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The HBS Blog


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

Who Can Be a Member of an LLC?
By Andrew Millman Monday, April 20, 2015

By now, most people know that Delaware is recognized around the globe as the best place to incorporate your company, and that the Delaware LLC is amongst theQuestions most popular business structures, with unmatched flexibility, asset protection, and low maintenance costs. 

 

We work with clients from across the U.S. and all over the world who choose Delaware as the place to form their LLC. Roughly 16% of our business now comes from clients outside the United States.

 

Who can be a member of a Delaware LLC? 

 

Anyone in the world can be a member of a Delaware LLC or corporation. Generally, the members of an LLC are individuals, but it doesn’t stop there.  Many people opt to set up the Delaware LLC with another company as the member. This can be a corporation, LP, or even another Delaware LLC. 

 

Often, business owners set the LLC up with an LLC as the member, and additional persons as members. Any mix is permissible. If for any reason the members of the LLC change in the future, not to worry, this is all handled internally with the LLC Operating Agreement.

 

Traditionally, Delaware LLCs are filed without listing the name and address of the member(s) for public record, since it’s not required when filing the certificate of formation in the state of Delaware. 

 

This means any changes, from adding/removing members, changing the ownership structure, who’s in charge and who manages day to day activities are all addressed within the LLC Operating Agreement.

 

If you have any questions about membership or forming your Delaware LLC, please call, email, Skype, or live chat from our website during working hours. We’re always here to help!  

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Two Major Food Companies Sign Merger Agreement
By Michael Bell Tuesday, April 14, 2015

HeinzH.J. Heinz Company and Kraft Foods Group, Inc. both Delaware Companies signed a definitive merger agreement to create The Kraft Heinz Company.

H.J. Heinz Company was founded by Henry John Heinz in 1869 in Sharpsburg, PA and is now headquartered in Pittsburgh, PA. It is one of the world’s leading marketers and producers of healthy, convenient and affordable foods specializing in ketchup, sauces, meals, soups, snacks and infant nutrition. Heinz enjoys the number 1 and number 2 market share in more than 50 countries and sells 650 million bottles of its iconic ketchup every year.

Kraft Foods Group was founded in 2012 and is a consumer packaged food and Beverage Company with annual revenues of more than $18 billion. The company manufactures and markets food and beverage products including refrigerated meals, refreshment beverages, coffee, cheese, and other grocery products, primarily in the U.S. and Canada, under a host of brands.

KraftThis merger will create the third largest food and Beverage Company in North America. Under the terms of the agreement which has been approved by both company’s shareholders, Kraft’s current shareholders will own a 49% stake in the combined company, and current Heinz shareholders will own 51% on a fully diluted basis.

Kraft shareholders will receive stock in the combined company and a special cash dividend of $16.50 per share. The aggregate special dividend payment of approximately $10 billion is being fully funded by an equity contribution by Berkshire Hathaway and 3G Capital.

This creates a substantial value for Kraft shareholders as the special cash dividend payment represents 27% of Kraft’s closing price and will allow Kraft shareholders the opportunity to participate in the new company’s long-term value creation potential.

The combination of these iconic food companies together with the new company will have eight $1+billion brands and five brands between $500 million and $1 billion.

The new company, The Kraft Heinz Company, will be co-headquartered in Pittsburgh, PA and Chicago, IL. You can read more on this iconic merger between two Delaware companies.

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Doing Business in Alaska with a Delaware LLC
By Devin Scott Monday, April 13, 2015

Alaska State FlagBecause Delaware is known for having the strongest corporate law structure, we get clients from all over the world looking to form a Delaware LLC. The first question we get is whether it is possible to form a Delaware LLC when not physically in Delaware. The answer is yes. All you need is a Delaware Registered Agent. Clients often contact Harvard Business Services to form their company and act as their registered agent because our service fee is just $50 per year and guaranteed never to increase.

Keep in mind that your Delaware LLC is a “domestic company” in Delaware and a “foreign company” in every other state. When operating in Alaska, often clients will register there as a foreign company doing business in Alaska. This is the process in which Alaska gives you permission to operate there with a Delaware LLC. Theforeign qualification process” enables a company to transact business in a jurisdiction other than where it was formed.

Alaska, like most states, has a state fee and an application process. Generally clients will work with their registered agent to file the documents necessary to get the approval from the Alaska Secretary of State’s office. Harvard Business Services can obtain the approval for an Alaska foreign qualification in about 2 business days.

Alaska does not require a Certificate of Good Standing from Delaware in order to register there as a foreign entity. They do require that you have a registered agent address in Alaska. This must be an Alaska physical address where the state can send legal documents, notices, and service of process. If you would like to use Harvard Business Services as your agent in Alaska, the cost is $99 per year year.

One way that Alaska differs from other states during this process: Alaska will require to know the information of all members owning a 5% or more stake in the company including the percentage of ownership. They will also require a signature from an authorized person. Once registered as a foreign entity in Alaska, an initial report is due within six months. There is no filing fee for this report. Alaska also has a biennial report that is due on Jan. 2 on either odd or even years depending on the year that the business was registered in Alaska. This report carries a fee of two hundred dollars.

If you have a Delaware LLC operating in Alaska, Harvard Business Services would be happy to assist with the Alaska foreign qualification. If you would like to order this service, or have questions answered about this process please call, email, Skype, or live chat during working hours.

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Why File a Patent Application?
By Benjamin Blumenthal Monday, April 6, 2015

ApplicationThe first question a person has to ask himself or herself after the “Eureka” moment is why file a patent application at all.  This is not an idle question.  Many of us have ideas for new products or services, some of them may even be “the real thing”, but the question still has to be asked why file a patent application.  80-90% of patent applications filed with the US Patent and Trademark Office (USPTO) are rejected.  Of those that do get through, maybe 10% represent money-making inventions, while the rest oftentimes are remainders of ideas that did not pan out, get funded, or got left behind for something else.  And while only a small percentage of filed patent applications in the end represent money-making inventions, patent application preparation and filing and further prosecution and upkeep all cost thousands of dollars; if one goes for coverage beyond the US, say through a Patent Cooperation Treaty (PCT) filing, the expenditures can run into the tens of thousands of dollars—or more.  So why file?

Before a person converts an idea into a patent application, an inventor should ask himself/herself a couple of questions:

  • Does my invention make a real improvement?  Patents demand an improvement over that which is known. There are additional requirements such non-obviousness and enablement. One can file a “prophetic” patent application on things not yet done, but the embodiments must be fully described, and the science must make sense.
  • Does my invention exist?  This is not an easy question to answer, as the “exact” invention may or may not exist.  www.google.com/patents and www.uspto.gov are good places for an inventor to start looking for their inventions. Oftentimes, one has to be creative in looking for “prior art”.  You may see a diagnostic device, but others who have filed before you may have called it a detector.  Also, for patent purposes (discussed in a later blog), the lack of existence of your specific invention does not guarantee patentability, as an examiner may combine several pieces of art to arrive at your functional device and thus reject the claims of your application.  Prior art searches often are performed by experts in IP law.
  • How long will it take to develop my product and how much will it cost?  Patent applications come with built-in timers.  Once you file, you can make use of your filing date generally for 12 months to claim that date on future filings such as PCT applications.  If your invention is nearly complete, then what you file today may truly represent the invention.  If there are many stages of development with lots of unanswered questions ahead, one might think twice about filing now; claims more closely representing the invention may only be available in the future when technical issues are clarified and the true invention is better defined.
  • Do I need to file a patent application to raise money? Many investors, both angels and VC’s, want to see an active IP program before they invest.  They want to feel that there are reasonable protections for their monies and oftentimes investors file patent applications—at least initially—to allow for easier discussions with investors and/or possible strategic partners.

If you decide to file a patent application to cover a new invention, then your next big decision is with whom to file.  The two most important traits for any patent attorney or patent agent are honesty and knowledge within the field.  The first quality, while it might seem obvious, is critical.  Patent work and associated costs are fungible.  You may need to file in multiple jurisdictions and/or you may need more or less claims.  You want an honest patent preparer so that you are confident that whatever expenses you incur are real expenses. You do not want to be filing unnecessarily or filing bloated applications simply to help pay for the staff of the office which you use.  You also want someone who can tell you that prior art exists and/or there are significant risks in getting the patent that you are sure that you deserve.

As to the second quality, one of the greatest challenges is finding a patent preparer who understands the subject matter almost as well as the inventor himself/herself. You have been spending months, maybe even years, on this topic and you know the literature inside out; you also may be the only expert in your particular invention anywhere in the world.  While one may not expect a patent attorney or the like to be such an expert, that person must be well-enough versed in your invention to allow him/her to understand the invention, compare it to the art, and write cogently claims and the full application.  If the patent preparer does not fully understand the invention, then he/she may simply write a somewhat vacuous application that does not fully develop the concepts and embodiments of the invention.  If a person does not understand a client’s invention, then he/she should suggest someone else to write the application.

The costs can range significantly but reliable low-cost services for professional patent writing do exist. One of the best services available is www.PatentTank.com, a virtual Think Tank for Patents. The Company offers a free prior art search and free advice on how to strengthen the claims to increase the likelihood of an issuance, followed by a one-time fee of $5500 for the full patent writing including all claims, figures and assistance with filing to make sure the application forms are properly completed and submitted. The one-time fee also covers the response to the first office action which typically addresses issues of obviousness. For more information and a sample of work, visit www.PatentTank.com

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Is My Idea Patentable?
By Benjamin Blumenthal Tuesday, March 31, 2015

PatentsThe first questions a person should ask him/herself “Eureka” moment are:

  1. Is my idea patentable?
  2. How do I pick the right patent writer?
  3. Is it worth the time and cost of getting a patent?
  4. Is there a low-cost way of getting high-quality patents done?

This blog will help answer these questions.

1. Is my idea patentable?

 An inventor needs to ask three primary questions:

  1. Improvement – Does my invention make a real improvement?  Patents demand an improvement over that which is already known in the market. If you apply for a patent on a car with no demonstrable improvement, the patent will be declined.
  2. Non-Obvious – Is my invention non-obvious? Does my invention already exist? This is not an easy question to answer, as the exact invention may or may not exist. Google Patents and the USPTO website are good places for inventors to start looking for their inventions. Oftentimes, one has to be creative in looking for “prior art” (references to the idea in the public domain).  Keep in mind that terminology may change. You may see a" diagnostic device," but others who have filed before you may have called it a "detector." Also, for patent purposes, the lack of existence of your specific invention does not guarantee patentability, as an examiner may combine several pieces of art to arrive at your functional device and thus reject the claims of your application on the basis that your idea is an obvious outgrowth of existing knowledge. For example, if today you tried to patent a solar panel specifically designed to charge a computer, the examiner might claim that computer batteries are known and solar panels are known, thus the combination of both is obvious and not patentable. Prior art searches are oftne performed by experts in Intellectual Property law.
  3. Enablement – One can file a prophetic patent application on ideas not yet created, but the embodiments must be fully described and the science must make sense. In other words, one must be able to actually make the product work. You cannot patent an idea, but you can patent a process or system.

2. How do I pick the right patent writer?

If you decide to file a patent application to cover a new invention, then your next big decision is with whom to file. The two most important traits for any patent attorney or patent agent are honesty and knowledge within the field. 

  • The first quality, honesty, may seem obvious, but it is critical. Patent work and its associated costs are fungible. You may need to file in multiple jurisdictions and/or you may need more or fewer claims. You want an honest patent preparer so you are confident that whatever expenses you incur are real expenses. You do not want to be filing unnecessarily or filing bloated applications simply to help pay for the staff of the office you are using. You also want someone who can tell you that prior art exists and/or if there are significant risks in getting the patent you are sure that you deserve.
  • The second quality, knowledge in the field, is one of the greatest challenges in finding a patent preparer who understands the subject matter almost as well as the inventor him/herself. You have been spending months, maybe even years, on this topic and you know the literature inside and out. You may also be the only expert on your particular invention anywhere in the world. While one may not expect a patent attorney or to be such an expert, that person must be well-versed enough in your invention to allow him/her to understand the invention, compare it to the art, write cogent claims and complete the full application. If the patent preparer does not fully understand the invention, then he/she may simply write a somewhat vacuous application that does not fully develop the concepts and embodiments of the invention.  If a person does not understand a client’s invention, then he/she should suggest someone else to write the application.

3. Is it worth the time and cost of getting a patent?

The costs of filing a patent can be considerable, and it typically takes thirty days to complete the patent process. To draft the patent application, file it and handle the prosecution (responding to the examiners' communications) typically costs between $15,000 and $25,000, and if you apply for coverage beyond the United States, say through a Patent Cooperation Treaty (PCT) filing, the costs can increase by tens of thousands of dollars more. So why file? Because, once issued, the protection offered by a patent provides a meaningful entry barrier for would-be competitors. Patents can also assist in raising capital for a company, as they are viewed as highly desirable by investment firms and angel investors, adding a level of security and lowering the risks associated with competition. Additionally, having patents in place also provides reasonable protection for discussions with possible strategic partners. As such, the costs are often justified. But is there a lower-cost solution?

4. Is there a low-cost way of getting high-quality patents done?

Yes. A company called PatentTank provides low-cost, high-quality patent writing.

  • Costs
    • Traditionally, patents can cost $15,000 to $25,000
    • PatentTank offers professional patent writing services for 60%-80% less--$5,500 per patent instead of $15,000 - $25,000
    • All patents are written by senior patent writers with strong track records
    • This drives down legal costs and, with the same budget, allows more intellectual property to be filed
  • Timing
    • PatentTank can complete the patent within 10 days
    • This is 60% faster than the traditional thirty day process
    • A rush service is available for a 3-day turn-around, if necessary.
  • Areas of Practices 
    • Internet/High-Tech
    • Biotechnology
    • Aerospace/Defense
    • Oil/Gas Technologies
    • Alternative Energy Solutions
    • More...
  • PatentTank offers
    • Provisional patents, full United States patent applications, European Patents and PCTs
    • A team that has written over 100 patents over the last 15 years
    • Full end-to-end patent writing service
  • Clients Include businesses and inventors looking to reduce costs associated with patent writing; VCs and Private Equity firms looking to reduce patent writing costs for portfolio companies; law firms currently offering patent services looking to reduce costs (all Intellectual Propery remains in the U.S.); law firms not currently offering patent services looking to create an Intellectual Property department; universities looking for a cost-effective way to draft and file many patents over a long term

 

 

 

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