The HBS Blog
Companies Served Since 1981

The HBS Blog


Providing Delaware incorporation information and general business news you need to know now.

Is Your Delaware Company in Good Standing?
By Amy Fountain Tuesday, February 24, 2015

There will be times when you’ll need to check on the status of your Delaware entity and possibly obtain a certificate of good standing.  Perhaps you are applying for a bank loan.  Possibly you are filing a foreign qualification in another state.  Maybe you are entering into a contract with a third party.  Or maybe your entity is merging with another entity.  Whatever the reason, you will need to perform a quick search to ensure the company is still considered active and in good standing with the state of Delaware.  Companies that do not meet these qualifications are unable to proceed with transactions such as these.

Your search may begin directly with the state of Delaware website.  Their website provides limited information about entities formed in this state.  You would be able to determine the exact name of the entity, the Delaware state file number, formation date, entity type/kind, residency and details of the registered agent.  These are basic details about the entity, and do not reveal any internal information regarding the company.

Upon viewing the search results, the state of Delaware website explicitly states "This is not a statement of good standing."  Do not worry, this does not mean that your company did not qualify.  It simply means that the details noted on the website are not the equivalent of an actual certificate.

The state of Delaware has an official document called a “certificate of good standing” which is also known as a “certificate of existence”.  This document is printed on special paper, indicates several specific points about the entity and is signed by the secretary of state of Delaware.  Generally, this is the legal document that would be needed to prove that the entity is actually in a good standing status with the state of Delaware.

Therefore, the difference is that you would not be able to use the quick search results on the state of Delaware website to validate the status of your entity.  If you need to provide proof of your status, then the certificate of good standing must be obtained.

If you need to determine the status of your Delaware entity, you can simply contact our office and we will be happy to assist.  We have direct access to the state of Delaware database and can tell you immediately if your company is in good standing or not.

Should you need an official certificate of good standing document, then we can obtain a copy for you as well.  You can visit our good standing section and place an online order for the document.  We will obtain it from the state and send it to you the same business day.

If it is determined that your entity is not in a good standing status, we can also provide all the necessary information to help you restore the company, and take care of everything for you.

If you have any questions, simply contact our office at 1-800-345-2677, extension 6904 and a representative will gladly help.

Facebook Twitter Google Reddit LinkedIn
Your Delaware Corporation Franchise Tax Is Due By March 1
By Amy Fountain Monday, February 23, 2015

March 1, 2015 is a Sunday ... . Why do you need to know this?  Because every corporation (not LLC) that is incorporated in the state of Delaware is required to file an annual report and pay a franchise tax fee by March 1 of each year.  But just because the deadline falls on a Sunday, it does not mean that the state of Delaware will extend the due date until Monday.  You must file and pay the annual franchise tax report by March 1 or the state of Delaware will automatically impose a $125 late penalty plus interest. 

We can assist with the filing of the franchise tax annual report for your entity for a small service fee.  If you have not paid and filed your Delaware franchise tax report yet, you need to take care of this TODAY! Pay your Delaware corporation franchise tax by clicking here.

To get started with the online franchise tax filing, you simply need your exact company name and Delaware state file number.  We can perform the franchise tax filing, regardless of whether Harvard Business Services is your Delaware registered agent.

To ensure that all franchise tax filings are properly filed with the state of Delaware by the deadline, we must impose a cut-off time.  This will allow our office to accurately process all annual reports in our possession before the deadline.

Our office schedule on Friday, Feb. 27 is as follows:

  • At 2 p.m. EST, we will no longer be accepting any new franchise tax payments via telephone, fax or email.  The ONLY filings we can accept after this time is via our website at:  www.delawareinc.com/payft.  
  • At 5 p.m. EST, our office will be CLOSED.  We will be unable to answer any telephone calls, correspond via live chat, respond to emails, etc.
  • At 8 p.m. EST, our website WILL NOT accept any more online franchise tax payments. 

After 8 p.m. EST on Feb. 27, we will no longer be able to take any franchise tax payments in any form.  You will need to contact the state of Delaware directly to make payment and filing arrangements.  Their direct contact details are as follows:

Website:  corp.delaware.gov

Telephone:  302-739-3073

If you have any questions about the franchise taxes and the deadline, please telephone our office at 1-800-345-2677 or 1-302-645-7400, extension 6901.  You can also email your questions to franchisetax@delawareinc.com.

Facebook Twitter Google Reddit LinkedIn
Common Tax ID Number Questions for Delaware LLCs -- Answered!
By Brett Melson Tuesday, February 17, 2015

Once a Delaware LLC has the certificate of formation stamped and approved by the state of Delaware, the next natural step is to obtain a federal tax ID number, also known as an EIN, from the IRS.

An SS-4 form is completed and submitted to the IRS in order to generate the tax ID number. When applying for the EIN number, there are a number of questions that will be required to be complete the SS-4 application.   This post will help to clear up the questions that many clients get stuck on when applying for the tax ID number for the Delaware LLC.

Name of the LLC- What was the exact name submitted to the Delaware Division of Corporations office, be sure to include the full name with the LLC at the end.

To whom should notifications be sent- The IRS would like to know with whom they should communicate; this person can be located anywhere in the world. Some examples could be the LLC’s member, manager, tax professional or attorney.

Mailing address of the LLC- Where the tax related matters should be sent, this does not have to be an address in the US

County and state where principal place of business is located- the IRS needs to know exactly where in the world this will be.   The principal place of business can be located anywhere in the world and does not have to be in the US

Name and social security number of the responsible party – typically this information is one of the members of the LLC.   Keep in mind that a member of a Delaware LLC does not have to be located in the US or a Citizen of the US.   The member can be located anywhere in the world.   If the member does not have a Social Security Number, that is acceptable.   However, if the member does have a SSN the number must be provided.

How is the LLC going to be taxed- This is a crucial step and can have drastic tax consequences for the LLC.   Typically the LLC will automatically be classified as a partnership, if the LLC has more than one member. If there is only one member the classification is a sole proprietorship (for a single-member LLC) for federal tax purposes.  What this means is the LLC will have the asset protection the LLC affords, but the taxation is the same as a partnership (for a multi member LLC) or a sole proprietorship (for a single member LLC).    An LLC will typically be required to file the same exact federal tax forms as a partnership or sole proprietorship when it comes time to prepare and file the Federal tax returns with the IRS.

An LLC may elect to be treated and taxed as a S corporation or a C corporation by the IRS.  It may be a good idea to consult a tax professional regarding the consequences / benefits of making the S or corp election with the IRS.

Clients can change the classification with the IRS at any time down the road with the help of a tax professional.

Date the business was started or acquired- this is typically the date of formation of the Delaware LLC

Closing month of the accounting year- to keep things simple most of our clients choose December, unless specifically instructed by their tax professional to choose otherwise.

Highest number of employees expected- This information can always be updated and is hard for new companies to gauge since there are many factors that come into play.   Clients typically do their best to estimate this figure.

Select a category the LLC best falls into- There are 12 categories. Do your best to choose one. If you're unsure, there is an option of "other."

Brief description of the business- Do your best to tell the IRS a little bit more about what the LLC will be doing.   If construction was selected as a category, what type of construction?    If other was selected as a category, provide a brief description of the activities.

Don't let the process of obtaining a tax ID number for your Delaware LLC intimidate you! HBS offers a service to quickly and easily obtain a tax ID number for the newly created Delaware LLC and take the stress and aggravation of dealing with the IRS away!

Facebook Twitter Google Reddit LinkedIn
"Do I Need a Business License?"
By Michael Bell Monday, February 16, 2015

You’ve formed your business entity, obtained your tax ID number, and foreign qualified in your home state...now what? You may be wondering, "Do I need a business license?" Before you can open your doors you must obtain the necessary business licenses and permits required for your business. Licenses may be required by the federal, state and local governments, depending on the type of business. Don’t get caught without the proper licenses! Failure to obtain these licenses can result in costly penalties and even potential closure of your business.

A business license is an approval or permit issued by a government agency that authorizes a business to operate within a specific jurisdiction. This license is often an additional requirement beyond the registration of a business at the state level. Whether a business is required to have a specific license depends on such factors as the activities of the business, types of products sold, and location. Government authorities use business licenses to regulate business behavior and protect the public. License fees are also commonly used as a way to tax businesses operating within certain jurisdictions.

Some licenses are required of all businesses operating within a jurisdiction. These include:

  • Basic Business Licenses
  • Payroll Tax Registration (if there are employees)
  • Sales Tax Registration (if it sells tangible goods or performs taxable service)

Many licenses are industry specific. Commonly licensed industries include:

  • Healthcare: Pharmacy, Wholesale Drug Distributors, DME, etc.
  • Debt – Collection Agency, Debt Buyers, Debt Settlement etc.
  • Insurance
  • Construction – roofing, electric, plumbing, home improvement, etc.
  • Charities
  • Tobacco – wholesale and retail
  • Telemarketing
  • Retail sales
  • Security – Guards, Agencies, Alarm Companies, etc.
  • Energy Broker
  • Engineering

And many more…

State regulatory agencies take great pains to identify and penalize unlicensed business operations. Unlicensed businesses diminish the integrity of the profession, create undue competition for properly licensed businesses, and often provide inadequate goods and services. What are the consequences of not having a business license? Any business operating without a license, or with an expired license, may be subject to penalties, such as harsh fines and/or cease-and-desist orders.

With over 40,000 different licensing jurisdictions, determining and obtaining the proper licenses can be a daunting task. We can help! Through a strategic partnership with LicenseLogix, a leading license compliance firm, we will meet all your business licensing needs! Please visit our business license page for details.

Facebook Twitter Google Reddit LinkedIn
High Corporation Franchise Tax Bill? Don't Panic.
By Amy Fountain Tuesday, February 10, 2015

If you have a Delaware corporation (not LLC), then you know the franchise tax fees are due by March 1 of every year.  If your corporation also has over 5000 total shares of stock authorized, then you may have been surprised to have received a high Delaware corporation franchise tax bill from the state.  This is because the amount due can range anywhere between $400 and $180,000.  If you received one of these bills, don’t worry, we can help break down the situation for you.

The state of Delaware has two methods to calculate the franchise tax fees due.  The first method, which is called the authorized shares method, assesses X dollars per X number of authorized shares.  This method works on a graduated scale, so the amount will vary based on your specific entity details. This is how the state has figured your tax on the form we sent you.

The alternative method is known as the “assumed par value capital” method.  Under this method, the state uses a formula that takes into account the relationship between the authorized shares, issued shares, par value and gross assets in order to calculate an adjusted amount due.  In most cases, the amount of franchise tax due is significantly reduced when filing with this method. 

The best part is that you get to pay the amount due that is the lessor of the two methods.  So if the amount due via the authorized shares method is $7500, but the amount due via the alternative method is $400, you will only pay the $400.  Quite the discount!

Since the franchise tax is an annual filing, this calculation process must be done each and every year in order to maintain the corporation’s existence.  But what if you don’t want to go through this procedure every year?  Well the state of Delaware imposes a flat rate of $225 for any corporation that has less than 5000 authorized shares.  So in some situations, the option of filing a stock change amendment to reduce the number of authorized shares can be implemented. 

While the stock change option may work for some corporations, make sure you are aware of the entire situation.  You cannot retroactively file a stock change amendment to try and reduce a prior year’s franchise tax assessment.  Therefore, if you are interested in going this direction, be mindful that the amendment will only affect future franchise tax filings.

When you are ready to proceed with your franchise tax filing, simply visit our website at:  www.delawareinc.com/payft.  Our online system will automatically calculate the franchise tax fees due to the lowest amount for you.  If you have any questions about potentially filing a stock amendment or refiguring your franchise tax, feel free to call us at 1-800-345-2677 to talk with a franchise tax specialist. Just keep in mind, the due date is March 1st. which is a Sunday. Our cut-off time to assist you in filing your Delaware franchise tax is Friday, Feb. 27 at 5 p.m. EST.

Facebook Twitter Google Reddit LinkedIn