCitizens
ForcompaniesphysicallylocatedoutsidetheUSownedbynoncitizens,DBIcannotusetheelectronicfiling
method,butcanobtainanEINbyadifferentmethod.AVirtualOfficeisnotconsideredaphysicallocationwithin
theUSA.DBIwillpreparetheapplicationformwiththeinformationyouprovideandwillsendittoyoubyemailor
faxforthesignatureofanowner.Whenthesignedapplicationformisreceived,DBIwillfiletheapplicationform
withtheIRSonyourbehalf.
YouwillnotberequiredtoprovideasocialsecuritynumberorITINiftheownerdoesnothaveone.Youmust
providethephysicaladdressoutsidetheUSwherethebusinessisactuallylocated,butyoumayhaveyourtax
relatedcorrespondencemailedtoadifferentmailingaddress.Onlythemailingaddresswillappearonthe
confirmationletter.WewillalsoneedtoknowifyouexpecttohaveanyW2wageearningemployeeswithinthe
next12months,howmanymemberswillbeinyourLLC,andthenatureofyourbusinessactivity.Additional
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informationmayberequestedbyanIncorporationSpecialistafteryourorderisreviewed,ifneededtocomplete
yourapplication.YourEINwillbeassignedwithin15businessdays.TheEINconfirmationletterwillbemailedto
yourmailforwardingaddresswithin23weeks.
Q: Mycompanywonthaveanyemployees;canIstillgetanEIN?
A: Althoughthenamemayseemmisleading,youarenotrequiredtohaveemployeesto
applyforanEIN.IfyouneedanEINforbankingpurposesyouwillbeassignedanEINeven
ifyouhavenoemployees.
Q: IfIapplyforanEIN,doesthatmeanIhavetostartpayingUSFederalIncomeTaxes?
A: ObtaininganEINisnotafactortakenintoconsiderationwhendeterminingifyouwillowe
USFederalIncomeTaxes.UScitizenswhohaveaOneMemberLLCoranSCorporation
willusuallyfileanyprofitsorlossesontheirpersonalincometaxreturn.Ingeneral,Non
?
ResidentNoncitizenswhohavenoUSSourceIncomewillnotowepersonalUSFederal
IncomeTax.IfyouarenotsureifyouwilloweCorporateorPersonalIncomeTaxwe
recommendthatyouconsultataxadvisor;pleasecontactanIncorporationSpecialistif
youwouldlikeareferral.
Q: WhatisthedeadlinetoapplyforanEIN?
A: IfyouwillhavewageearningemployeesintheUSitisbesttoobtainyourEINbeforethe
firstpayrollruns.Ifyouwillnothaveemployeesordonothaveanyyet,andhaveno
immediateplanstoopenabankaccount,youmaywaituntiltheneedarises.Beaware
thattheremaybeothertaxregistrationdeadlineswhichapplytoyourbusinessother
thantheEINapplication.AnEINapplicationdoesnotaffordSCorporation,CCorporation
orTaxExemptstatus;itonlyassignsataxpayeridentificationnumber.
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WhatisanITIN?
AnIndividualTaxpayerIdentificationNumber(ITIN)isataxprocessingnumberissuedbytheInternalRevenue
Service.TheIRSissuesITINstoindividualswhoarerequiredtohaveaU.S.taxpayeridentificationnumberbutwho
donothave,andarenoteligibletoobtainaSocialSecurityNumber(SSN)fromtheSocialSecurityAdministration
(SSA).ITINsareissuedregardlessofimmigrationstatusbecausebothresidentandnonresidentaliensmayhaveU.S.
taxreturnandpaymentresponsibilitiesundertheInternalRevenueCode.Individualsmusthaveafilingrequirement
andfileavalidfederalincometaxreturntoreceiveanITIN,unlesstheymeetanexception.
HowdoIapplyforanITIN?
UsethelatestrevisionofFormW7.SendFormW7andproofofidentitydocumentsto:
InternalRevenueService
AustinServiceCenter
ITINOperation
P.O.Box149342
Austin,TX787149342
Whatdocumentsareacceptableasproofofidentityandforeignstatus?
Thereare13acceptabledocuments.
Anoriginal,oracertifiedornotarizedcopy,ofanUNEXPIREDpassportisacceptedforbothidentityandforeign
status.
Ifyoudonothaveapassport
Ifyoudonothaveapassport,youmustprovideacombinationofcurrentdocumentsthatcontainexpiration
dateswe[theIRS]acceptdocumentsissuedwithin12monthsoftheapplicationifnoexpirationdateisnormally
available.Thedocumentsmustalsoshowyournameandphotograph,andsupportyourclaimofforeignstatus.
IRSwillacceptcertifiedornotarizedcopiesofacombination(twoormore)ofthefollowingdocuments,inlieu
ofapassport:
- Nationalidentificationcard(mustshowphoto,name,currentaddress,dateofbirth,andexpirationdate)
- U.S.driver'slicense
- Civilbirthcertificate
- Foreigndriver'slicense
- U.S.stateidentificationcard
- Foreignvoter'sregistrationcard
- U.S.militaryidentificationcard
- Foreignmilitaryidentificationcard
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- Visa
- U.S.CitizenshipandImmigrationServices(USCIS)photoidentification
- Medicalrecords(dependentsunder14yearsoldonly)
- Schoolrecords(dependentsand/orstudentsunder18yearsoldonly)
HowandwhencanIexpecttoreceivemyITIN?
IfyouqualifyforanITINandyourapplicationiscomplete,youwillreceivealetterfromtheIRSassigningyourtax
identificationnumber,usuallywithinfourtosixweeks.IfyouhavenotreceivedyourITINorothercorrespondence
sixweeksafterapplying,youmaycalltheIRStofindoutthestatusofyourapplication.
WhatisanAcceptanceAgent?
AnAcceptanceAgentisanindividual,businessororganization(college,financialinstitution,accountingfirm,
etc.)authorizedbyIRStoassistindividualsinobtainingITINs.CertifyingAcceptanceAgentsreviewapplicants'
documentation,completeacertificateofaccuracy,andforwardthecertificateandapplicationtotheIRSfor
processing.SomeAcceptanceAgentsmaychargeafee.
LocateAcceptanceAgentsbyCountry:http://www.irs.gov/individuals/article/0,,id=96304,00.html
ThefollowingfirmsalsoofferassistanceasAcceptanceAgents:
DeloitteandTouche,LLP
Ernst&YoungLLP
KPMGLLP
PricewaterhouseCoopersLLP
Checklocaltelephonedirectoryfornearestlocation.
AnITINisfortaxreportingonly;itisnotaformofidentificationandisnotanauthorizationto
liveorworkintheUnitedStates.
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Certified Copy
ACertifiedCopyisareproductionofanydocumentfiledwiththeCorporationsDivisionattachedtoastatement
bytheSecretaryofStatethatthedocumentisatrueandcorrectcopy.MostoftenaCertifiedCopyofthe
CertificateofFormationorCertificateofIncorporationisrequestedbyabank,foreignstateorotheragencytoverify
thecredentialsofyourcompany.WeareusuallyabletoobtainaCertifiedCopywithinanhourortwoofyour
payment,howeversomedocumentsarenotavailablefor12hourservice.YourIncorporationSpecialistwillletyou
knowtheexpectedprocessingtimeandwilldiscussanyexpeditedserviceoptionsavailable.
ItisnotpossibletoobtainaCertifiedCopyofanOperatingAgreement,BylawsorTransferLedger,because
thesedocumentsarenotfiledwiththeSecretaryofStatesoffice.SeeNotarizedTrueCopyforinformationabout
certifyingdocumentswhichwerenotfiled.
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Certificate of Incumbency
ACertificateofIncumbencyisanofficialdocumentwhichcertifiesthenamesandofficerstitlesofthe
individualsassociatedwithagivenorganizationsuchasMembers,Managers,Officers,Directorsandsometimes
majorshareholders.Thisdocumentisoftenrequestedwhenabankorotheragencywishestoconfirmwhohasthe
authorityofthecompanytoendorsedocumentswiththeirsignature.Itmayormaynotincludetheincumbents
identifyinginformationsuchasdateorbirthorpassportnumber.
Apostilles
ApostilleisaFrenchwordwhichmeansacertification.ItiscommonlyusedinEnglishtorefertothelegalization
ofadocumentforinternationaluseunderthetermsofthe1961HagueConventionAbolishingtheRequirementof
LegalizationforForeignPublicDocuments.DocumentswhichhavebeencertifiedwithaconformantApostilleare
acceptedforlegaluseinallnationsthathavesignedtheHagueConvention.
AnApostillecanbeobtainedforanydocumentfiledwiththeDelawareSecretaryofState.IfanApostilleisneeded
foranonpublicdocument,suchasanOperatingAgreement,thedocumentmustfirstbenotarizedbyaDelaware
NotaryPublic.DBIhasDelawareNotaryPublicsonstaff.
Conversions
Conversionistheprocessofchangingacompanyfromonetypetoanotherbyfilingtheappropriate
documentationwiththeissuingauthoritysothatthechangewillbeofficiallyrecognized.Therearethreevarietiesof
Conversion:EntityType,DomesticationandTaxStatus.
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Domestication
InDelaware,andinmoststates,itispossibletoconvertaForeignEntityintoaDomesticEntity.Thismeans
thatacompanyinitiallyregisteredinonejurisdictioncanhaveitsChartertransferredtoanotherjurisdiction.So,for
example,ifDBIGlobal,Inc.wascreatedbyregisteringaCertificateofIncorporationinDelaware,theDelaware
CorporationcanbetransformedintoaCaliforniaCorporation.ThehomeofthecompanyCharterwouldthenbe
California.Aftertheconversion,DBIGlobalwouldbeaForeignCorporationinDelawareandaDomestic
CorporationinCalifornia.Infact,afterconvertingintoaCaliforniaCorporation,ifDBIGlobalwantedtocontinue
doingbusinessinDelaware,itwouldhavetoQualifyasaForeignCorporation.ThecostofDomesticationvaries
widelybystate;pleasecontactanIncorporationSpecialistformoreinformationandapricequote.Itisalsopossible
toconvertanentityfromanotherstateorcountryintoaDelawareentitybythesameprocess.
Ifyouareconsideringconvertingyourentitystaxstatus,pleaseconsultaTaxAdvisortofind
outifyouareeligibleandtodiscusstheimpactthiswouldhaveonyourpersonaland
corporatetaxes.Ifyouneedareferral,pleasecontactanIncorporationSpecialist.
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Corporations
TomaintainyourDelawareCorporateCharteryoumustdothreethingseveryyear:
1. FileanAnnualReporteveryyearbeforeMarch1st.
2. PayFranchiseTaxeveryyearbeforeMarch1st.
3. PayRegisteredAgentServiceRenewalfeeeveryyearontheanniversaryofyourcompanysformation
(IncorporationDate).
LLCs
TomaintainyourDelawareLLCCharteryoumustdotwothingseveryyear:
1. PayLLCTaxeveryyearbeforeJune1st.
2. PayRegisteredAgentServiceRenewalfeeeveryyearontheanniversaryofyourcompanysformation.
IfyouenrollintheGoodStandingProtectionServiceProgramwewillchargeyourannualtaxandRegistered
AgentRenewalfeetoyourcreditcardautomatically.IfyourcompanyisaCorporationwewillalsofileyourAnnual
Reportforyoueveryyearreferencingthecorporatedatawestoreonfileforyou.
Ifyouareinterestedinenrolling,pleasecontactusat3029965819.
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Glossary
AdministrativeDissolution: SeeVOIDSTATUS
Alien: Aforeignnational,apersonwhoisnotacitizenoftheUnitedStates.Aliensmay
beResidentorNonResident(intheUS.).
Amendment: AchangemadetoapreviouslyadopteddocumentsuchasaCertificateof
IncorporationorBYLAWS.SomeAMENDMENTSarerequiredtoberegistered
withtheSecretaryofStatewhileotherscanbeaccomplishedprivatelybythe
CORPORATIONorLLCwithoutregistrationorfilingwiththeSecretarysOffice.
Apostille: TheLEGALIZATIONofadocumentforuseina foreignjurisdictionwhichisaparty
totheHagueConventionAbolishingtheRequirementofLegalizationofForeign
PublicDocuments.
ArticlesofIncorporation: SeeCERTIFICATEOFINCORPORATION
ArticlesofOrganization: SeeCERTIFICATEOFFORMATION
ArtificialPerson: AlegalENTITYthroughwhichthelawallowsagroupofhumanpersonstoactasif
theywereasinglecompositeindividualforcertainpurposes,forexample,agroup
ofinvestorswhoownstockinaCORPORATION.ThisdoesnotmeantheArtificial
Personisahumanbeing,butrathermeansthatthelawallowstheArtificialPerson
toenjoytheprivilegesahumanpersonwouldenjoyincertaincases,forexample:
therighttobringordefendlawsuits,toownproperty,andtomakecontracts.
Authentication: Theverificationofthelegitimacyofadocumentandtheauthorityoftheissuer.
AuthorizedShares: Thenumberofstock sharesauthorizedatthetimetheCHARTERwasregisteredto
potentiallybeissuedbythecompany.
BusinessStatement: SeeSTATEMENTBYINCORPORATOR
ByLaws Adocumentspecifyingtherulesadoptedbythefoundersand/ordirectorsofa
corporation,
andoutliningtherightsandresponsibilitiesofSHAREHOLDERS,DIRECTORSand
OFFICERS.
Cancellation: ThelegalprocessofendingtheexistenceofanLLCaftercloseofbusiness.
Capital: Themoneyorotherassetsofvalue(usuallySTOCKS,bondsorotherSECURITIES
thatcanbereadilyconvertedtocashataneasilyestablishedmarketvalue)which
SHAREHOLDERSinvestinabusinesstoenableittooperate.Thecapitalofan
establishedcorporationisnormallydefinedasthecontributionsofthe
shareholdersplusaccumulatedprofits.Itisthetotalbookworthoftheenterprise
afterallliabilitiesarededucted.
Capitalization: Thetotalvalueofallsecuritiesofanenterprise.Capitalizationsometimesincludes
longtermdebt,ifany.Itrepresentswhatwouldhavetobepaidtoinvestorsand
longtermcreditorsifthebusinessanditsassetsweretobeliquidated.
CapitalStock: Thetotalamountofstock aCORPORATIONisauthorizedtoissuebyitsCertificate
ofIncorporation
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CapitalSurplus: Thesumofthepaidinsurplus(ifany),profits(ifany)retainedasearnedsurplus
andthesurplus(ifany)createdbyarevaluationofassets,includinggoodwill
(uponwhichavaluemaybeset).
CCorporation: ACORPORATIONwiththedefaultTAXSTATUSwhichpaysFederalCorporate
IncomeTaxattheCorporatetaxrates.
CertificateofIncorporation: AdocumentfiledwiththeauthoritywhichissuesCorporateCHARTERSinagiven
jurisdiction(suchastheSecretaryofStateinDelaware)andwhichoutlinescertain
definingqualitiesoftheCORPORATION,suchasitsname,thenumberofsharesof
StockauthorizedandtheaddressofitsREGISTEREDAGENT.
CertificateofIncumbency: SeeSTATEMENTBYINCORPORATOR
Charter: ACharteristhegrantofauthorityorrights,statingthatthegranterformally
recognizestheprerogativeoftherecipienttoexercisetherightsspecified.A
CORPORATIONissuedaCharterbytheSecretaryofStateofDelawarehasbeen
grantedtherighttoexistasanARTIFICIALPERSONandtooperateasabusiness.
CloseCorporation: ACORPORATIONwhichsetscertainlimitationonthesale,holdingandtransferof
itssharesofStock,whichisheldbeasmallnumberofShareholdersandwhichis
exemptfromcertainadministrativeresponsibilitieswhichotherCorporations
mustobserve.
CMRA ACMRA(CommercialMailReceivingAgency)isaprivatebusinessthataccepts
mailfromthePostalServiceforothers(recipients),retainsitforcollection(in
mostcasesaprivatemailbox"PMB")orremailsittoanotherlocationwith
paymentofnewpostage.MailservicesofferedbyCMRAsareexternaltoservices
offeredbythePostalServicethereforeCMRAcustomersbeartheexpenses
associatedwiththeservicesprovided.DBIisaregisteredCMRA.
CommonStock: CorporatestockwhichnormallyentitlestheshareholdertoDividendsifthe
CORPORATIONisprofitableanddoesnotneedtoretainallofitsearningsforits
ownpurposes.Commonstockmaybeassumedtocarryvotingrightsunlessitis
classedasNonvotingCommonStock
ConvertiblePreferredStock: CarriestheprivilegesandentitlementsofPreferredStockandgivestheholders
theright,attheiroption,toconvertthesesharesintoCommonStock,accordingto
aspecifiedformula.
CorporateSeal: TheCorporateSealisanimageapprovedbytheDirectorsorMembersofa
companytorepresenttheauthorityofasignatoryasacompanyrepresentative,
orthecompanysendorsementofadevicesuchasacontract.TheSealmaybein
theformaninkstamporembossingstamporasagoldmedallionaffixedby
adhesive.TheSealisfrequentlyaffixedtoaSTOCKCERTIFICATEatthetimeof
issuancetoaSHAREHOLDER,differentiatinganIssuedStockCertificatefroman
unissuedCertificate.
CorporateSecurity: Ashareofstock,bond,note,debenture,orotherfinancialinstrument,issuedbya
CORPORATIONandregisteredastoitsownershiponthebooksofaCorporation.
Corporation: AnEntityregisteredwithastateauthorityandissuedaCharterbywhichitobtains
therightsandprivilegesofanArtificialPerson,withLimitedLiabilityforthe
owners,whoareknownasShareholders.
Director: ApersonelectedbyorappointedbyabodyofSHAREHOLDERStooverseethe
activitiesoftheCORPORATION,toactonbehalfofthefullassemblyofvoting
shareholders.TheDirectorusuallysitsonaBoardofDirectorswhose
responsibilitiesareoutlinedintheByLawsoftheCorporation.
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Dissolution: TheprocessoflegallyendingtheexistenceofaCorporation afterthecloseof
business.Itisnotlegalforshareholderstotakethefinaldistributionaftercloseof
businessuntiltheCertificateofDissolutionisfiled.
DisregardedEntity: AnEntitywhichhastherighttoberegardedasanArtificialPersonforlegal
purposesbutwhoistreatedasaNaturalPersonorPartnershipofNaturalPersons
fortaxpurposes.AnLLCisaDisregardedEntitybydefaultandwillbetaxedonan
ownerspersonalincometaxreturnifthereisoneMemberortaxedasa
partnershipiftherearemultipleMembers.ThetaxesofaDisregardedEntityare
saidtoPassThroughtotheownerspersonalincome.
Domestic: AcompanyisconsidereddomesticinthestateinwhichitisDOMICILED,which
istosay,thestateinwhichitwasCHARTERED(Incorporated,Organized),
regardlessofwherethecompanyisphysicallylocatedorheadquartered.
Domicile: ThestateorJurisdictioninwhichacompanyreceiveditscompanyCHARTER,the
stateinwhichitwasINCORPORATEDorORGANIZED.TheDomicileisthelegal
homeofyourcompanyregardlessofwhereyourbusinessisphysicallylocatedor
headquartered.
Dividend: AdistributionofprofitsmadetoaSTOCKSHAREHOLDERorMEMBER.
DoubleTaxation: WhenincomeissubjectedfirsttoCORPORATIONIncomeTaxandthentaxeda
secondtimewhenpaidtotheSHAREHOLDERSasDIVIDENDSandtaxedas
PersonalIncome.
EarnedSurplus: Theprofitsacorporationhasretainedsinceitsincorporation.Itissynonymous
withretainedearnings,retainedincomeandaccumulatedsurplus.Earned
surplusmayalsoincludeportionsofthesurplus(es)ofothercorporationsthat
mayhavebeenacquiredbyormergedorconsolidatedintothecorporation.
EIN: EmployerIdentificationNumber.AnumberissuedtoCORPORATIONSandLLCs
fortaxreportingpurposes;aprerequisiteforopeningabankaccountintheUSin
thenameofanLLCorCORPORATION.
Entity: Somethingwhichhasadistinguishableexistence.
EntityType: Theclassofcompanyasofficiallyregisteredwithastateauthority.
CORPORATIONSandLLCsareexamplesofEntityTypes,asareLimited
PartnershipsandTrusts.
Equity: Thenetinvestmentwhichshareholdershaveintheircorporation.Itisanother
termforNetWorthwhichiswhatremainsfortheownersafterallliabilitiesare
deductedfromassets.
ExclusiveUse: OnlyoneENTITYhastherighttousethenameregistered.
ExpeditedService: Fasterthanregularprocessing,usuallywithinaguaranteedtimeframe.
FiscalYear: Aperiodusedforcalculatingannualfinancialstatements.AFiscalYearisoften,
butnotalways,thesameasacalendaryear.
Foreign: AcompanyCHARTERED(Incorporated/Organized)inDelawareisaForeign
CorporationorForeignLLCinanystateorJURISDICTIONotherthanDelaware,
regardlessofwherethebusinessorheadquartersarephysicallylocated.
ForfeitStatus: InDelaware,therevocationofacompanyCHARTERduetofailuretomaintaina
DelawareREGISTEREDAGENT.
Formation: Usually,thecreationofanLLCbyREGISTRATIONintheDOMICILEstateandthe
filingoftheCERTIFICATEOFFORMATION.Sometimesalsousedtomean
INCORPORATION.
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GeneralCorporation: SeeCORPORATION
GoodStanding: AstatusinDelawareandmanyotherstatesinwhichtheCORPORATIONorLLChas
avalidCHARTERbyvirtueofmeetingallofthestaterequirementssuchas
REGISTRATION,payingannualtaxesandfilinganAnnualReport,andmaintaininga
REGISTEREDAGENTandREGISTEREDOFFICEinthestate.ACertificateofGood
StandingisastatementbytheSecretaryofStatethattheEntityisinGood
Standing.
Incorporation: TheprocessofcreatingaCORPORATIONbyREGISTRATIONintheDOMICILEstate
andfilingtheCERTIFICATEOFINCORPORATION.
Incorporator: ApersonorcompanyappointedbythefounderofanewCORPORATIONasan
agentforthepurposeofregisteringthenewcompanywiththeSecretaryofState
andfilingtheCERTIFICATEOFINCORPORATIONorCERTIFICATEOFFORMATION.
DBIisanINCORPORATOR;ourdutiesendwhenthenewCORPORATIONis
registeredandtheINITIALDIRECTORisappointedasoursuccessor.
InitialDirector: ThepersonappointedbytheINCORPORATORofaCORPORATIONtoholdthe
responsibilityoforganizingthecompanyafterishasbeenregistered.Such
responsibilitiesmayincludeissuingSTOCKSHARECERTIFICATES,holdingtheInitial
MeetingtoelectorappointtheBOARDOFDIRECTORSorOFFICERS,and
assemblingtheBYLAWSforratificationbytheBoard.
InitialMember: ThepersonappointedbytheORGANIZER ofanLLCtoholdtheresponsibilityof
organizingthecompanyafterithasbeenregistered.Suchresponsibilitiesmay
includeissuingMEMBERSHIPINTERESTCERTIFICATES,draftingorretaininga
professionaltodraftanOPERATINGAGREEMENT,openingbankaccountsorother
responsibilities.
Interstate: Involvingpartiesintwoormorestates.
Intrastate: Involvingpartieswithinthesamestate.
InvoluntaryWithdrawal: SeeFORFEITSTATUS
IRS: The IRS is theinternal revenue service of the UnitedStates federal government.
The agency is a bureau of the Department of the Treasury, and is under the
immediate direction of the Commissioner of Internal Revenue. The IRS is
responsible for collecting taxes and the interpretation and enforcement of the
InternalRevenueCode.
IssuedShares: Thestockshareswhichhaveactuallybeensold,transferredorassignedtoa
SHAREHOLDER(owner).
ITIN: IndividualTaxpayerIdentificationNumber.Anumberissuedtononcitizennon
residentsfortaxreportingpurposes;aprerequisiteforobtaininganEINfor
companiesownedbynonresidentALIENS.
Jurisdiction: Thegeographicalareatowhichanauthorityapplies.Exampleswouldinclude
Cities,CountiesandStates.
LLC: LimitedLiabilityCompany.AnENTITYTYPE whichfeaturesLIMITEDLIABILITY
similartoaCORPORATIONbutwhichisgenerallyregardedashavinggreater
flexibilityandeaseofadministration.
Legalization: Theprocessofhavingadocumentinspectedandcertifiedaslegitimateforuseina
foreignJURISDICTIONbyarepresentativeofthatjurisdiction,suchasaForeign
Consulate.
LimitedLiability: AfeaturesharedbyLIMITEDLIABILITYCOMPANIESandCORPORATIONSbywhich
apersonsaccountabilityforlossduetothedebts,obligationsorliabilitiesofa
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companyislimitedtotheamountthepersonpaidfortheStockSharesor
MembershipInterest(orotherwiseinvestedinthecompany);providedthatthe
persondidnotpersonallyguaranteethedebtsoftheEntityorcommitfraudor
otherillegaldealings.
Manager: Specifically,whenusedinthediscussionofanLLC,aManager isanemployeeor
agent,appointedbytheMEMBERSoftheLLC,toruntheoperationsofthe
companyontheirbehalf.ThepositionissimilartothatoftheDIRECTORofa
CORPORATIONortheGeneralPartnerofaPartnership.Unlessthetitleisgivenas
ManagingMember,aManagercanbeassumedtohavenoownershipstakein
theLLC.WhenanLLCdistinguishesbetweenMEMBERSandMANAGING
MEMBERS,theMembersrolemaybecomparedtothatofaSilentPartner
whiletheManagingMembersmaybecomparedtothatoftheGeneralPartner;
suchadistinctionisatthediscretionoftheLLCandisnotrequiredtobemadein
Delaware.
Member: ApersonwhoownsallorpartofanLLC.TheMember issimilartothe
SHAREHOLDERofaCORPORATIONorthePartnerinaPartnership.
MembershipInterest: AMEMBERSpercentofownershipofanLLC.AMembershipInterestCertificateis
similartoaStockCertificateinthatitrecordstheinvestorsshareofownership.
Minutes: ArecordoftheproceedingsofaMeetingoftheDIRECTORS,OFFICERS,
SHAREHOLDERS,MEMBERSorMANAGERSofacompany.CORPORATIONSshould
maintainMINUTESoftheirmeetings;LLCsarenotrequiredtodoso;butmayif
theysochoose.
NamingConventions: Therulesorstandardswhichmustbefollowedinselectingacompanynametobe
REGISTEREDwiththeSecretaryofStateorotherauthority.
NetAssets: Theamountbywhichthetotalassetsofacorporation,includingmoney,
securities,property,equipment,etc.,exceeditstotaldebts.
NGO: SeeNOTFORPROFIT
NonProfit: SeeNOTFORPROFIT
NonStock: SeeNOTFORPROFIT
NoParValue: STOCKwithnomoneyvaluestatedinthecompany CHARTER.NOPARVALUE
stockmaybesoldforwhatevertheinvestoriswillingtopay.
NotforProfitCorporation: ACORPORATIONorganizedsolelyforCharitable,EducationalorReligiousreasons.
Officer: PersonselectedbytheSHAREHOLDERSorDIRECTORSofaCORPORATIONtodirect
dailyoperationsandorbusinessplanning.Examplesinclude:CEO,President,
Secretary,andTreasurer.
OperatingAgreement: Thedocumentoutliningthebusinessstructure, mannerofoperationsand
distributionrightsofanLLC.TheOperatingAgreementissimilartotheBYLAWS
ofaCORPORATIONorthePartnershipAgreementofaPartnership.
OperatingSurplus: Theamountremainingattheendofa corporationsreportingperiod(fiscalyear),
followingthedeductionofexpenses,taxesanddividends.Attheendofthefiscal
year,operatingsurplusisaddedtoearnedsurplusonthecorporationsbooks.
Organizer: ApersonorcompanyappointedbythefounderofanewLLCasanagentforthe
purposeofRegisteringthenewcompanywiththeSecretaryofStateandfilingthe
CERTIFICATEOFFORMATION.DBIisanOrganizerandourdutieswillendwhen
theINITIALMEMBERisappointedasoursuccessor.
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ParValue: ThestatedmoneyvalueonthefaceofaSTOCKshare.IfaParValueisstatedwhen
theCHARTERisregistered,thecompanymustreceiveCONSIDERATIONworthat
leastParValueforeachsharesold.
PassThrough: AqualityofcertainTaxStatuseswherebytheprofitsandlossofthecompanywill
passthroughtotheownerofthecompany(SHAREHOLDERorMEMBER)andbe
claimedontheownerspersonalincometaxreturn.
PaidinSurplus: Thedifferencebetweenpaidupcapitalandthestatedvalueofthecorporate
stock.Itisthesurplusthatiscreatedwhenshareholdershavepaidmorefortheir
stockthanthestatedvalue(parvalueornoparvalue)pershare.
PaidupCapital: ThetotalamountpaidbySHAREHOLDERSfortheirsharesofCAPITALSTOCK.On
thebalancesheetoftheCORPORATION,PaidUpCapitalisequaltothestated
value(PARVALUEorNOPARVALUE)ofitsCOMMONSTOCKpluswhat
Shareholdersmayhavepaid,orcontributedinvalue,inexcessofstatedvalue.
PerpetualDuration: AnLLCorCorporation whichwillcontinuetoexistasalegalEntityindefinitelyor
untilaCertificateofCANCELLATIONorDISSOLUTIONisfiled.Theoppositewould
beacompanywithafiniteduration,whichwouldautomaticallybelegally
dissolvedonanstatedexpirationdate.
PreferredStock: EntitlesitsSHAREHOLDERStopriorityoverothertheshareholdersofotherclasses
ofSTOCKintheDISTRIBUTIONofprofits.Frequently,preferredstockentitlesits
holderstoDIVIDENDSofaspecifiedamounteachyearwhichmustbepaidbefore
COMMONSTOCKdividends,ifany,arepaid.Preferredstockholderstypically
surrendervotingrightsinreturnforpriorityindividendpayout.However,they
mayobtainvotingrightsbydeferringtheirdividends.Thesedividends,inturn,will
accrue,addingtotheoveralloutstandingdebtofthecompany.
Qualification: Theprocessofapplyingforpermissiontodobusinessinastatethatisnotthe
homeofyourcompanyCHARTER.WhenacompanysuccessfullyQualifiesin
anotherstatetheyaretypicallyissuedaCertificateofAuthoritytoTransact
Businessinthatadditionalstate.
RegisteredAgent: TheagentappointedtoreceiveSERVICEOFPROCESSandtaxnoticesonbehalfof
aregisteredENTITY.Requiredbylawinmoststates.
RegisteredOffice: TheaddressoftheREGISTEREDAGENT.TheRegisteredOfficeisnottheaddressof
thecompany.
Registration: TheprocessofenteringacompanyintotherecordinaspecificJURISDICTIONand
filinganydocumentationnecessarytosatisfytherequirementsofthatjurisdiction.
SeealsoINCORPORATION,FORMATION,ORGANIZATION.
SCorporation: AnEntity(STOCKCORPORATIONorLLC)whichhassuccessfullyelectedtobetaxed
underSubChapterSoftheIRScode.
ServiceofProcess: Thedeliveryoflegalnoticeofanactionofthecourt.ServiceofProcesscanbe
deliveredbyregisteredmailorhanddeliveredbyaProcessServer.
Shareholder: TheownerofaportionofaSTOCKCORPORATIONiscalledaSHAREHOLDER
becausetheyhavebeenissuedStockSharesinevidenceoftheirownershipstake.
InthecaseofaCORPORATIONownedbyoneperson,thatownermightbeknown
asaSoleShareholder.
StatedCapital: ThesumoftheparvalueofallissuedsharesoftheCORPORATIONassignedPAR
VALUEplusotheramountsthathavebeenpaidintothestatedcapitalofthe
corporation.
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StatementbyIncorporator: AnotarizedstatementbytheINCORPORATORattestingto theorganizationofa
company,includingthenamesofOFFICERS,MEMBERS,MANAGERS,and
sometimesSHAREHOLDERS.
Stock: ASECURITYwhichrepresentstheCAPITALinvestedintoaCORPORATIONbythe
founders/owners/investors.AStockShareisaunitofStockissuedtoaninvestor
usuallyexpressedbyaSTOCKCERTIFICATE.
StockCertificate: AcertificaterecordingashareofownershipinaCORPORATIONbyspecifyingthe
nameoftheowner,thenameoftheCorporation,thenumberofSHARES
AUTHORIZEDandthenumberofSHARESISSUED.
Suffix: ThepartofacompanyslegallyregisterednamewhichidentifieswhichENTITY
TYPEitis.ForexampleInc.isaSuffixwhichidentifiestheEntityTypeasa
CORPORATION.
Surplus: TheamountbywhichthenetassetsofaCORPORATIONexceeditsstatedcapital.
TaxStatus: TaxStatusdefineswhatFederalTaxreturnapersonorEntitywillfile.Examplesof
TaxStatusincludeDisregardedEntity,CCORPORATIONorSCORPORATION.
Title: SynonymouswithName
TotalSurplus: Thesumofallsurpluses,includingearnedandcapitalsurplusandanyadditionsto
surplusfromrevaluationsofassetswhichmayhaveappreciatedordepreciatedin
valueduringthefiscalyear.
TreasuryShares: Anysharesofstock whichwerepreviouslyissuedtoaSHAREHOLDERand
subsequentlyboughtbackfromtheshareholderbytheCORPORATIONitself,and
whichwerenotcancellednorretiredfollowingreacquisition.TreasurySharesare
includedwhencountingthetotalnumberofsharesissuedbutarenotconsidered
outstanding.
USPS: USPS(UnitedStatesPostalService)isanindependentfederalagencythatprovides
mailprocessinganddeliveryserviceforindividualsandbusinessesintheUnited
States.
VirtualOffice: Asuiteofserviceswhichprovideremoteaccesstotheamenitiesofaprofessional
office,includinganofficeaddressatwhichareceptionistormailroompersoncan
receiveandsignforregularandcertifiedmail,courierdeliveryandsmallparcels,
withmailforwarding,atelephonenumber,phoneforwarding,faxnumberandfax
forwarding.
VOIDStatus: InDelaware,therevocationofacompanyCHARTERduetofailuretopaytaxesor
fileandAnnualReport.
WithoutParValue: SeeNOPARVALUE
ZeroPar: SeeNOPARVALUE
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Index
Amendment....................................................................................................................................................................19,33,43,72
Anonymity.....................................................................................................................................................................................6,11
Anonymous...................................................................................................................................................................................6,33
Apostilles.....................................................................................................................................................................................14,67
Authentication......................................................................................................................................................................67,68,72
BankAccount..............................................................................................................................................................................10,62
ByLaws..........................................................................................................11,19,27,33,37,43,44,45,46,51,53,67,69,72,73
Cancellation................................................................................................................................................................................21,72
CCorporation...........................................................................................................................................8,30,37,38,47,48,49,69
CertificateofFormation...................................................................................................................6,7,10,16,17,19,23,33,67,69
CertificateofGoodStanding.....................................................................................................................................10,14,60,67,75
CertifiedCopy...........................................................................................................................................................13,16,60,67,68
Charter.........................................................................................................6,7,11,12,20,27,30,31,39,40,47,51,59,69,71,73
CloseCorporation.......................................................................................................................................................................37,45
Conversion............................................................................................................................................................................34,68,69
CorporateKit.........................................................................................................................................................................13,17,44
Corporation...5,6,7,8,9,10,11,12,13,14,15,16,18,19,20,21,23,26,27,28,30,32,33,37,39,40,41,42,43,44,45,46,47,
48,49,50,51,52,53,54,56,57,59,60,67,69,71,73,74,75,76,77,78
DBA...................................................................................................................................................................................................56
Director..........................................................................................................................6,7,14,17,18,28,37,39,43,45,46,73,75
DisregardedEntity..........................................................................................................................................................30,32,74,78
Doubletaxation....................................................................................................................................................................30,32,49
EIN.......................................................................................................................................................................10,13,14,63,74,75
EmployerIdentificationNumber....................................................................................................................................10,63,70,74
EntityType......................................................................................................................................................8,14,32,68,69,74,78
Expedited....................................................................................................................................................................................16,67
Foreign................................................................................................................................................7,40,56,65,68,69,72,74,75
FORFEIT.......................................................................................................................................................................................20,75
GoodStanding..........................................................................................................................................7,16,20,39,57,67,71,75
InitialDirector...................................................................................................................................................................................37
InitialMember........................................................................................................................................................6,7,14,17,33,75
International....................................................................................................5,6,8,9,10,11,12,13,15,16,17,18,22,23,45,48
Interstate................................................................................................................................................................................7,59,75
Intrastate....................................................................................................................................................................................59,75
ITIN..............................................................................................................................................................................................65,66
Jurisdiction..............................................................................................................................................26,49,56,69,72,73,75,77
LegalizationofDocuments................................................................................................................................................................68
Manager................................................................................................................................................................................30,33,76
Member..................................................................................................................................................14,30,32,33,34,51,74,76
Minutes.......................................................................................................................................................................................18,76
Name...............................................................................................................................................................................10,19,55,78
NotforProfitCorporations............................................................................................................................................37,43,45,46
Officer.............................................................................................................................................................................33,37,43,60
Offshore...........................................................................................................................6,8,9,10,11,12,13,15,16,17,18,22,23
OperatingAgreement..............................................................................11,13,16,17,19,27,30,31,33,45,51,53,67,68,69,76
OperatingAgreementKit......................................................................................................................................................13,17,33
ParValue...................................................................................................................................................................20,21,40,76,78
PatriotAct.........................................................................................................................................................................................70
Qualification................................................................................................................................................................7,13,59,60,77
RegisteredAgent........................................................................................6,11,12,14,18,19,20,28,33,43,45,46,57,61,71,77
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Registering................................................................................................................................................................15,51,52,53,76
SCorporation................................................................................................................................................32,37,45,47,48,49,69
Serviceofprocess.............................................................................................................................................................................28
Shareholder.................................................................................................................................27,37,40,44,47,48,49,50,73,78
Stock.............................................................................9,14,19,27,28,37,39,40,43,45,46,48,49,51,53,72,73,75,76,77,78
Taxstatus...................................................................................................................................................9,11,32,44,45,47,49,69
USPS...78
VirtualOffice...................................................................................................................................................................11,14,28,78
VOID................................................................................................................................................................................20,30,72,78
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APPENDIX
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Corporate Kits & Operating Agreement Kits
Important information about proper documentation:
TheByLawsorOperatingAgreementarethedocumentswhichdefinetherulesforprofitdistributions,
resignationofmembersordirectors,shareholderrightsandotherimportantmatterswhichcouldbeessentialin
resolvingdisputesbetweenprincipalsordefendingtaxstatusinanIRSinquiry.AllkitsincludemodelByLawsor
OperatingAgreement.
The State of Delaware never registers the names of the owners of a corporation or LLC! This allows for
unparalleledprivacybutitdoesmeanthatthebusinessownersmustkeepproperrecordsofstockormembership
shareassignmentandtransfer. Our CorporatekitsandOperatingAgreementkitsincludesharecertificatesand
transferledgerstoensurethatyourownershipofthecompanyisproperlydocumented.
Records Binder -A high quality binder customized with the name of your
company in gold lettering with matching slipcase, locking D rings and
pockets. The records binder provides ample room for your company records.
The kit also includes Section Divider Tabs, Model Minutes forms, Register
of Shares Transferred, and List of Officers & Directors or Members List.
To see other kits offered by DBI visit the Corporate Kits section of our website.
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