The CTA, enacted to combat money laundering, terrorist financing, and other financial crimes, imposes significant penalties for non-compliance.
Let’s review the consequences of failing to comply with the Corporate Transparency Act, covering scenarios such as forgetting to file, filing incorrect information accidentally, filing incorrect information intentionally, and not filing at all.
]]>In an era of heightened emphasis on corporate transparency and accountability, legislation like the Corporate Transparency Act (CTA) plays a pivotal role in ensuring that businesses disclose accurate and up-to-date information about their ownership structure.
The CTA, enacted to combat money laundering, terrorist financing, and other financial crimes, imposes significant penalties for non-compliance.
Let’s review the consequences of failing to comply with the Corporate Transparency Act, covering scenarios such as forgetting to file, filing incorrect information accidentally, filing incorrect information intentionally, and not filing at all.
One of the most common pitfalls for businesses subject to the Corporate Transparency Act may simply be forgetting to file the required reports. The Act mandates that certain entities, such as corporations, limited liability companies (LLCs), and partnerships, submit beneficial ownership information FinCEN. You can learn more about who is required to file a BOI report here.
Forgetting to file can lead to a series of cascading consequences.
Warning Notices: In some jurisdictions, businesses might initially receive warning notices as a reminder to fulfill their reporting obligations. These notices are intended to serve as a gentle nudge, alerting businesses to their oversight.
Fines: Persistent non-compliance after warning notices may result in financial penalties. Fines can vary based on the jurisdiction and the severity of the lapse but are designed to incentivize timely and accurate reporting.
Suspension of Business Activities: In more severe cases, regulators may have the authority to suspend certain business activities until compliance is achieved. This can have a substantial impact on a company's operations and reputation.
Legal Repercussions: Repeated failure to file reports might escalate the situation to legal action. This could involve court proceedings, and businesses may find themselves embroiled in legal battles that could have been avoided through timely compliance.
Accurate reporting is a cornerstone of the Corporate Transparency Act, and unintentional errors can still attract penalties. Whether due to oversight or a genuine mistake, filing incorrect information can lead to regulatory scrutiny and potential repercussions.
Correction Requirements: The CTA requires businesses to submit a corrected report within 30 days of when the reporting company becomes aware of any inaccuracy.
Increased Scrutiny: Entities that repeatedly file incorrect information, even unintentionally, may come under increased regulatory scrutiny.
Financial Penalties: There are no penalties for filing an inaccurate BOI report provided it is corrected within 90 calendar days of when it was filed.
Fines may be imposed for inaccuracies, particularly if they are deemed substantial or intentional. The severity of the penalty often depends on factors such as the nature of the error and the impact on the overall objective of the Corporate Transparency Act.
Intentional misrepresentation of beneficial ownership information is a serious offense under the Corporate Transparency Act. Such actions undermine the very purpose of the legislation and can result in severe consequences.
Criminal Charges: Intentionally filing incorrect information can lead to civil and criminal charges. Prosecution may result in fines of up to $500 per day and 10 years imprisonment.
Revocation of Business Licenses: Regulatory authorities may have the power to revoke or suspend business licenses for entities found guilty of intentional misrepresentation. This could effectively halt a company's operations.
Director and Officer Liability: Directors and officers of a company may be held personally liable for intentional misrepresentations. This can result in financial penalties, legal action, and damage to their professional reputations.
Permanent Exclusion from Government Contracts: Companies found intentionally providing false information may be permanently excluded from participating in government contracts. This exclusion can have far-reaching implications for a business's revenue and growth opportunities.
The most severe breach of the Corporate Transparency Act involves a complete failure to file the required reports. Deliberate non-compliance with the Act undermines the fundamental purpose of enhancing corporate transparency and combating financial crimes.
Severe Fines: Deliberate non-compliance may result in the maximum fines prescribed by the legislation. These fines are intended to be punitive and act as a deterrent for businesses contemplating willful non-disclosure.
Criminal Penalties: Willful non-compliance may result in criminal charges, which can lead to fines of $500 per day and up to 10 years imprisonment for individuals involved in the decision not to file.
Corporate Dissolution: Regulatory authorities may have the authority to initiate proceedings for the dissolution of a non-compliant entity. This extreme measure is intended to remove businesses that refuse to adhere to the transparency requirements.
Exclusion from Financial Systems: Non-compliant entities may be excluded from participating in financial systems, making it difficult or impossible to conduct legitimate financial transactions.
The penalties for non-compliance with the Corporate Transparency Act are designed to ensure that businesses take their reporting obligations seriously. Whether through forgetfulness, accidental errors, intentional misrepresentations, or a complete refusal to file, the consequences can be severe. It is imperative for businesses to understand the specific requirements of the legislation in their jurisdiction, stay informed about updates, and seek professional guidance to navigate the complexities of reporting accurately and on time. Adhering to the Corporate Transparency Act not only avoids legal repercussions but also contributes to a more transparent and trustworthy business environment.
]]>In a significant development for financial reporting, the Financial Crimes Enforcement Network (FinCEN) has announced a crucial deadline extension for reporting companies. This update allows reporting companies created or registered in 2024 an additional 90 calendar days from the time they receive their documents from the Secretary of State (or other public notice of creation) to file their initial Beneficial Ownership Information (BOI) reports with FinCEN.
FinCEN Director Andrea Gacki emphasized the far-reaching benefits of this deadline extension. The extension is designed to provide valuable extra time for companies to understand the requirements of this new regulatory obligation and gather the essential information needed for their BOI reports.
It's important to note that FinCEN will only start accepting BOI reports from reporting companies beginning January 1, 2024—no submissions can be made before this date. This extension is expected to simplify compliance for the inaugural filers under the new reporting requirement and foster the development of a comprehensive BOI database, in accordance with Congressional mandates. Read the full announcement from FinCEN here.
For more information about the Corporate Transparency Act and Beneficial Ownership Information (BOI) reporting requirements, take a look at our CTA FAQs page. We will continue to keep this page updated with the most recent information.
]]>Newly formed entities will be required to submit company applicant details with their BOI reports. One company applicant is required but two may be listed.
]]>With the upcoming regulatory changes bought forth by the enactment of the Corporate Transparency Act, companies established on or after January 1, 2024 will be required to submit Beneficial Ownership Information (BOI) to FinCEN, a bureau of the U.S. Department of Treasury.
Need more details on the Corporate Transparency Act? Check out our blog post for an introduction. You can also find further details about BOI Reports here.
Newly formed entities will be required to submit company applicant details with their BOI reports. One company applicant is required but two may be listed.
There are two distinct types of company applicants:
Every company formed on or after January 1, 2024 will be required to include a direct filer on their BOI report. The direct filer is the person who physically submits the company's formation or incorporation documents to the Secretary of State.
If you choose to utilize The Incorporators' services to form your new entity, the individual from our team who submits the documents will serve as the direct filer. We will provide you with the necessary information to include in your BOI Report.
This designation pertains to the person who directly makes the decision to establish the new entity. Although they may not personally submit the documents, they have directed the formation of the entity.
On January 30, 2024, you decide to form a new LLC. You place an order for a Basic E-Kit LLC package on theincorporators.com to form your Delaware LLC.
When your order is complete, you receive an email from a member of The Incorporators staff with your Articles of Formation, signed and sealed by the Delaware Secretary of State. Your LLC is official.
Within 30 days you are required to submit a BOI report to FinCEN. That report will include your company applicant information. In this case, the direct filer is the staff member from The Incorporators who completed the filing on your behalf. You will receive the necessary direct filer details in the email with your order. In this case, you are the company applicant who directed the filing action, so your details would be included as the second company applicant.
If you have further questions, take a look at our Corporate Transparency Act FAQs page here. We will continue to keep you updated on any changes to the upcoming requirements.
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The upcoming implementation of the Corporate Transparency Act mandates the reporting of beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of Treasury. But what is beneficial ownership and what specific information will be required to be reported? Let's take a look at the details.
FinCEN defines a beneficial owner as “any individual who exercises substantial control over your company, or who owns or controls at least 25 percent of your company.”
The company's beneficial owners and each company applicant (if it is an LLC or corporation formed in 2024 or later) are required to provide the following personal details:
Every corporation and LLC in the United States will be required to submit a BOI Report unless they meet the criteria for an exception.
Most notably, companies that meet all three of the following criteria are not required to file a BOI Report:
Other exceptions include publicly traded companies and other entities that file reports with the SEC, banks, credit unions, money services businesses, securities brokers and dealers, tax-exempt entities, insurance companies, state-licensed insurance producers, pooled investment vehicles, public utilities, and accounting firms.
If your company was established or officially registered prior to January 1, 2024, you must submit your filing with FinCEN by January 1, 2025.
Any company formed on or after January 1, 2024 is required to submit a BOI Report to FinCEN within 30 days of receiving the formation or incorporation paperwork from the secretary of state or similar state office that originally created or registered the company.
Filing will take place electronically through a secure filing system via FinCEN’s website. FinCEN anticipates that the platform will be available starting January 1, 2024.
We understand! This is a significant change to the requirements of many of our clients. We have added a CTA FAQ page if you'd like to learn more and we will keep it updated as new information is announced. We'd also encourage you to take a look at the BOI Small Entity Compliance Guide recently released by FinCEN.
]]>In 2021, the U.S. Congress passed the Corporate Transparency Act (CTA) as part of the broader William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021. This legislative action resulted in significant changes to the regulations concerning financial integrity and will require action by the majority of LLCs and Corporations.
The CTA seeks to combat money laundering, terrorist financing, and other illicit activities by enhancing the reporting requirements for business entities. It aims to safeguard U.S. corporations and LLCs from criminal exploitation and aid law enforcement in identifying illicit conduct.
Under the CTA, the vast majority of business owners will now be obligated to provide their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department. Beneficial Ownership Information includes details of who owns the company or exercises substantial control over the business.
Although there are 23 specific exemptions in place, most businesses are subject to this reporting requirement.
Starting January 1, 2024, new entities must submit their Beneficial Ownership Information (BOI) to FinCEN within 30 days of their creation or incorporation. Businesses formed prior to 2024 are required to submit a beneficial ownership report by the end of the 2024 calendar year.
The passage of the Corporate Transparency Act in signifies a pivotal shift in the regulatory landscape. This legislation reflects a proactive approach to combatting money laundering and illicit financial activities. By requiring business owners to disclose their beneficial ownership information to FinCEN, the CTA aims to enhance transparency, protect U.S. companies from criminal exploitation, and bolster law enforcement's ability to detect and address illicit conduct, marking a significant step in safeguarding financial integrity.
To learn more about the Corporate Transparency Act and how it will affect small businesses, visit FinCEN's Small Entity Compliance Guide.
We intend to keep you informed about any changes in requirements and will post updates accordingly. To ensure you don't miss anything, follow us on LinkedIn.
]]>If you find yourself unable to locate any proof that your Delaware company exists, don't panic. There are steps you can take to recover your company's identity and ensure its continuity in Delaware.
]]>Losing proof that your company exists in Delaware can be a stressful situation. This critical documentation is essential for establishing your business's legal existence and is required for many business transactions. However, accidents happen, and important paperwork can be misplaced or destroyed.
If you find yourself unable to locate any proof that your Delaware company exists, don't panic. There are steps you can take to recover your company's identity and ensure its continuity in Delaware.
Take a moment to try to recall how you originally received the documents and check all potential locations where the proof of existence might be.
If your company was formed in the past few years, it’s likely that the documents were sent to you via email and that you did not receive a paper copy. Check your current and former computers (if you're able) for the documents, as well as any email accounts you may have used.
If you are unable to locate the proof of existence, the next step is to contact a Delaware registered agent and request a certified copy of your Articles of Incorporation (for a corporation) or Articles of Formation (for an LLC).
Registered Agents are responsible for handling business filings and maintaining records for companies registered in the state. A registered agent should be able to look up your entity by just the name or file number. To do a preliminary search of your entity’s existence, you can look up the file number by entity name here.
The Incorporators is able to retrieve this document for you whether or not we are your current registered agent. If you'd like to order a copy of your document, you can order a certified copy of your articles of incorporation or formation here.
A registered agent can also obtain a certificate of good standing, which serves as official proof that your company is authorized to conduct business in the state and is up to date with all state taxes and entity requirements. You can order a certificate of good standing from The Incorporators here.
Delaware has annual franchise taxes for all entity types and annual report requirements for corporations. Depending upon how long it has been since you were current on these requirements, you may find that your entity has been voided by the state of Delaware.
Corporations that have not paid their franchise taxes or filed an annual report for two years are automatically voided by the state. LLCs that have not paid their franchise taxes after three years will also be voided. If the entity has been voided by the state, you will need to file a revival, pay overdue taxes and penalties to the state, and file all missing annual reports before a certificate of good standing may be obtained.
If your entity has not gone void but is not in good standing, a Delaware registered agent will be able to look up the total amount that you owe in order to bring your entity back in to good standing. Once the amount is paid to the state and all annual reports are filed, you can receive a certificate of good standing immediately.
The Incorporators is able to assist you with this. If you request a copy of your Certificate of Good Standing and your entity is not in good standing, we are able to quickly provide you with the details of what would be required for you to revive your LLC or corporation.
Entities that have been voided are typically eligible to be renewed or revived. This requires the business owner to pay the overdue taxes owed to the state, additional penalties, and (if it’s a corporation), filing annual reports for the missing years.
Once that is complete, a registered agent may file revival paperwork to bring your entity into compliance and confirm that it is now in good standing.
Another reason your entity may find itself out of good standing is if your registered agent has resigned and your company is without a registered agent. All entities in Delaware are required to name a registered agent.
You are able to be your own registered agent if you have a physical address in Delaware, but most business owners choose to hire a registered agent. Learn more about why you may not want to be your own registered agent here. If you are in need of a registered agent, you may purchase our Delaware registered agent services here.
While your revival is pending, it may be wise to reconstruct your corporate records to the best of your ability. Gather any available supporting documents, such as tax returns, financial statements, contracts, and previous filings with the state. These records can serve as secondary evidence of your company's existence and may be required when dealing with banks, investors, or government authorities.
Reach out to former partners, stakeholders, and clients who might have interacted with your company in the past. They might possess copies of contracts, invoices, or other business documents that can corroborate your company's existence. Their support can be invaluable in reestablishing your company's identity and helping your company move forward.
Losing proof that your company exists in Delaware can be a challenging ordeal, but it's not an insurmountable one. By reaching out to a registered agent and taking proactive steps to reconstruct your corporate records, you can reestablish your company's identity and continue conducting business in the state.
Once you have copies of all necessary documents, remember to keep your business records organized and backed up securely to prevent future instances of document loss. We recommend keeping digital copies in a secure cloud storage environment as well as printed paper copies in a secure fireproof location.
If you have any questions or you need assistance recovering proof of your company's existence, contact The Incorporators by calling (800) 223-3928 or contacting us here.
]]>Accounting is an essential part of any business, as it helps to keep track of finances and ensure that a business is profitable. Two of the most common methods of accounting are the cash method and the accrual method. These are sometimes called cash basis accounting or accrual basis accounting. While both methods have their benefits and drawbacks, it's important to understand the differences between them in order to choose the best method for your business. Additionally, the type of entity that you have can dictate which method of accounting you are allowed to use.
The cash method of accounting is a simple way for businesses to track their money based on when cash is received or paid out. It's a good option for small businesses and individuals who want a clear picture of their cash flow.
Here's how it works: if a business provides a service to a customer and the customer pays on the spot, the revenue is recorded right away. Likewise, if a business purchases supplies and pays for them with cash or a check, the expense is recorded at that moment.
One of the benefits of the cash method is its simplicity. It's easy to understand and doesn't require fancy accounting software or a degree in accounting. Plus, it gives a clear picture of how much money is coming in and going out of the business.
However, the cash method does have some limitations. One major drawback is that it may not provide an accurate picture of a business's overall financial performance because it only recognizes revenue and expenses when cash is received or paid out. This means that revenue or expenses that have been earned or incurred but have not yet been paid or received will not be accounted for until the cash is exchanged. For example, revenue from services provided in one month but not paid until the next month would not be recognized until the payment is received.
The IRS has specific guidelines as to which types of entities are eligible to use the cash vs. accrual method and many small businesses do qualify. Most corporations are not permitted to use the cash method, though the cash method may be used by certain farming or timber businesses, qualified personal service organizations, and businesses that pass a $29 million gross receipts test. S-Corps and LLCs, on the other hand, are frequently permitted to use the cash method.
On the other hand, the accrual method of accounting recognizes revenue and expenses when they are earned or incurred, regardless of when cash is received or paid out. This means that revenue from services provided in one month but not paid until the next month would still be recognized as revenue in the month it was earned. The same goes for expenses, such as supplies purchased on credit that won't be paid for until the next month.
One of the benefits of the accrual method is that it provides a more accurate picture of a business's financial performance over time. This can be especially important for businesses that have long-term contracts or delayed payments. It can also provide a more accurate view of profitability and help businesses better understand their financial trends.
That said, the accrual method can be more complicated and time-consuming to implement than the cash method. It requires a greater understanding of accounting principles and software, and it may require more frequent bookkeeping and record-keeping to ensure accuracy. Additionally, it may not provide as clear a picture of a business's current cash flow.
Most (if not all) bookkeeping or financial business software will allow you to select which type of accounting you'd like to use for your business. In fact, many of the most popular software products will allow you to switch from one to the other if you change your mind or your business becomes ineligible for the cash method.
In Quickbooks, this is found under Settings > Account and Settings > Advanced (tab). Select Edit and choose your accounting method and click save.
Additionally, most modern accounting and bookkeeping software will allow you to view reports in either cash or accrual method so it's easier than ever to maintain a complete understanding of your business's financial picture.
Overall, the cash method of accounting is a simple and easy way for businesses to track their money based on when cash is received or paid out. It's a good option for small businesses and individuals who want a clear picture of their cash flow. However, it may not provide a complete picture of a business's financial performance. The accrual method, while more complex, provides a more accurate picture of a business's overall financial performance.
Ultimately, the choice between the two methods will depend on the individual needs and goals of the business. It's important to consult with your accountant to determine which method is best for your business.
]]>On Friday, December 23rd, we will be closing at 2pm EST.
We will be closed on Monday, December 26th in observance of Christmas Day and Monday, January 2nd in observance of New Year's Day.
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In anticipation of the upcoming holidays, we'd like to take a moment to share our holiday hours with you.
On Friday, December 23rd, we will be closing at 2pm EST.
We will be closed on Monday, December 26th in observance of Christmas Day and Monday, January 2nd in observance of New Year's Day.
Any orders placed on an observed holiday will be processed the following business day. We wish you and your family a safe and healthy holiday season.
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With the rise of public consciousness regarding sustainability and corporate responsibility, more business owners are looking for ways to further their mission and business with an eye for the future. The state of Delaware has long been a leader in corporate governance so it’s no surprise that they’ve adapted to the times by adding an entity type to meet the needs of the modern business owner.
Public Benefit LLCs have been codified into law, allowing business owners to form this new entity type and meet the evolving expectations of the conscientious consumer.
A Public Benefit LLC is a new entity type in the state of Delaware (and several other states) that exists as a for-profit company that is intended to produce a public benefit or benefits and to operate in a responsible and sustainable manner.
The state of Delaware defines a public benefit as:
“A positive effect (or reduction of negative effects) on 1 or more categories of persons, entities, communities or interests (other than members in their capacities as members) including, but not limited to, effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature.”
Today’s consumer is often looking to spend their money in a more conscientious, targeted manner. Brands and businesses with a well-marketed public benefit may see increased customer loyalty and goodwill over traditional LLCs.
Additionally, having a third clause included within the articles of formation stating the specific public benefit purpose puts in place a more formal system of checks and balances to maintain the business’s commitment to a specific cause.
Put simply, a public benefit LLC is a for-profit business. The goal of the business is typically to make a profit while furthering a specific cause.
Non-profit businesses raise money to further their mission but do not make a profit that is then distributed to it's members, directors or officers.
Federally, Public Benefit LLCs are viewed as LLCs. Federal guidelines do not discern between public benefit LLCs and LLCs.
Public Benefit LLCs are taxed the same way that traditional LLCs are taxed. LLCs are pass through entities, meaning the profits of the LLC are claimed on the personal income taxes of the members.
If an LLC is not formed as a statutory public benefit LLC, it may become a statutory public benefit limited liability company by amending its company agreement and certificate of formation.
You can learn more about amending your LLC operating agreement here.
While traditional LLCs are not required to produce any type of annual report or notice, Public Benefit LLCs must provide a statement biennially to its members.
The statement must include the objectives of the public benefit, standards that have been adopted to measure progress, objective, factual information based on those standards in regard to meeting those objectives, and an assessment of the companies success in meeting the objectives.
Not every business needs to have a stated public benefit in order to give back or have an impact in their community. That said, Delaware is once again at the forefront of meeting the needs of business owners with the addition of public benefit LLCs as a legal entity type.
If you are interested in forming a public benefit LLC, you can place an order here and The Incorporators will form your new entity. If you have any questions, feel free to give us a call at 800-223-3928.
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LLCs and S-Corps are commonly cited options, particularly for solopreneurs. But while they have some overlapping benefits (like pass through taxation), they have several notable differences.
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New business owners often struggle to determine if forming an LLC or incorporating is the right option for them.
LLCs and S-Corps are commonly cited options, particularly for solopreneurs. But while they have some overlapping benefits (like pass through taxation), they have several notable differences.
An S-Corp is a standard corporation in terms of setup but has elected Subchapter S status for taxation purposes. This means that the business owner has chosen to pass the corporate income, losses, deductions, and credits through to shareholders for tax purposes, avoiding the corporate level double taxation.
Setting up an S-Corp initially looks much like setting up a traditional corporation. In fact, that’s exactly what happens. The first step is to form a corporation.
To form a corporation in Delaware, you’ll need to select a registered agent. Forming an entity in Delaware requires a Delaware address, which is what your registered agent provides (along with other vital services). Learn more about registered agent services here.
The state offers business owners the ability to file their own paperwork (you can do that here), though the state website notes, "The Division works closely with the registered agents that provide incorporating services and we encourage the users of this webpage to contact one of the registered agents for additional information."
If you plan to file your paperwork yourself, you'll need your registered agents name and address to do this. Business owners physically located in the state of Delaware can technically be their own registered agent, though it is discouraged. Here's why you may not want to be your own registered agent.
If you're utilizing a registered agent service (like The Incorporators) to form your entity, you'll provide them with basic details of the business including director information, contact information, stock, and par value. When the filing is complete, you receive a stamped filed copy of your Certificate of Incorporation, also called the Articles of Incorporation (here's what you need to know about the Articles of Incorporation). This document is the official proof that your company exists; much like a birth certificate for your corporation.
The Incorporators can take care of the setup for you and all of our packages include your first year of registered agent services. Check out our straightforward and affordable packages here.
After the corporation is formed and you receive your Articles of Incorporation, you may file Form 2553 with the IRS within 75 days of the date of incorporation.
S-Corps are typically only recognized at the federal level although some states require that paperwork be filed at the state level as well. Delaware is not one of those states so Delaware corporations that file for S-Corp status at the federal level are viewed as corporations at the state level.
The form itself is four pages long and requires corporate details including the name, address, and signature of each shareholder or former shareholder required to consent to the election.
If you have any questions about the form, it’s best to consult your accountant or attorney to ensure you’re completing it correctly.
Shareholders of an S-Corp claim the corporate income, losses, deductions, and credits on their personal income taxes. Shareholders are considered employees of the business and are typically given a salary with the corporation deducting the payroll taxes.
Delaware minimum tax for corporations is $175, with a $50 fee for filing the annual report (required). This amount may vary if the corporation is using the Authorized Shares Method or Assumed Par Value Capital Method. Learn more about Delaware franchise tax rates here.
The benefits of S-Corps most cited are:
S-Corps have more requirements and restrictions than LLCs including a limit of 100 shareholders, US citizenship requirement, stock restrictions, and industry restrictions.
LLCs are often thought of as a hybrid entity, with some of the best features of sole proprietorships, corporations, and partnerships.
Like a corporation, an LLC is a separate legal entity distinct from its owners; thus removing the owners and managers from any personal liability for the company's debts or obligations. Like S-Corps, LLCs are taxed via pass through taxation.
Setting up an LLC in Delaware is a fairly easy process and much of the information above regarding the utilization of registered agent services still applies. You are able to set up your LLC yourself and will need to provide your registered agent's name and address on your documents. Utilizing a registered agent service for formation is encouraged and expedites the process, as registered agents receive most documents digitally instead of via postal mail.
When the filing is complete, you receive a stamped filed copy of your Certificate of Formation, also called the Articles of Formation. This document is the official proof that your company exists.
The Incorporators can create your documents and form your LLC for you. Check out our LLC formation packages here.
LLCs are taxed via pass through taxation. Pass through taxation refers to the tax structure of Delaware LLCs, where the business itself pays no income taxes. The business pays taxes through the individuals who control the LLC. They are taxed on their personal tax returns.
LLC members typically take distributions from the LLC – meaning they transfer money from the business bank account to their personal account usually via a bank transfer or check. Distributions may take place as often as the members would like and do not have to be in the form of a salary.
Delaware LLCs do pay an annual franchise tax fee to the state of Delaware. This is a flat fee of $300 and is due annually on or before June 1st.
LLCs are typically ideal for individuals running their business solo. Companies with multiple members or managers may benefit from the oversight of a board of directors that a corporation (including an S-Corp) requires.
It's also worth considering whether your business is going to seek funding from investors or require the ability to allocate stock. Venture capital firms often require a C Corp (traditional corporation) in order to invest.
Lastly, LLC members typically pay self-employment taxes on the distributions they receive.
If you are unable to attain S-Corp status because of the restrictions, then an LLC may be the appropriate choice for you.
The ideal way to decide which entity type is right for your business is to discuss it with your accountant or attorney. They are best equipped to be able to assess your business structure and income and determine which entity type will benefit you most.
If you're ready to start your S-Corp or LLC, The Incorporators would be happy to help! Begin by selecting one of our packages here.
]]>For many business owners, all the official parts of the setup process are complete! These days it’s common to have a website and social media accounts for a business before it’s official. You may have already set up a few of these things (my partner and I had before we officially started our LLC).
Let’s look at some of the most important unofficial parts of setting up your business.
]]>This is part five of our series, Start an LLC with Me. So far, we’ve started a Delaware LLC, gotten an EIN number, opened a business bank account, and gotten a business license.
For many business owners, all the official parts of the setup process are complete! These days it’s common to have a website and social media accounts for a business before it’s official. You may have already set up a few of these things (my partner and I had before we officially started our LLC).
Let’s look at some of the most important unofficial parts of setting up your business.
A crucial element of every business? Good record keeping. Once you’ve got your bank account set up and ready, you’ll need to determine how you are going to track business income, expenses, and distributions.
Many businesses choose Quickbooks or online software options such as Quickbooks Online, Honeybook , or Freshbooks.
Whether you’re a service-based business or you’ll be regularly mailing products, there’s a good chance you’ll need a shipping account with UPS, FedEX or DHL.
Shipping accounts often offer discounted rates to businesses depending on volume. Consider cost and convenience (how close is the closest drop box to your office?) when choosing between major carriers.
One of the most important things to do when you’re considering starting a business is to check the domain availability for your business name.
You want to reserve your business name as a dot com if possible, as it is still the most widely used domain extension (ending) in the United States. Services like GoDaddy or Google Domains make it easy to reserve your domain.
If your business name is unavailable, it might be wise to confirm that no other business holds a trademark for the name you’d like to use. You can do a US trademark search here. If not, you could go ahead and brainstorm variations of your business name or add location information to the url.
Examples:
Wordpress is one of the most widely used platforms for creating websites. In fact, 43% of the web is built on Wordpress!
The pros? Wordpress probably offers the most flexibility and customization options of the easily accessible platforms. The cons? There is a learning curve. But fear not! The great thing about Wordpress is that because it is so widely used, there is a Youtube tutorial for everything. Just make sure you’re on Wordpress.org with your own hosting, not Wordpress.com (their free service).
If you’re looking to keep it simple and don’t mind a monthly fee, Squarespace or Wix are both great basic options.
For an ecommerce solution that includes payment processing, try Shopify. It’s one of the most popular ecommerce platforms for a reason! You’re reading this on a Shopify site and we can confidently say, we think it’s a great service.
Whether you intend to utilize social media or not, it’s important to reserve your business name on all social media platforms. Why would you reserve your business name on a platform you don’t intend to use? Brand protection purposes – to keep someone else from getting it!
As with domain names, you may find that your business name is already reserved. This is where you may have to get creative with your usernames. If possible, keep the social media handle the same on all platforms.
It’s easier than ever to get a professional looking logo for your company. Options like Canva or Looka allow you to take the wheel with your logo design.
Want to leave it to a professional? Hire a graphic designer on 99 Designs, where you can run a contest and get initial ideas from dozens of designers before deciding which you like. Once you select their initial offering, you’ll work with that individual to fine tune the original idea. Plus, they offer fixed pricing packages to complete the job.
These days many businesses simply do not need any paper products. But that doesn’t mean yours doesn’t!
If you’re planning to do a lot of in person networking, grab some business cards. There are tons of options for designing and printing, from Vistaprint, to Moo, or even designing them yourself on Canva. A paper business card doesn't mean you have to be old school. Create a QR code (we promise, it's easy) to include on your business card so it's easy to get people to your website.
If you’re selling a physical product, consider designing tags or even thank you cards to include with your orders.
You know your business best so think about what types of products you might need for sales, marketing, and production.
Think blogging isn’t for you? You might want to think again. Producing original content on your website is one of the best ways to establish yourself in your industry and get noticed by Google.
Getting noticed by Google will (slowly) get you what your business really needs – organic search traffic, i.e. people finding you on Google without you paying a dime. This takes time, certainly. But writing content about your products or industry on a monthly or biweekly basis can really help you in the long run.
If you’ve got all of your ducks in a row and you’re ready to increase your business, it might be time to invest in some advertising.
The most popular options are Google Ads or ads on social media platforms such as Facebook or Instagram. Where you advertise is going to depend entirely on your business. How do you anticipate that new customers will find you? Start there and work backwards.
Thank you so much for coming along with us on this journey of starting an LLC. We hope you’ve found it helpful!
]]>To avoid penalty and interest, the tax must be paid by June 1, 2022.
Franchise taxes are assessed annually on every LLC entity registered in Delaware, regardless of level of business activity. Franchise tax for LLCs is a flat rate of $300 that must be paid by June 1st every year. You can learn more about why it's called a franchise tax here.
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As a reminder, the 2021 Delaware LLC Franchise Tax due date is approaching.
To avoid penalty and interest, the tax must be paid by June 1, 2022.
Franchise taxes are assessed annually on every LLC entity registered in Delaware, regardless of level of business activity. Franchise tax for LLCs is a flat rate of $300 that must be paid by June 1st every year. You can learn more about why it's called a franchise tax here.
Please note: A $25.00 service fee applies.
or
You can pay directly here. If you do not know your file number, you can look it up here.
To send a check to the Division of Corporations, please mail in the state notice you received via mail along with a check (write your file number in the memo line) to:
If you have any questions about paying your annual franchise tax, please feel free to give us a call at 800-223-3928.
]]>Business licensing is probably the least straightforward of the steps to opening a business. This is because business licensing varies greatly by location. In some jurisdictions or industries, you may not need a business license at all. In others, you may need one at the federal, state, county, and city level.
]]>This is the fourth post in our series Start an LLC with Me. In our first post, readers came along as I officially formed an LLC. I then got an EIN number (and shared step-by-step instructions) and opened a business bank account. Next up: getting a business license.
Business licensing is probably the least straightforward of the steps to opening a business. This is because business licensing varies greatly by location. In some jurisdictions or industries, you may not need a business license at all. In others, you may need one at the federal, state, county, and city level.
Certain industries are regulated at the federal level, and you’ll need to start there if your business falls into one of those categories.
Categories include:
For more information on where to start with these federally regulated industries, visit the Small Business Administration site here.
If your business is operating in the state of Delaware, you will need a business license from the Division of Revenue.
It’s important to note that operating in Delaware and forming a Delaware entity are not the same. If you have a brick-and-mortar business located in the state of Delaware or the primary location of your business is physically in Delaware, you’ll need a business license in Delaware.
If you formed a Delaware entity but your business is primarily conducted elsewhere, you may not need a Delaware business license but you may need one in the state where your business is located.
If you have determined that you do need a business license from the state of Delaware, you can apply for a One Stop account with the state of Delaware here.
Each of the three counties in Delaware have different business licensing and permitting requirements. Many cities and towns within Delaware do as well.
Luckily the state has a quick page for you to reference for resources for each county and city/town in the state. You can find it here.
Beyond a general business license and one at the county and city level, certain industries are also regulated by the state.
These businesses and industries range from restaurants and food services to medical licensing, cosmetologists, attorneys, and more.
You can find a full list of the professions and industries that require additional permitting or licensing here.
With much of our commerce happening online these days, it’s easy to see how challenging it is to regulate online businesses. Is the business located where the owner of the website resides? Where the business is located? Where the server that hosts the website is located? Internet sales present unique challenges for states.
At this time, Delaware has not enacted legislation or regulations concerning sales tax for internet based businesses. You can read more about the specifics of online businesses here.
A common question we receive at The Incorporators is, does Delaware require reseller permits? No, the state of Delaware does not require reseller permits.
Many states will have business licensing requirements at different levels, just as Delaware does.
If you formed a Delaware entity but your business home is in another state, you’ll need to research what the requirements are there. We’d suggest starting with the SBA website, as they provide many helpful resources for business owners. They also offer free business counseling should you have specific questions. You can find more information here.
]]>Today we're heading on to the next step most LLC's take: opening a business bank account.
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Welcome to part three of our series, Start an LLC with Me. If you missed it, in part one I walked you through how to start a Delaware LLC, step-by-step. In part two, we went over how to apply for an EIN number with the IRS.
Today we're heading on to the next step most LLC's take: opening a business bank account.
My partner and I had been making a small income from our side hustle for a few months. We knew that for tax purposes we needed to open a joint bank account and then take equal distributions from there to pay ourselves. Once we had our Articles of Formation and EIN number, we were ready to apply for a business checking account.
Paying yourself from your LLC is often referred to as a draw or a distribution. When a single member LLC moves money from the LLC to their personal account, it’s called a draw. When it is a multiple member LLC, it’s referred to as a distribution.
It is up to the business owner to determine how to pay themselves. For instance, my partner and I typically do an ACH transfer from our business checking to our personal accounts when we receive a payout from our online business. Many business owners just write themselves a check. If the business has ongoing expenses that will be paid for with the business bank account, you may want to always leave a set amount in the account.
It's up to you as the business owner how you pay yourself. If you're unsure or need further guidance, we'd suggest talking to your accountant.
The first thing that startled me when applying for a business bank account was just that – that we needed to apply. Business checking accounts are not like personal checking accounts where you can just open one. The application process is more involved and selecting a bank requires more time and thought than for a personal account.
The application process for a business checking account generally only takes a few minutes, provided you have your documents ready to upload. The bank will review your application and this may take hours to days for them to complete.
The requirements for each bank differ but nearly all will require:
For more information about the documents you may need, check out our post on the documents you need to open a business bank account. We address some additional documentation that may be required if you are seeking funding.
You'll find that every major bank offers business checking accounts. Additionally, there are online only options for business owners as well. When selecting a business bank account, it's important to consider your business needs. Here are some specifics to consider and prioritize:
Many banks waive the monthly fee amount if you maintain a certain balance or have direct deposits on a regular basis. Some offer multiple levels or types of business bank accounts with different perks and fees by usage.
As I researched business bank accounts, one thing that I discovered was that many banks that market themselves as online bank accounts are actually technology companies, not banks. You can usually spot this when they refer to themselves as a “banking platform” or “financial technology company” rather than a bank, or by reading the fine print.
The banking platforms I researched were still FDIC insured and backed by a real bank – often a smaller community bank with very few branches.
For instance, Bluevine, one of the top-rated online banks, is actually a technology company and the bank behind it is Coastal Community Bank. Coastal Community Bank is based in western Washington and has just 14 locations.
Mercury, another popular online banking choice, provides banking services through Evolve Bank and Trust, a bank with six branches based primarily in Arkansas.
Though there are no obvious downsides to these offerings, it must be noted that your banking abilities depend on a continued partnership between the technology platform and a smaller bank.
Some banks may require that you come into a branch to show your ID in person before they’ll complete the application for the business bank account. Additionally, some banks require that you at least live in a region where they have branches available.
My partner and I learned this lesson the hard way. We initially applied for a business checking account with a bank that has physical locations where my partner lives, using my home address as our physical location. We were denied because I do not live in a region where the bank has a presence, even though my partner does. This requirement is not noted anywhere on their site.
I’ll come right out and say it – our number one priority when looking for a business checking account was that it was free. We’re a small business and we don’t have the steady income yet to meet some of the qualifications that many business checking accounts require to waive their monthly fees. We found there were quite a few options that would work for us, completely free.
To make our selection, my partner and I looked at the specifics listed above and considered our needs. Our business never handles physical cash nor would we need to make a cash deposit. We live on opposite sides of the country and will have few transactions per month. We needed a good app or online interface and an easy process for ACH transfers.
We reviewed the rankings lists at Nerdwallet, Investopedia, Bankrate, CNBC, and Money Under 30. Most have helpful pro/con lists that will quickly narrow down your list.
My partner and I wound up going with an online only banking platform and have had a great experience so far.
Are there many banking options for LLCs? Yes. But the best business bank account is the one that works for you. If you live close to your local credit union and have always had great service from them, they might be the best choice. Choose the business banking service that is most convenient for you and makes it easy to run your business.
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If you recall from our first post of the series, my friend and I started a small business that began to make money. My accountant advised us to form an LLC for tax purposes. We officially formed an LLC with The Incorporators and received all the documentation we need to move forward with setting up other elements of our business.
]]>This is part two of our series, Start an LLC with Me. In this series we're walking you through each step to setting up an LLC and becoming a fully operational small business. Read part one here.
If you recall from our first post of the series, my friend and I started a small business that began to make money. My accountant advised us to form an LLC for tax purposes. We officially formed an LLC with The Incorporators and received all the documentation we need to move forward with setting up other elements of our business.
Applying for an employer identification number, commonly known as an EIN, is probably the first thing you want to do after your LLC is officially formed. It is a fairly simple process that takes only a few minutes.
Today we're walking you through the process so you'll know exactly what to expect when you're ready to apply.
First things first, what is an EIN? An EIN is an Employer Identification Number. It is given to businesses by the IRS and essentially serves as the social security number for the business as a whole.
EINs are commonly referred to as EIN numbers, despite the fact that the "N" in the acronym stands for "number".
You can begin the EIN application process on the IRS website here. Please note that applications are accepted from 7am to 10pm EST. The portal to apply is closed outside of these hours.
So far so good. The next page will refresh your memory about what an LLC actually is (just to make sure you really have one).
Click continue and move on.
Make sure you download and save your EIN Confirmation Letter from the link shown. I saved ours to my computer, our shared drive, emailed it to myself, and printed it and filed it with our formation paperwork.
And that's it! Now that we have the EIN number, we are able to proceed with the next step in starting our business - applying for a business bank account.
We hope you found this helpful and we look forward to walking you through the business bank account details and options in the next post in this series.
]]>Like many people, the pandemic has given me time to explore my strengths and hobbies from home. A fun side project I was doing with a friend has begun to make money and my accountant advised us to start an LLC.
]]>Today we’re beginning a series to walk new business owners through all the initial steps to form a Delaware LLC and get their business up and running.
Like many people, the pandemic has given me time to explore my strengths and hobbies from home. A fun side project I was doing with a friend has begun to make money and my accountant advised us to start an LLC.
My friend (and now business partner) and I live in different states so my accountant suggested Delaware as a home state for our business. This is no surprise to me because after years of working at The Incorporators, I know how business-friendly Delaware is. In fact, 93% of all U.S. initial public offerings are entities registered in the state of Delaware! (source)
If you're not sure which entity type or state is best for you, talk to your accountant or attorney.
The first step to starting my LLC is to select a service provider to file the documents on my behalf. Lucky for me, I know the best in the business – The Incorporators!
First, I’m going to visit theincorporators.com and head to the navigation menu, hovering over “start your business” and selecting “LLC” from the drop down.
This will take you to a page that allows you to select a package.
The main question to ask yourself here is – Do I need/want the physical documents? Or am I okay with receiving everything digitally? If we decide we want paper copies, do we want a customized snap or three-ring binder, plus all the bells and whistles?
As two millennial women, my partner and I are used to doing most things digitally and don’t foresee ourselves needing additional corporate supplies right now. If we decide later that we’d like corporate supplies (like a corporate seal or binder), they can be purchased from The Incorporators here.
If you would like hard copies of all the documents sent to you in either a snap binder or customized three-ring binder, you can select the E-Z Snap Kit or Executive LLC Package.
If you prefer to have the ability to issue membership certificates on screen and would like to have a customized digital gold seal, you may want to consider the LLC Executive E-Kit.
We’ve decided to select the LLC E-Kit. It’s a popular choice among new business owners because of its affordability.
Up next, begin filling out the form with all the business details needed for The Incorporators to create your documents.
These questions are fairly straightforward and mostly include details about your new business and contact information but let’s talk through some of the ones that new business owners may have questions about.
All companies in Delaware are required to have a specific ending, which you can select from the drop down menu.
Since we are not forming a series LLC, my options are:
When you consider which to select, also note that if you want a comma after your business name and before the company ending, it must be included in the preferred and alternate name box.
The examples above will be Nadine Starts a Business LLC or Nadine’s Business LLC.
If we add a comma after like the above example, my business name will be Nadine Starts a Business, LLC or Nadine’s Business, LLC.
For our business, we opted to go without the comma and selected LLC as our company ending.
Since my partner and I own our business 50/50, when I got to the question about naming a manager, I paused. What if we are both the managers?
Luckily there is an easy answer to this – you only need to name one manager during formation and then may add managers during your initial meeting. Your package includes a template for initial meeting minutes. You will find a page within the minutes that allows you to name additional managers.
Since I’m the one setting up the business, my partner and I agreed that I’d be the manager and she’d be a member during the initial set up process.
Once I’m confident that I’ve entered all my details correctly, I click “Add to cart”. This takes me to the cart screen where I can review the details I’ve entered again.
The checkout process is fairly straightforward. The Incorporators uses Shopify, a popular ecommerce platform so the checkout pages may look familiar to you. Throughout the checkout process you'll be able to see and confirm all of the details of your company on the right side of the page.
When complete, you'll see a confirmation page like this:
Due to Covid and the high volume of orders at the end of the year, the State of Delaware Division of Corporations is currently experiencing a backlog.
My partner and I decided to upgrade to expedited processing to avoid the current 30-40 business day wait time for normal processing.
And that's it! The Incorporators has all the details that they need to start our LLC. I immediately received an email confirmation from The Incorporators with a receipt and full order summary.
Six days later, I received an email from The Incorporators with 13 attachments including:
I immediately saved all documents to both my computer and our business shared drive. I printed a hard copy of the formation documents and filed them with my other important personal documents.
The entire process to start an LLC took me less than five minutes. Now on to the next important step - getting an EIN number. We'll be covering that in our next post in this series.
]]>Selecting a registered agent may feel like a daunting task. With so many service providers available, it may feel like who you select doesn't really matter. But registered agents provide a critical business service and it's important that you select a registered agent who is ready to be your partner in entity management.
A registered agent’s basic duties include:
The ability to accept and forward service of process requires a registered agent to be available during standard business hours at their registered address. This is the legal requirement set forth by the state and is one of the main reasons that most business owners do not opt to be their own registered agent.
A good registered agent will also offer additional services such as email reminders, tax filing services, excellent customer service for easy additional filings and retrievals, as well as being a helpful point of contact for all of your entity management related questions.
The biggest role that your registered agent serves is to accept and forward service of process, should you receive it.
Service of process is the delivery of the summons, complaint, or petition related to legal proceedings. It is most often delivered in person but can be delivered via certified mail or by posting on your door.
Think your business won’t be sued? A Small Business Association study found that each year between 36 and 53 percent of small businesses (described as businesses with less than 500 employees) are involved in litigation. The majority of these cases involved contract, torts, civil rights, and labor related lawsuits.
The SBA study found that the cost of litigation ranged from $3,000 to $150,000 for study participants and that one-third spent less than $10,000. These costs have serious consequences, particularly for newer business. Litigation within the first two years of business reduced the survival rate of the business to 15.8% after two years; down from the typical 33% survival rate of businesses not involved in litigation.
So what happens when an attorney prepares a lawsuit to serve you or your business? They will serve you to the official business address on file – your registered agent. This is why it’s so important that your registered agent be a legitimate and reliable service. When the service of process is delivered to your registered agent, you need to be sure that your registered agent will get it to you in a timely manner.
If you use your own address or an unreliable registered agent and are then unable to receive service of process, you’re at risk of not receiving your service or getting it too late.
Missing a court date or not having proper time to prepare your legal response could be detrimental to your business. In some cases if you do not respond to legal action against the business, you risk a default judgement, which means the suing party automatically prevails.
It's also important to note the issues of public relations and privacy when considering where service of process will be received.
Often small businesses are started by a single business owner with one address - their home. The Covid-19 pandemic has also prompted many to start side gigs or to take their side gigs full time. These businesses often don't have office space and will use their home address for business purposes. This means that their home address will be public information. Some business owners may be okay with this, but many consider privacy and safety reasons and opt to hire a registered agent.
Additionally, if your business has a brick and mortar location (or multiple locations), are you comfortable with service of process being delivered there? Consider how it may look to customers in your coffee shop or restaurant if you're being served there. Do you feel confident having tax or legal documents delivered to the employees at those locations? This is yet another reason why business owners opt to hire a registered agent.
A quality registered agent will receive your service of process on your behalf and forward it to you promptly. This is one reason why it’s critically important that you keep your registered agent apprised of any changes of address.
When you receive service promptly, you are able to begin organizing your response, hiring an attorney, or preparing for court dates.
The Incorporators provides registered agent services for Delaware entities. We've been a trusted partner for Delaware businesses for over 45 years (not to mention, our 5 star google rating). You can purchase registered agent services here or change your registered agent here. If you're changing from another service, your first year of registered agent services are free!
As always, feel free to give us a call at 800-223-3928 or email us at info@theincorporators.com.
]]>The Incorporators Ltd. will be closed on the following dates:
We wish you and your family a happy and healthy holiday and we look forward to working with you in the New Year.
]]>As the year comes to a close, we'd like to take a moment to share our holiday hours for the coming week.
The Incorporators Ltd. will be closed on the following dates:
We wish you and your family a happy and healthy holiday and we look forward to working with you in the New Year.
]]>Our most cost effective package option is our LLC E-Kit, an all digital package with delivery via email.
This package is priced at $175 and includes all state taxes and fees. Each package includes everything you need to make your business official including a stamped filed copy of your Certificate of Formation, a sample operating agreement and minutes, membership certificates
]]>Our most cost effective package option is our LLC E-Kit, an all digital package with delivery via email.
This package is priced at $175 and includes all state taxes and fees. Each package includes everything you need to make your business official including a stamped filed copy of your Certificate of Formation, a sample operating agreement and minutes, membership certificates, member ledger, stub sheet, charter compliance memorandum, IRS forms, and an electronic company seal.
The turnaround time for a standard filing is typically 3-5 business days.
As we approach the end of the calendar year, the Delaware Division of Corporations is experiencing a high volume of orders and there is currently a 15-20 business day turnaround time on filings.
For urgent matters, we’d encourage you to upgrade to expedited processing for guaranteed processing time. Expedited processing is currently 24-48 hours.
Pass through taxation refers to the tax structure of Delaware LLCs, where the business itself pays no taxes. The business pays taxes through the individuals who control the LLC. They are taxed on their personal tax returns.
The major difference between an LLC and a sole proprietorship is the legal protection that an LLC provides a business owner. In a sole proprietorship, the individual owner and the business are viewed as one entity for tax and legal purposes. This can put the business owner at risk in the event of legal action.
If you're unsure which business structure is right for you, we'd encourage you to contact your attorney or accountant.
A series LLC is a newer entity type that exists only in some states - including Delaware. Series LLCs start with a parent or umbrella LLC, under which series LLCs are formed, much like a corporation and subsidiaries. Each Series LLC may have its own managers and its liabilities and debts are separate from that of the parent LLC.
Delaware was the first state to allow Series LLCs, in keeping with Delaware's history of being at the forefront of corporate law and remaining one of the most business friendly states.
Series LLC's are often used for real estate holdings, where each property may be held in it's own Series LLC beneath the overall parent holding company.
The Incorporators does not open bank accounts on behalf of clients but we do provide you with the documents you will need to open a business bank account.
Most banks require a copy of your operating agreement, formation documents, or statement of incorporator naming the initial manager. Each of our packages includes a sample operating agreement and the formation documents (signed by the incorporator) for your new entity. Some banks may require a certified copy of your Articles of Formation.
Many banks also request your EIN (employer ID number), a number you receive from the federal government after incorporation/formation.
Our packages include the documents and the form you need to apply for an EIN. You can apply for one online quickly and easily via the IRS website here. We cannot apply for an EIN on your behalf.
If you have any questions about LLC formation, feel free to give us a call at 800-223-3928 or contact us.
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The Incorporators Ltd. will be closed on the following dates:
In preparation for the upcoming holidays, we'd like to take a moment to share with you our hours for the remainder of the calendar year.
The Incorporators Ltd. will be closed on the following dates:
We wish you and your family a happy and safe holiday season and we look forward to assisting you with your year end business needs.
]]>UCC stands for Universal Commercial Code, a group of acts related to sales and commercial transactions that have been adopted as law in all 50 states. It was established when it became clear that the variations in state laws were posing challenges to businesses and it was necessary to standardize the laws for commercial transactions.
A UCC filing refers to the UCC-1 Financing Statement, a legal document that a lender or creditor files with the secretary of state when they have a security interest in the personal or business property of a debtor.
]]>UCC stands for Universal Commercial Code, a group of acts related to sales and commercial transactions that have been adopted as law in all 50 states. It was established when it became clear that the variations in state laws were posing challenges to businesses and it was necessary to standardize the laws for commercial transactions.
A UCC filing refers to the UCC-1 Financing Statement, a legal document that a lender or creditor files with the secretary of state when they have a security interest in the personal or business property of a debtor.
The Incorporators works with many law firms and and lenders to complete UCC filings in the state of Delaware.
When a business is approved for secured financing, the lender or creditor files a UCC-1 Financing Statement with the secretary of state in the state where the entity is registered.
It gives notice that the lender has an interest, or lien, against the asset being used by a business to secure the financing. Should the business fail to repay the debt, the lender is entitled to the asset.
The lender acquires a lien on assets of the business, such as equipment, inventory, receivables, etc., which serve as collateral until the debt owed by the business is discharged.
A UCC Filing provides protection to the lender so that if the debt is not repaid, they would take possession of a valuable asset.
A UCC Search is generally conducted when a lender or other business management related interest wants to know if the assets of a business are owed as a collateral for a debt. If the assets are already owed as collateral on a previous debt, it should show up in the UCC search results. This protects the lender by ensuring that the same assets are not used as collateral for multiple debts.
In Delaware, UCC Searches are only able to be completed by a Delaware Authorized Searcher. Any search performed by a Delaware Authorized Searcher are certified and obtained directly from Delaware’s UCC Information System.
The Incorporators Ltd. is a Delaware Authorized Searcher. We are able to provide UCC Searches and Filings and have direct access to the Delaware UCC Information System. If you'd like to request UCC Services, please complete the form found here.
Delaware has a high number of UCC Filings simply because it is the business home to many entities. Did you know that Delaware is home to over 1,000,000 entities and over 66% of Fortune 500 companies? Delaware is considered one of the most business friendly states. Learn more about why many companies choose Delaware as there business home here.
UCC filings are completed in the state where the entity is formed and as such, Delaware has a high number of them.
The cost of a UCC filing in Delaware is dependent on a number of factors, including the number of pages the document contains, the number of debtor names on the UCC filing statement, and other variables. If you'd like a quote for your UCC filing, please complete our UCC services request form here.
We are happy to help you with your UCC search needs and can provide a quote quickly. Please complete our request form and we'll be in touch shortly with further details.
Do you have additional questions about UCC filings or UCC searches? We're here to help! Give us a call at 800-223-3928.
This terminology confuses some, simply because our common use of the word franchise usually means a store with multiple locations. In this case, the term is used because the taxes for LLC's...
]]>Delaware LLC's are required to pay an annual tax to the state of Delaware on or before June 1st. The tax is often referred to as "franchise tax".
This terminology confuses some, simply because our common use of the word franchise usually means a store with multiple locations. In this case, the term is used because the taxes for LLC's are not based on the income of the company, but rather are a flat fee for every Delaware LLC. It is essentially a privilege fee that you pay to the state of Delaware to maintain your entity, thus the use of the term franchise.
Failure to pay the required annual taxes by the due date will result in a penalty of $200.00 plus 1.5% interest per month on tax and penalty, and non-payment could also result in loss of the entity charter.
Every Delaware LLC received notification by letter, which included instructions for the payment of taxes due. The letter was mailed to the address currently on file for the LLC. You do not need the letter to pay your franchise tax.
Some registered agents scan these notices and forward them to you via email or upload them to a login portal. At The Incorporators, we forward you the notice directly so it is prudent that you ensure we have an accurate address for you so that you do not miss this notice.
Delaware LLC's are not required to file an annual report. This requirement only applies to Delaware corporations.
To use our eFiling Service, click here. Note: A $25.00 service fee applies.
Don’t know your file number? Look it up here.
Please note: Check payments MUST be sent directly to the Division of Corporations. See back of tax notice for mailing instructions. The Incorporators Ltd. is unable to process check payments for LLC taxes. Checks received in our office will be returned to sender.
If you have any questions, feel free to contact us here or give us a call at 800-223-3928.
DISCLAIMER: The Incorporators LTD. is a business formation service company only.
All content on this site is for informational purposes only and should not be construed as legal, taxation or financial advice or services.
Here are some questions to ask yourself to decide if you need a registered agent:
You might be wondering - do I need a registered agent? If you run a small business or live in the state where your entity is registered, the reasons for hiring a registered agent may not be obvious.
If you answered yes to any of the above questions, then you might want to hire a registered agent.
Many states require a registered agent in the state where an entity is established. Delaware is one such state with that requirement. If your entity is registered in a state where you do not live or have a location, you will need a registered agent. The Incorporators Ltd. provides registered agent services for entities in Delaware. Our partners at Universal Registered Agents offer services nationwide.
So what if your home is your office? The listing of your business address is all about privacy. If your home is where you run your business, are you comfortable with having your personal information out there? Again, this is a personal choice but for safety and privacy reasons, many business owners opt to have a registered agent whose address is then used instead.
If you live in Delaware (or in the state where your entity is registered) then you could theoretically act as your own registered agent but many choose not to for privacy reasons.
Businesses with a brick and mortar location can use that address. But let’s say you own and run a coffee shop. Are you comfortable with being served to the barista at the front register? Or receiving legal or tax documents to this location?
In order to maintain legal compliance, you're required to be available to receive service of process during business hours at your business address. If your business (brick and mortar or home based) is not open during traditional business hours, you will need a registered agent to ensure that service of process can be received.
Many business owners think that it won't happen to them - until it does. Whether it's a disgruntled customer, an accidental injury, or a contract dispute, it absolutely could happen to you and your business. We're there to make sure that if it does, you receive it in a timely fashion so you can respond appropriately.
Your registered agent will accept and forward annual report tax notices and any other official documentation from the Secretary of State to the entity contact; and will accept and forward Service of Process.
Under Delaware law, a registered agent must be generally available during normal business hours to accept service of process. That said, this is the minimum of what your registered agent should be doing for you. A great registered agent provides additional helpful tools and services.
Here are some of the things The Incorporators Ltd. can do for you:
Yes, as mentioned above, if you have a street address in the State of Delaware you may act as your own registered agent. However, you may choose not to due to the privacy concerns.
Yes, you may change your registered agent at any time and it’s actually an easy process.
If you need a Delaware registered agent and you’d like to use The Incorporators, purchase services here we’ll get you set up.
If you need services in another state, we offer nationwide services through our partners at Universal Registered Agents. Just fill out our quick form here and someone will be in touch shortly to get you set up.
You must keep your registered agent informed of any changes to your company’s contact information. This is extremely important, as your registered agent may receive service of process on your behalf and must be able to accept and forward it to you.
For our Delaware clients, we will also forward Annual Report Tax Notices and any other notices from the State of Delaware to the designated contact.
Additionally, you will also need to pay a fee to your agent for their services. Commercial Registered Agent fees vary greatly. The Incorporators Ltd. annual Registered Agent fee is $99.00.
If you have any further questions about what a Registered Agent does or how The Incorporators Ltd. can help you form or maintain a business, contact us or call 800-223-3928.
]]>The Incorporators Ltd. is pleased to announce that we've moved to a new office space.
Our new larger space will accommodate our growing team so that we can continue to provide you with the unparalleled client service you've come to expect from us.
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The Incorporators Ltd. is pleased to announce that we've moved to a new office space.
Our new larger space will accommodate our growing team so that we can continue to provide you with the unparalleled client service you've come to expect from us.
Our phone number and email remain the same. You can reach us at 800-223-3928 or by emailing info@theincorporators.com. Many of our services and filings are also available for purchase right here on our website. You can order a certificate of good standing here or form a new entity here.
Please update any business mail you typically have sent to us to reflect our address change. If you have mail forwarding with us, it's critical that you provide our new address to your bank, insurance company, domain name registrar, and any other business who may attempt to reach you by mail. While we will still be receiving mail if it is sent to our previous location, we want to ensure that you receive all mail in a timely fashion.
The Delaware Division of Corporations is aware of our address change and the receipt of service of process should be uninterrupted.
We value and appreciate your business and look forward to serving you from our new location.
All certificates of good standing may be validated at the Delaware Division of Corporations ink found here for one year from issuance. This means that the requesting party can confirm that it is a legitimate certificate, not a forgery. The date on the certificate means that as of the date of issuance...
A Certificate of Good Standing is a document issued by the Delaware Secretary of State that confirms that your entity is authorized to do business and has completed the following:
A Certificate of Good Standing may also be referred to as a "Certificate of Existence" or a "Certificate of Status". Other states may use their own preferred terminology to refer to this document.
There are two ways to obtain a Certificate of Good Standing in Delaware.
The first is to get one from the Delaware Division of Corporations directly. You can access the service here by utilizing the document upload feature. The Division of Corporations does not have an option to deliver the document to you via email so the turnaround time on these includes processing plus mail delivery time of the physical document.
The Incorporators Ltd. can obtain a Certificate of Good Standing from the Delaware Secretary of State for you. We offer an easy online form here and your Certificate of Good Standing will be delivered via email in a matter of hours.
If you order from The Incorporators, the turnaround time for a Delaware Certificate of Good Standing is the same day. In fact, we generally deliver your Certificate of Good Standing within hours, during normal business hours (M-F; 9:00am to 5:00pm EST). If you need a Good Standing immediately, you can select expedited for delivery via email within one hour.
Turnaround time when ordering from the state directly depends on which service you pay for and if you upgrade your shipping speed. Timing varies from days to weeks.
All certificates of good standing may be validated at the Delaware Division of Corporations link found here for one year from issuance. This means that the requesting party can confirm that it is a legitimate certificate, not a forgery. The date on the certificate means that as of the date of issuance, the company was in good standing with the state of Delaware.
That said, the party requesting the certificate of good standing my give you a time frame of how recent the certificate needs to be.
For instance, a bank you are working with to obtain a business loan may request a certificate of good standing before offering you a loan. They may request that the certificate of good standing be dated within 30 days, 60 days, 90 days, etc. It is up to the requesting party to determine how recent they'd like your certificate to be.
If you order a certificate of good standing from The Incorporators, you will receive the document via email and can then send the certificate to the party who requested it from you. They may then validate it and know that as of the date on the certificate, your company was in good standing with the state of Delaware.
If you have any questions about Delaware certificates of good standing, feel free to contact us or give us a call.
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By now all active Delaware corporations should have received a notification by letter, which included instructions for electronic filing of the annual report and payment of taxes due.
]]>Delaware law requires that all Delaware corporations file an annual report and pay any taxes and fees by March 1st of each year. Corporations who do not complete these steps risk having their charter voided for failure to comply.
By now all active Delaware corporations should have received a notification by letter, which included instructions for electronic filing of the annual report and payment of taxes due. The letter was mailed to the address that your registered agent has on file for you.
If you did not receive the letter, you are still able to file your annual report and pay your taxes; however you should reach out to your registered agent immediately to ensure they have the correct address on file for you.
Keep in mind, your Delaware registered agent needs your current address at all times in order to forward you any service of process received and help you maintain corporate compliance. Corporate compliance saves you time and money and it's the easiest way to avoid paying unnecessary fees.
There are the two options available for filing the Annual Franchise Tax Report:
To use our eFiling Service, click here or click the blue announcement bar at the top of the screen. Note: A $25.00 service fee applies.
The Division of Corporations website can be found here. You will be asked for your file number and may follow the prompts to pay your franchise tax and submit your annual report. Don’t know your file number? Look it up here.
Please note: Our office staff cannot complete the filing for your corporation. You MUST complete the form online.
If you have any questions, feel free to contact us here or give us a call at 800-223-3928.
]]>The operating agreement is the document that sets forth how your LLC will run. This document outlines several important elements of your LLC including:
The operating agreement is the document that sets forth how your LLC will run. This document outlines several important elements of your LLC including:
The operating agreement is an internal document with the LLC. Most states do not require a copy of the operating agreement to be filed with the secretary of state. Delaware requires LLC's to have an operating agreement but does not require a filed copy of it.
If you form your LLC with The Incorporators, we provide you with an operating agreement for your LLC which can be edited and utilized as you see fit.
You'll find plenty of examples of operating agreements online or you are welcome to work with an attorney or draft one yourself. Be cautious when using a free template and ensure that it is customized to fit the needs of your company.
Your LLC Operating Agreement should be kept up-to-date at all times.
LLC Operating Agreements are often changed for the following reasons:
If any of these changes take place, you'll need to update your operating agreement.
Some states require changes in membership be submitted to the state via an amendment to your formation document (with some inevitable fees paid). Delaware has no such requirement. Changes made to your membership may be made by the existing members with no notification to the Delaware Division of Corporations.
The Operating Agreement includes a Schedule A, which is a list of Members’ names and addresses, their capital contribution and percentage of interest in the company. This schedule would be updated to reflect any changes in membership.
Members are issued a membership certificate with the percentage of ownership listed (similar to a stock certificate). The company membership directory would then be updated. If you need membership certificates and a membership directory, you can purchase them from us here, whether or not you formed your company with us.
Other changes to the operating agreement can be done as amendments. An amendment is a simple document that clearly states the modifications to the original operating agreement and is signed by all members. This amendment becomes part of your operating agreement.
The details regarding how to approve amendments are set forth in your original operating agreement. Some companies require 100% approval by all members while others require a majority approval.
If you seek to change any of the information included on your original Articles of Formation document (such as the name of your LLC), you should file the amendment with the state of Delaware.
The Incorporators can assist you with filing an amendment. Please fill out this form and we'll get back to you promptly with details and pricing.
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Today we're answering all of the most common questions about Delaware corporate franchise taxes.
]]>If you have a Delaware corporation or are considering forming a corporation in Delaware, annual corporate franchise taxes and report filing will be a pivotal part of maintaining corporate compliance and keeping your entity in good standing.
Today we're answering all of the most common questions about Delaware corporate franchise taxes.
Delaware law requires that Delaware corporations pay an annual fee to the state called franchise tax.
Paying this annual tax keeps the business in good standing, meaning that the business is active and is recognized by the state of Delaware as a valid entity.
Corporate franchise taxes are due annually for all domestic corporations on or before March 1st.
Taxes for Delaware corporations are calculated using one of two methods: the Authorized Shares Method or the Assumed Par Value Method.
The minimum annual franchise tax is $175 for corporations using the authorized shares method and $400 for corporations using the assumed par value capital method.
Using the authorized shares method, the fees are as follows:
The Assumed Par Value Method is a more complex calculation using the figures provided in the corporations annual report. It utilizes the figures for all issued shares and gross total assets to determine the amount owed in taxes.
The tax rate under this method is $400.00 per million or portion of a million. If the assumed par value capital is less than $1,000,000, the tax is calculated by dividing the assumed par value capital by $1,000,000 then multiplying that result by $400.00.
If you’re unsure how much your corporation owes in franchise taxes, you can utilize the calculator provided by the division of corporations here (spreadsheet with calculations will download).
If you have any questions about how much you owe in taxes or need assistance, please feel free to give us a call at 800-223-3928.
The annual Corporate Franchise tax notifications are sent to your Delaware registered agent annually. Your registered agent is responsible for forwarding this notice to you. Some registered agents forward them by mail, while others scan and email them to you.
This is one reason it's crucial that your registered agent has your current contact information at all times.
Delaware domestic corporations must also submit their annual report to the state of Delaware. This is also due on or before March 1st.
The annual franchise tax and report can be filed and paid simultaneously on the state website. There is a $50 fee to file your annual report. This brings the total annual cost of maintaining a Delaware corporation to $225 for many corporations.
In accordance with Delaware law, corporations registered in Delaware must provide an annual report to the state.
The annual report must include:
If your corporation fails to pay annual franchise taxes or submit your annual report on or before March 1st, a $200 penalty will be assessed plus 1.5% interest per month on the taxes and penalty due.
This means that your corporation is no longer in good standing with the state of Delaware and you would be unable to get a certificate of good standing.
These are often required during typical business transactions such as:
More recently, many companies needed to produce a certificate of good standing during their Paycheck Protection Loan application.
If it has been two years since your corporation last paid taxes to the state, your entity may have gone void. This means that according to the state of Delaware, it no longer exists. While this is an urgent issue if it happens to your company, it can be swiftly fixed with a few key steps - here's what to do if your company is not in good standing.
Paying corporate franchise taxes and submitting an annual report are key elements of corporate compliance in the state of Delaware. We urge you to take these requirements seriously and are here to help with any questions or issues you may have. Feel free to contact us or give us a call at 800-223-3928.
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The Incorporators Ltd. will be closed on December 24th and 25th in celebration of the Christmas holiday. We will also be closed on January 1st for New Year's Day. All orders placed during these holidays will be processed on the next business day.
We would also like to remind you that if you need to close your business before year end, we will stop taking cancellation and dissolution orders on December 28th to ensure we can process them in time.
]]>The Incorporators Ltd. will be closed on December 24th and 25th in celebration of the Christmas holiday. We will also be closed on January 1st for New Year's Day. All orders placed during these holidays will be processed on the next business day.
We would also like to remind you that if you need to close your business before year end, we will stop taking cancellation and dissolution orders on December 28th to ensure we can process them in time. You can learn more about closing your business before the end of the year here. Feel free to contact us or leave us a message at 800-223-3928 and we will follow up promptly on December 28th.
We offer you our warmest wishes this holiday season and we wish you health and happiness in 2021.
]]>If it's time to say goodbye to your business, we can help you close up shop so that you're not accruing taxes in to 2021.
]]>It has been a challenging year, particularly for many small businesses. According to the US Chamber of Commerce, "Only four in 10 (40%) of all small business owners believe their business can continue to operate indefinitely without having to shut down permanently."
If it's time to say goodbye to your business, we can help you close up shop so that you're not accruing taxes in to 2021.
Delaware assesses taxes on all active entities annually on January 1. If your business was open for even one day of 2021, you will owe the full tax amount.
If you wish to close your business and do not want to pay taxes for 2021, you'll need to make sure your entity is officially dissolved or cancelled by December 31, 2020.
Legally closing your LLC is called a cancellation. Legally closing your corporation is called a dissolution. They both mean that your entity no longer exists.
Taxes and fees are due for Delaware corporations in March and for LLCs in June. Whether you have an LLC or corporation, if your business entity was open on January 1, 2021, you will owe the full tax amount.
It may seem easier to allow the state to administratively dissolve your corporate charter or cancel your LLC after a period of non-compliance with tax payments and filings. This strategy is risky, as it may result in issues such as mounting penalties, fees, and possible personal liability for judgments against the business.
The right way to formally conclude your business-related obligations is to file a dissolution of your corporation or a cancellation of your LLC with the state of Delaware. By doing so, you will end the existence of your entity.
If your business is qualified to do business in other states, you should file a withdrawal in those states as well.
Should you choose to file the dissolution or cancellation yourself, you can find the dissolution and cancellation forms on the state of Delaware website here. Select and complete the form which applies to your entity.
You will also need to fill out and include the required filing memo found here. You may then fax, upload or mail these forms along with the appropriate fees to the Delaware Division of Corporations (these may be found on the filing memo).
Keep in mind, the processing time for your documents will be longer because you do not have direct access to the Delaware Corporate Information System. Only Delaware registered agents do. The USPS is experiencing delays and therefore we would not recommend using that method of submission if you want to ensure processing before year end.
Once the state has finalized your cancellation or dissolution, you will receive a filed copy of your documents in the mail.
The advantage of using a Delaware registered agent (like The Incorporators), is that we have direct access to the Delaware Corporate Information System and can therefore cut down on the processing time of your dissolution or cancellation. This ensures that your documents are processed by year end and may save you the cost of taxes for 2021 if your paperwork does not reach the state of Delaware in time to be processed in 2020.
If you wish to utilize our services, we handle all paperwork and you will receive your filed copy of your documents via email in days. You can begin the process by submitting our form here and we will respond promptly with the next steps.
The Incorporators will stop taking cancellation and dissolution orders on December 28th, to ensure that we can process them fully by year end.
If you have any questions about closing your Delaware entity, feel free to give us a call at 800-223-3928 or email us at info@theincorporators.com.
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