The HBS Blog on Delawareinc.com provides Delaware incorporation information and general business news you need to know now.
After almost six months since the end of the 2014 calendar year, the Delaware Secretary of State has finally released the much-anticipated Annual Report, which highlights the accomplishments of the Delaware Division of Corporations for the 2014 year. Once again, there were statistics that stood out, including a record breaking 168,966 new company formations, an increase of over 65 percent since 2009. The Delaware limited liability company continues to flourish, and is the most commonly formed entity in the state of Delaware, accounting for 72 percent of all new business formations in the state. Since the LLC eliminates the formalities associated with corporations, such as bylaws, meetings, maintaining minutes of meetings, having a Board of Directors, issuing stock, appointing officers and other corporate formalities, the LLC can be used to operate very different companies, such as a simple holding company, a consulting firm or a plumbing company. Thus an LLC entices all types of people since it is easy to operate and oversee due to the lack of corporate formalities. The corporation, on the other hand, is still used by many people trying to raise capital by selling shares of stock, and it accounted for 21 percent of the new formations in Delaware in 2014. The state continues its dominance in the publicly-traded markets, accounting for almost 66 percent of all the Fortune 500 companies. Companies looking to offer Initial Public Offerings (IPO) almost always choose Delaware. In fact, over 88 percent of all IPOs chose Delaware in 2014, up from 76 percent in 2010.
Delaware enacted legislation allowing for a Public Benefit Corporation to be incorporated in the state of Delaware on August 1, 2014. The Public Benefit Corporation is similar to the General Corporation and is a for-profit entity; however, a portion of the profits are directed toward a particular benefit instead of all profits being distributed to shareholders. This unique business structure allows for a company to improve the world while also paying dividends to shareholders. In 2014, there were only a total of 158 Public Benefit Corporations formed in Delaware, but Harvard Business Services, Inc. is proud to be the Registered Agent for 20 percent of the total Public Benefit Corporations formed in the state.
The state of Delaware strives to keep Delaware Corporate Laws as dynamic and strong as possible in order to continue attracting business people from around the world. The Delaware Corporate Law structure and the Division of Corporations are an integral part of Delaware’s economy. Amazingly, 26 percent of the state of Delaware’s revenue originates from fees paid to form a Delaware company, file amendments, and retrieve documents and other filings, as well as annual state Franchise Taxes. As a resident of Delaware, I feel it is extremely important for Delaware legislators to focus on keeping Delaware the “Incorporation Capital.” Delaware is currently one of the few states without sales tax, primarily because of the income generated by its status as the “Corporation Capital” of America.
For any questions about Delaware companies, or if you would like to form a Delaware LLC or corporation, please feel free to contact me at 800-345-2677, Ext 6131 or email me email@example.com.
Citation: Delaware. Delaware Divison of Corporations. “2014 Annual Report.” Corp.delaware.gov. Delaware Divison of Corporations. n.d. Web. 10 August 2015.
Can you imagine using the same computer database you had in 1989? As absurd as it sounds, this is exactly where the Delaware Division of Corporations has found itself toward the end of the year 2015. However, that is about to change.
For the past several years, the Delaware Division of Corporations has been working on a new computer platform. This platform is scheduled to go live on September 8, 2015 at 8:00 AM EST. In preparation of this date, the Delaware Division of Corporations will be closing for business at 4:30 PM EST on Thursday, September 3, 2015. No filings (including Franchise Tax payments), document retrievals or even information searches can be processed during this time.
The Division of Corporations has chosen to launch its new platform over the Labor Day weekend in order to minimize the number of business days it will be offline. However, the closure will still cause delays in approval times for filings submitted the week of September 8, 2015. We also expect delays on the filings submitted before the closure on September 2nd and September 3rd.
At Harvard Business Services, Inc., we understand how important it is for you to receive your filed documents as soon as possible after filing. In order to minimize the inevitable delays due to the Division of Corporation’s closure, we are announcing the following work schedule for the week preceding the closure:
Monday, August 31 and Tuesday, September 1: All filings will be submitted via standard procedure with the Delaware Division of Corporations. We do not anticipate any delays on these orders.
Wednesday, September 2: All filings will be submitted with complimentary expedited service – at Harvard’s expense -- in the hope that our clients will receive their approved filings before the Division of Corporations shuts down its database the following day. Any document not approved before the closure will be among the first to be approved once the system returns online.
Thursday, September 3: Again, all filings will be submitted with complimentary expedited service in the hope that our clients will receive their approved filings before the Division of Corporations shuts down its database at 4:30 PM EST. Any document not approved before the closure will be among the first to be approved once the system returns online. All filings submitted to us by 4:00 PM EST will be entered into the Delaware Division of Corporation’s database that day. All filings received after 4:00 PM EST will be filed on Tuesday, September 8, 2015.
Friday, September 4: The Delaware Division of Corporations is closed. Our office will be open until 12:00 PM EST. We will be accepting orders, all of which will be processed on Tuesday, September 8th when the Division of Corporations re-opens for business. However, no filings will be processed by the State on this day.
Tuesday, September 8: Normal business resumes at both the Delaware Division of Corporations and Harvard Business Services, Inc. However, please expect significant delays, as approval and processing times may take longer than what is stated on our website. We will work diligently to process all orders as quickly as possible, but delays will be inevitable. If possible, please plan ahead and submit orders early in the week of August 31st. We at Harvard Business Services, Inc. truly appreciate everyone’s patience during this time.
The Delaware Division of Corporations’ official message about its system upgrade and closures can be found here: follow this link.
The Delaware general corporation has had the strongest type of company structure in the United States since the late 1800s, when major entities, such as the railroads, Standard Oil and The DuPont Company, needed to arrange themselves into organizational structures that could provide for the governance of the companies once they had grown beyond their famous founders. The general corporation is perfectly designed as an entity for engaging in business, yet it also provides a way to raise capital, as needed, throughout the life of the company.
In its simplest form, the general corporation has three tiers of power: the shareholders, the Directors and the officers. The shareholders own the company; the Directors manage the company; and the officers run the company on a day-to-day basis. The bylaws of the company set forth the powers and the limits of power in each of the three tiers. Each group may have separate priorities, and they may clash occasionally. When one tier rises up against the others, a takeover battle may ensue; takeover battles are usually fought and resolved in the Delaware Court of Chancery. In this unique business court, a single judge decides the case—there are no juries, no tribunals and no 12 angry men. One judge determines—quickly—which party shall prevail, according to 200 years of laws and legal precedents. It is said that the Chancellors of the Court respect the good faith decisions of Directors over the profit priorities of shareholders, but a majority of shareholders can generally elect a new Board of Directors if they don’t like their current Directors.
The rules on how these three tiers interact with each other are embodied in three general knowledge bases. The code, which is the written law passed by the state legislature (in this case, the Delaware General Corporation Law); the case law, handed down by the Delaware Court of Chancery and the Delaware Supreme Court over the past 200 years; and Letter Rulings, which are individual, judicial decisions on a myriad of minute details that come up in court cases.
Stockholders are granted two rights that Directors and officers are not permitted: the right to vote for the Board of Directors and the right to share in the dividends of the company when the Directors declare dividends. The shareholders, however, cannot operate the company; they cannot walk in and start telling people what to do. They act as a group, in a meeting, not individually. (Unless one person owns more than 50% of the company, in which case s/he could control the entire company and all three tiers of power.)
The Board of Directors also acts as a group in meetings. Directors generally do not act individually. Meetings must be announced in advance, to all Directors, and each meeting much be attended by a majority of Directors in order to be a legal meeting. The Board of Directors makes all the important decisions in the company; it is responsible for company policy and overseeing the managers. The Directors determine what the company will do with its profits, and they control the sale of stock in the company. They hire the officers of the company to run the business on a day-to-day basis.
The officers work at the pleasure of the Board of Directors, or by contract with the Board of Directors. Officers are usually the President, Vice President, Secretary and Treasurer, but the company’s bylaws can prescribe any officers and their titles, responsibilities and duties. Officers are responsible for the conduct of the company as well as the profitability. If they fail, they usually get fired, quickly; if they succeed, they become superstars.
This unique structure, with its three mandatory tiers of power, deserves a great deal of credit for the success of the American Industrial Revolution, the American economy (since 1900) and the success of Wall Street itself. This structure differs greatly from other forms of company organization, such as the sole proprietorship or the partnership, both of which precede it, as well as the limited liability company, which followed it chronologically.
If your vision is to form a big company, like Apple, Google or Dell, you couldn’t pick a better corporate organizational structure than a Delaware general corporation.
It used to be that banks offered toasters or beer cozies for opening a new account, but since the Dodd-Frank Act, bankers are more concerned with not opening accounts for the wrong people than they are about finding new clients. Many bankers in big cities are fearful of any new customer who walks in requesting to open a new account.
For this reason, walking into a bank to open up a business account for your newly-formed Delaware company can be stressful. Banks and bankers are a diverse group, each with their own set of suspicions and biases. They fear the regulators more than they want your business.
However, if you walk in prepared, your chances of opening an account without being cross-examined or embarrassed are greatly improved. In fact, if you have a clear idea of what you’ll be asked to present and already have it in your briefcase, opening a business bank account can actually be a stress-free event.
First, let the bank representative know right away what your new company does and why you’ll need a bank account. This may sound obvious—every company needs a bank account—but think about it this way: the first thing the bank representative will have to explain to his/her supervisor is what you’re doing with your new company and why you want a bank account. Try to tailor the following explanation to your situation:
“Hello Mr. Jones, I’m John Adams and I’m planning to open a restaurant here in [insert city]. I’m going to need a banking relationship in order to lease a location, hire employees and accept customers’ credit cards.”
Now you have answered the first question he/she will have to relay to his/her supervisor and banking regulators.
Next, you want to establish a connection between you and the bank. Try this line, using your own referral: “Tom Smith from XYZ Company suggested I speak with you, and highly recommended the customer service at your bank.”
Now the bank representative is feeling great about opening an account for you, because you have a good reason to need a bank account and there is a pre-existing connection between you and the bank.
At this point, you can continue to impress the bank representative with the documents in your briefcase, which should include:
You might also have a Banking Resolution already prepared, but banks usually have their own forms they prefer to use. A banking resolution can also be in the form of corporate minutes of a meeting of the members with a special resolution giving you the power to open a bank account at a specific bank. We are happy to share this example of a banking resolution with you.
Remember, you can call Harvard Business Services, Inc. from the bank if there are any questions about your Delaware company, or if you need any documents emailed to you while you wait.
You've been in a band for five years. Your band has been gigging regularly, both locally and statewide. That is fantastic! New musicians are discovered every day, and there is always a need for exciting new music. Here at Harvard Business Services, Inc., we have been helping musicians create Delaware LLCs and corporations since 1981, and we would love to help you.
First we should clarify why musicians—typically the last people to consider themselves business people—should actually be very keen to incorporate their bands. It's the smart thing to do, on many levels.
The reason a band should incorporate is because most musicians’ dreams are to become the next Rolling Stones, Mumford & Sons or Maroon 5. However, in order to do that, you have to attract the notice of an A&R representative and then get signed to a record label. Say your dream comes true and a record label likes your band and wants to help you create music for the masses—amazing! However, that record label wants to sign your band, not a group of individuals. The label is not investing in you solely, it is investing in your band, and the label wants to see that your band is in an LLC or corporation. Incorporating your band accomplishes several things for you. It:
For more in-depth information, visit our asset protection for musicians page.
The second question musicians should consider is: "What type of company should a band form?"
Typically, a band chooses to form an LLC. The LLC is by far the most popular type of company formation, as it has fewer corporate formalities and allows you to operate your business as you see fit. The LLC is governed by a contract, called an Operating Agreement, which all members agree upon; by utilizing your LLC's Operating Agreement, you can shape the company structure to fit your specific situation.
The final question your band should be pondering is: "How do we incorporate?"
Incorporating a band is as easy as calling Harvard Business Services, Inc., the leading business formation company in Delaware. You can call us at 800-345-2677 or form an LLC online, If you have any questions about incorporating your band or questions about forming a Delaware LLC, you can also email or live chat with us.
Remember, when you’re ready to incorporate your band, Harvard Business Services, Inc. will be ready for you.