The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.
Entrepreneurs from all over the world incorporate their companies in Delaware in order to take advantage of Delaware’s prestigious corporate law structure. Each one aspires to create the next great Delaware company, such as Facebook, Google, Uber or Twitter. We love being a part of the entrepreneurial process—helping people form their companies, obtaining their Federal Tax ID Numbers for them and cheering them on as they start to achieve their goals.
People from all over the world inquire about obtaining a Federal Tax ID Number or EIN (Employer Identification Number) for their new businesses. Some people think that because they do not have a Social Security Number, a U.S. address or an Individual Taxpayer Identification Number (ITIN) that they cannot obtain an EIN. This is not true. If you do not have a Social Security number, you are not disqualified from obtaining a Federal Tax ID Number. You will be required to fill out and submit an SS4 Form, just as any U.S. resident would. The address listed on the SS4 Form can be anywhere in the world. The IRS is only interested in knowing where the business is operating.
If you do not have a Social Security Number or U.S. address, you cannot obtain an EIN online. The application for an EIN must be mailed or faxed to the IRS. Be very careful when doing so, however, as there are potential drawbacks to dealing with the IRS on your own. If the application is not prepared correctly or is transmitted illegibly, the IRS may fax you a letter of rejection. This letter of rejection can sometimes take weeks to receive; once it is received, you are welcome to reapply for the EIN, but you will have to start the process from the beginning. When you use Harvard Business Services, Inc., our dedicated team in the Filings Department will be responsible for making sure your SS4 application is prepared and filed correctly in order to ensure the timely approval of your Federal Tax ID Number. If there are any problems, we will call the IRS to resolve the issue, thus saving you time and energy so you can concentrate on your new company.
We can typically obtain an EIN for any international client within ten to fifteen business days. We will prepare the SS4 Form first, and then email it to the responsible party for signature. The responsible party controls, manages or directs the applicant’s entity and the distribution of its funds and assets. The responsible party for a corporation must be an actual person, but this person can be an officer of the corporation and he/she can live anywhere in the world. The responsible party of an LLC can be a member or managing member from anywhere in the world. The responsible party simply signs the document and emails or faxes it back to us. Harvard Business Services, Inc. will follow up with the IRS on your behalf if the EIN is not received in a timely fashion. This can save you hours of frustration, since contacting the IRS can be a lesson in futility at times.
If you would like to apply for a Federal Tax ID Number for a new or existing company, please call us, regardless of whether or not you have a U.S. Social Security number, ITIN or U.S. address. We can help alleviate the hassle of dealing with an often uncooperative and unfriendly IRS. Please call 1-800-345-2677, Ext. 6910.
Harvard Business Services, Inc. is known for its stellar customer service and guaranteed $50 annual Registered Agent service. Since the state of Delaware is recognized worldwide as the gold standard for incorporating companies, we have many international clients who come to us in order to form Delaware corporations and LLCs. As of today, approximately 17% of our business is from international clients, people with physical addresses outside the United States.
We currently offer four different formation packages to our international clients, ranging from the Green Package, which is our environmentally-friendly, paperless option, to the International Premium Package, which is our top-of-the-line expedited option. All of our formation packages include the essentials: we check your company name for availability; we prepare and file the Certificate of Formation or Certificate of Incorporation for your new Delaware company; we pay all the Delaware filing fees; we act as your Delaware Registered Agent for one full year; we email you an electronic version of the approved documents (generally within four to five business days); and we provide your new company with a Digital Corporate Seal.
The question is, which package is right for you?
International Green Package vs International Basic Package:
Both the International Green Package and the International Basic Package include the formation aspects mentioned above; the International Basic Package, however, also includes a Certified Copy of the Certificate of Formation/Certificate of Incorporation with Apostille. An Apostille is a method by which business documents are recognized internationally. The Apostille is often needed if a company plans to operate in, or do business with, companies in such countries as the United Kingdom, Ireland, Italy, France, Germany, Austria, Switzerland, India and South Korea. Check the Hague Convention for a full list of members.
The International Basic Package also includes a Notarized Statement of Authorized Person (LLC) or Statement of Incorporator (Corporation). This is the instrument that is used to release the company to the initial member(s) or Director(s) once it is approved by the state of Delaware’s Division of Corporations.
The International Basic Package also contains several helpful extras, such as templates for LLC Operating Agreements; customizable corporate Bylaws; Corporate Resolutions; IRS forms; Banking Resolutions and more. These useful templates are traditionally used for determining the ownership and management of LLCs and laying out the internal hierarchy for corporations.
The International Basic Package includes courier shipping to anywhere in the world. Once your new company is approved by the state of Delaware, the Apostilled Certificate of Formation/Certificate of Incorporation and the Notarized Statement of Authorized Person/Incorporator will be shipped out via UPS, and will generally arrive within three to four business days. We will then provide you with the UPS tracking number so you’ll know exactly where your documents are while in transit.
If you need help deciding which package is right for you, or you have any other questions about forming your new Delaware corporation or LLC, please contact me today. I can be reached directly at 302-644-6265 or firstname.lastname@example.org.
Whether it was to fulfill a dream or purely for investment purposes, you established a Delaware company, and now you may have concerns regarding the maintenance of your business entity and what you are required to do for it on a regular basis. One of the annual requirements is the filing of an annual Delaware Franchise Tax report. Don’t let either word—“franchise” or “tax”—frighten you; Harvard Business Services, Inc. is here to answer the Top 10 Franchise Tax questions.
1. What is Franchise Tax? The term may make it seem like you own a Chipotle or Pizza Hut franchise, but that is not the case at all. “Franchise Tax” is just the term the Delaware Secretary of State gave to the annual fee.
2. Do I have to pay the Franchise Tax? Yes. Every business entity that is formed in Delaware is required to pay Franchise Tax each year.
3. Do I still owe Franchise Tax if my company does not have any profits that year? Yes. Your company owes Franchise Tax every year, regardless of whether or not your company has started making money, opened a business bank account or filed a federal tax return. If your company is formed in the state of Delaware, you must pay the annual Franchise Tax.
4. Do I have to pay the tax if I just formed my company? Yes. The state levies the Franchise Tax in the same fashion as the IRS levies your income tax, meaning it is paid in arrears. So if you formed your company this year, the first Franchise Tax filing will be due the following year. You do not have to pay the Franchise Tax in the same year that your company was established.
5. Is the Franchise Tax the same as federal income tax? No. Delaware Franchise Tax is completely separate from your federal income tax filing. We will gladly provide assistance with your Delaware Franchise Tax filing; however, you will need to consult your CPA or Accountant for assistance with your federal income tax filing.
6. How much is my Franchise Tax? The amount due is dependent upon several variables. If your company is an LLC or LP, then the standard, flat rate is $300 per year. If your company is a corporation, then the amount due will be between $225 and $180,000 annually. The exception would be an exempt entity, such as a religious organization, church or foundation, which only has to file an annual report at a reduced rate of $25.
7. Why is the corporation Franchise Tax bill so high? Don’t fret—the vast majority of corporations pay somewhere between $225 and $400 for their Franchise Taxes each year. Click here for a calculator to generate an estimate on how much your taxes may be.
8. When is the Franchise Tax due? The fee for a corporation is due by March 1 of every year; the fee for an LLC or LP is due by June 1 annually.
9. What happens if I don’t pay by the deadline? The state of Delaware will assess a late penalty, plus interest, for all late filings. For a corporation, the late penalty is $125 plus 1.5% monthly interest; for an LLC, the late penalty is $200 plus 1.5% monthly interest.
10. How can I file and pay my company’s Franchise Tax? Just go to www.delawareinc.com/payft and complete the online form.
Every company that interacts with customers must, by default, offer customer service. The significant issue that some businesses fail to address, however, is what level of customer service they are providing. Great customer service can be the difference between a business that succeeds and a business that fails, regardless of the product or service being offered. Customers want what they want, and companies that would like to keep their customers happy should be placing immense value on each encounter with a customer. In the real world, however, how common is it that a customer actually receives quality customer service? Ask yourself the following questions:
Unfortunately, the above circumstances have probably occurred more often than any of us would like them to. But why? Why is it that some (many?) businesses do not value customer service? It can’t be one bad employee. Likewise, it can’t be an entire untrained staff. Could it be the company does not value customer service at all? When we receive excellent customer service, it stands out, but that’s backwards; great customer service should not stand out—it should be the norm.
I recently had to call my cable TV vendor in regard to a billing issue. I was on hold for 20 minutes. After a representative finally answered the call, it took the rep five minutes to pull up my information. After explaining to her that I had been overcharged, she explained to me that she could not help me. I was then told I would be transferred to a supervisor. I sat on hold for another 20 minutes. When the supervisor finally answered the call, it took him another five minutes to access my information. He then told me all he could do was issue me a credit for one-third of what I was overcharged. When I asked if there was someone else I could speak to, he said no and told me to call back another time. So almost an hour into my phone call, they had not solved my problem. In fact, I was given the impression that they did not care about my problem or my service. It felt as if they just wanted me to go away. This was not a good customer service exchange; in fact, the level of customer service wasn’t even mediocre—it was awful.
Good customer service is putting yourself in the customer’s shoes. It is listening to their concerns, and then figuring out the best way to help them. The customer is not always right, but when they are right, they deserve extraordinary customer service. When they are wrong, they still deserve good customer service. After all, customers are what keep your business growing.
After you have made the difficult decision to dissolve your Delaware corporation, there are a number of things you must do next in order to formally close your company. Make a checklist and make sure you:
Your corporation is not legally dissolved until you have filed a Certificate of Dissolution with the state. A filing specialist, such as Harvard Business Services, Inc., can assist you in obtaining the information required to assess your final Delaware Franchise Tax, which is necessary in order to complete the dissolution of your corporation. Once the Certificate of Dissolution is prepared, an officer of your corporation will need to sign it. Upon filing, the state will stamp and approve the document. Once these steps are complete, your corporation will be officially dissolved.
Close a Corporation without filing a Certificate of Dissolution
Some corporation owners do not want to pay the expense of filing the Certificate of Dissolution. There is an alternative to dissolving your corporation via Certificate of Dissolution—you can tell your Registered Agent to resign as the agent with the state. Once your Registered Agent files a Certificate of Resignation, the state of Delaware removes the Registered Agent and your corporation is no longer in good standing, causing it to go void after 30 days. Once this occurs, your company will be void and your company name becomes available in the state’s database for another business owner to choose.
Once your Registered Agent resigns, your corporation’s Franchise Tax will stop accruing. It is vital that you tell your Registered Agent to resign. If your Registered Agent does not resign and you simply stop doing business and ignore your late Tax notices, your company will continue to receive Franchise Tax notices as well as accumulate late fees and interest.
There is a fee associated with Harvard Business Services, Inc. resigning as your Delaware Registered Agent; please feel free to reach out to us for more information or any questions.