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The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.

What is a Delaware LLC Certificate of Formation?
By Devin Scott Tuesday, February 21, 2017

What is a Delaware LLC Certificate of Formation? delaware LLC certificate of formation

 

The Certificate of Formation is the document you receive from the state of Delaware once your LLC is filed and approved by the Delaware Secretary of State, Division of Corporations. 

 

The Delaware LLC Certificate of Formation is akin to a birth certificate for your newly-created Delaware LLC.

 

Your approved and original Certificate of Formation, which will be emailed to you, is a black and white document with a time-stamp and date-stamp in the corner that indicates it has been approved by the Delaware Secretary of State.

 

This Certificate of Formation is the only document you are required to file in order to create a Delaware LLC. The Delaware LLC Certificate of Formation remains on file with the Delaware Secretary of State, and is required to contain only three items:

 

 

  • the name of the Delaware LLC
  • the address of the Delaware LLC's registered office
  • the name and address of the Delaware Registered Agent

 

The ownership, operation and management of the LLC are set forth in the company's LLC Operating Agreement, which is not required to be filed with the state and can therefore be changed without the company ever having to pay a fee to file an amendment.

 

Should I Add Information to my Delaware LLC Certificate of Formation?

 

You can, if you so desire, elect to add additional information to your Certificate of Formation. This is a personal choice with advantages and disadvantages. 

 

Some people want the LLC's members' names listed on the Certificate, or the titles of the LLC's members, or perhaps the physical business address. These people typically feel more secure in knowing their name has been filed with the state as a member of the LLC, in case a dispute over ownership should arise at any point.

 

One of the disadvantages of listing extra information on the Certificate is that in order to make any changes, an amendment must be filed with the state. Not surprisingly, the state charges a hefty fee to file an amendment; the thought of this superfluous fee is unappealing to many clients, which is why most people choose not to list any additional information on their Certificate of Formation.

 

If you are preparing your own Delaware LLC Certificate of Formation, your name will be listed on the Certificate as the Delaware LLC's authorized person; this is is why many people opt to have us act as their Delaware Registered Agent.

 

We can prepare the Delaware LLC Certificate of Formation for you, which allows you to take full advantage of the privacy offered by the Delaware LLC Act.

 

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W9 Form: When and Why to Use It
By Andrew Millman Monday, February 20, 2017

We are asked many questions about W-9s by business owners and entrepreneurs, so we thought a brief blog on the topic might be helpful. However, as is the case for all other tax-related issues, questions, or concerns it’s always best to reach out to a tax professional for any in-depth discussions regarding the W9.

what is a w-9

What is a W9?

The W-9 is typically used to request tax information from freelancers, independent contractors and other self-employed people.

 

Who needs a W9? 

Anyone who does work for a company but is not a full-time employee of the company should fill out the W-9 federal income tax form. Freelancers and independent contractors may have to fill out many W-9 forms, depending on how many companies they work for over the course of a year.

Consultants are also required to fill out a W-9 for each company they consulted with throughout the year.

 

How do I get a W9?

The W9 form can be downloaded from the IRS website.  

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How to Do Business in Wyoming with a Delaware Company
By Devin Scott Tuesday, February 14, 2017

operate a delaware corporation in wyoming

When it comes to incorporating your business, Delaware is more often than not the popular choice. Delaware has for many years been recognized as having the strongest corporate law structure.

 

Delaware is known for its strong corporate veil, which puts up a metaphoric wall between your business assets and your personal assets. If a company ever has an issue with liability, most business owners would rather have incorporated their business in Delaware in order to be under the protection of Delaware’s business-friendly law structure.

 

When incorporating in Delaware, your business is domestic to Delaware and foreign to every other state. If your business will have a physical presence by operating, hiring employees, banking or even holding an asset in a state other than its state of incorporation, owners often foreign qualify the business to operate in that state as a foreign entity.

 

This process is called Foreign Qualification. If you would like your Delaware LLC or corporation to operate in the state of Wyoming, you will have to file for Foreign Qualification in order to be granted the authority to do business in Wyoming from the state.

 

The document that Wyoming issues to prove you are foreign qualified is called a Certificate of Authority. There are several steps you must complete in order to obtain a Certificate of Authority from the state of Wyoming so that you may operate your Delaware company there.

 

Wyoming, like many states, has a state fee, an application process and also requires a Certificate of Good Standing from Delaware. Please note that the Delaware Certificate of Good Standing must be less than 60 days old. Wyoming also requires that you have a Registered Agent in the state of Wyoming.

 

Once you have completed the Foreign Qualification process and are registered as a foreign entity in Wyoming, please keep in mind you will be responsible for the Wyoming annual fees as well as the Delaware compliance fees. Wyoming’s annual report will be due on the first day of your anniversary month of the registration.

 

For assistance with your Wyoming Foreign Qualification, Registered Agent Service or if you have any additional questions, please feel free to call us at 1-800-345-2677, Ext. 6130 or email us at sales@delawareinc.com.  

 

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Proof Delaware Is The Most Corporate-Friendly State
By Meri Weiss Monday, February 13, 2017

why Delaware is the incorporation capital

Delaware: King of Corporations

The Delaware Division of Corporations 2015 Annual Report has just been published and distributed by Rick Geisenberger, Chief Deputy Secretary of State and Director of Corporations.

Once again, Delaware’s dominance cannot be denied.

There is simply no better state in which to incorporate a company in the United States than Delaware.

No matter what type of company you’re thinking about forming—corporation, Limited Liability Company or Limited Partnership—Delaware is by far the best state in which to incorporate!

Think we’re exaggerating? Check out this data:

  • More than 178,000 entities were formed in 2015, a five percent increase from the previous record of 169,000 entities in 2014.
  • 86% of all IPO’s in 2015 involved a Delaware General Corporation, such as Go Daddy, Shake Shack and Square.
  • 66% of all Fortune 500 companies were incorporated in Delaware, a 58% increase since 2000.

And check out this staggering statistic:

The total number of legal entities formed in Delaware increased to 1,181,000 in 2015, a 38% increase since 2008.

Let’s break it down by types of business entities, shall we? Here are the numbers of new business formations in 2015:

  • LLCs:                 128,042 (up from 121,592 in 2014)
  • LPs:                   10,746 (up from 9,721 in 2014)
  • Corporations:       38,288 (up from 36,445 in 2014)
  • Statutory Trusts:  1,645 (up from 1,208 in 2014)

That’s not all, folks.

The general fund revenue collected by the Delaware Division of Corporations in 2015 hit $1 billion for the first time. One. Billion. Dollars.

But wait…there’s more!

There were also several positive changes to Delaware Business Entity Laws, including:

  • Legislation that forbids Delaware corporations from requiring shareholders who unsuccessfully sue the corporation to pay the company’s legal fees.

 

  •  Exclusive forum clauses were approved, which let companies elect Delaware as the mandatory forum in which internal corporate lawsuits must be settled even if they are not Delaware companies.

 

  • The Delaware Rapid Arbitration Act gives companies around the world a “fast-track arbitration option to resolve business disputes.” The Delaware Rapid Arbitration Act puts time limits on any arbitration process so as to decrease both the time and money spent by Delaware companies on arbitration. It also proposes an opportunity for companies to avoid in-depth pre-hearing evidence in favor of a more time-efficient, less expensive solution to their disagreement.

 

  • An amendment to the Delaware Limited Liability Act was also approved. The amendment confirms that the “irrevocability of powers of attorney apply also to proxies.” The amendment also “confirms that the Delaware Secretary of State can issue public records in the form of photocopies or electronic image copies.”

 

Data doesn’t lie, ladies and gentlemen—Delaware is clearly the conquering hero of all the supposedly corporate-friendly states in the nation.

 

Source: Delaware Division of Corporations 2015 Annual Report.

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The Dead, The Walking Dead and Zombie Trademarks
By HBS Tuesday, February 7, 2017

trademarks

QUESTION:

The trademark I want to use and register, Zomboid, is marked Dead on the United States Patent and Trademark (“USPTO”) Register. Can I go ahead and use it on my products (video games) and register it as my trademark?

 

ANSWER:

As with most legal questions, the answer is, it depends. Dead can mean a lot of things in trademark lingo. There’s Really Dead, The Walking Dead and what we call Zombie Trademarks, the ones that can rise from the grave to walk again in interstate commerce and make your life miserable.

 

Patents and copyrights expire, but a trademark can live forever, as long as it’s being used commercially. Sometimes, an owner will stop using a trademark, with no intent of using it again because he/she has changed branding strategies.

 

This is called “abandoning” a trademark (AKA Really Dead) and abandonment is presumed after three years of non-use; it is also grounds to seek cancellation of a Registered Trademark. However, there are a lot of hurdles to jump in order to find out if a trademark is Really Dead and therefore available to you.

 

Dead Trademark Applications

In the case of applications for trademarks that have been filed in the USPTO, a trademark can be abandoned while the application is in the works or after it has been registered.

 

So, in the case of Zomboid, for example: a trademark application for toys and games was filed by Mattel back in 1992 and again in 2004. Both are now marked as Dead and abandoned in the USPTO.  

 

That sounds good, right? Yes, but we need to know more. Upon digging into the USPTO file, we see that Mattel apparently lost interest in the Zomboid trademark. Its applications went all the way through the year-long process, but Mattel then failed to submit proof it had started using Zomboid for toys and games.

 

Since the last Zomboid application was abandoned over ten years ago, this is a pretty good indication that Zomboid may be available now, but it’s not a certainty. The USPTO Trademark Register changes every day and there are over 5 million active trademarks of record now.

 

A check of Mattel’s website for Zomboid and a general Google search for Zomboid could reveal that Mattel, or another company, is now using the Zomboid trademark. Even if that person, or company, never filed an application to register the trademark Zomboid it would have “common law rights” flowing from actual use of Zomboid and your application for the trademark could be successfully opposed by that user.

 

In other cases where an application is marked abandoned it may be because the applicant missed a due date to respond to an examining attorney’s inquiry or objection (called an “Office Action”).

 

While a trademark is moved to The Walking Dead zone shortly after such a failure, it can easily be resurrected for up to two months by paying extra fees and filing a Petition to Revive. In other cases, the application may have been refused for any one of a number of legal reasons, and that could mean yours will be refused as well.

 

A Dead application that is marked as Withdrawn is the worst case of all. Almost no one withdraws an application, even if they have lost interest in the trademark, unless they have been forced to do so.

 

Usually, unwanted trademark applications simply die a natural death, expiring for lack of attention. However, a withdrawal usually indicates a legal fight has taken place, and the applicant settled the matter by withdrawing its application. This is a big red flag.

 

Even after clearing the above hurdles, you need to do, or have a professional do, a proper trademark search to determine if Zomboid is currently registrable. Are there other similar trademarks that have been filed in the meantime, which may be considered “confusingly similar” by the USPTO? This would include Zombie Boy, Zom-Boyd, Zomboy, Zombie-Oid and other variations.

 

Dead Trademark Registrations

What about actual trademark Registrations that are marked as Dead? Usually, these are noted as Canceled, and that usually means they were not properly renewed. 

 

In many cases, however, the trademark owner does not even know the trademark has been cancelled. The USPTO sends only a single courtesy reminder of renewal to the last address on file.

 

Many a trademark owner has been horrified to find his/her trademark has been canceled and rushes to file a fresh application. So your Zomboid application could be formally opposed by the original owner of the cancelled trademark on the basis of earlier use and/or a failure to renew on time.

 

However, the Registration might also be canceled because another party filed a Cancellation Action against it. Tread with extreme caution over these gravesites! Often in these cases, someone wants this trademark, or something similar, very badly.

 

Zombie Trademarks

A recent example of how a Zombie Trademark can still live and walk among us occurred last year. A company called Strategic Marks LLC sought to file trademark applications for long abandoned Macy’s trademarks. The matter was finally resolved after Macy’s sued, by a court-ordered settlement.

 

Macy’s was allowed to keep some of its heritage brand marks, including Marshall Field’s, on the basis that the public still had residual feelings and recognition of them, and could be confused into thinking that Macy’s itself was re-opening stores under this name. Marshall Field’s is therefore a true Zombie Mark, walking again after 15 years of abandonment by Macy’s.

 

Normally, three years of non-use is considered legal abandonment of a trademark. Strategic Marks LLC still managed to secure trademark rights to Bullock’s Department Store and May Company, among others. 

 

Thus you need to play detective to figure out if you can use and register a trademark without a legal challenge. Start by investigating the USPTO file; find out all you can about the reason the trademark application or registration was abandoned or canceled. 

 

Then do even more due diligence: search the previous owner’s website, do a Google search, an Amazon search and all other Internet searches that may reveal you more information about the trademark and who may be using it now. Lastly, obtain a professional search opinion as to whether the trademark you want is now registrable in the USPTO.

 

 

 

Written by Sylvia Mulholland

Trademark Attorney

Law Offices of Sylvia Mulholland

http://www.mulholland-law.com

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