The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.
You may have heard by now that the United States Postal Service (USPS) is currently in serious debt and could be closing a number of post offices and cutting hundreds of thousands of jobs. At this point, it is up to Congress to reform some bills in order to keep the USPS in business. If your business depends on the U.S. Postal Service, like my family business does on a daily basis, you might be wondering what your business will do if there are major changes to the USPS.
So this got me to thinking…what alternatives are there if the USPS does go insolvent? There are UPS, Fedex and DHL, which all makes sense…right? Well, they they cost more, which might mean for some companies a raise in prices or shipping fees. Then again the USPS keeps raising mail costs ever so slightly every year, and here at Harvard Business Services, Inc. we have still been able to provide the lowest Registered Agent fee in the industry since 1981 ($50 per year, guaranteed never to increase for the life of the company so long as the fee is paid on time and the company is in good standing). Why you ask? Because here at Harvard Business Services, Inc., we’re able to meet the needs of our clients entirely by email.
Email not only speeds up business, it doesn’t cost anything to sendl. To prove my point, I recently came across an article by Carol Tice from entrepreneur.com called Five Ways Small Businesses Can Beat Rising Mail Costs that may help your small business; it reiterates how email is so important in today’s world. Below is an excerpt:
1. Plan better. Having to spring for overnight delivery costs a bundle. Push back your mailing deadlines and send letters and packages by regular mail. As USPS deliveries may slow down, this could be even more important.
2. Prune your list. How current is the mailing list you're using? Maybe it's time to clean out your list. Send a postcard asking interested customers to respond to stay on the list. Cut the deadwood and lower your mail charges.
3. Compare costs. If USPS prices rise, competing offerings from UPS, FedEx and others may look more and more attractive. But even now -- before any changes kick in -- it might be worthwhile to reach out and see if there are cost or service advantages to switching all of your mail business to a competitor.
4. Switch to email. For letters, try an email marketing program such as AWeber or Mailchimp to deliver that great-looking flier to customers' email inboxes instead of their mailboxes. If you're concerned customers won't like it, mail them and ask for email opt-in. (You'll probably be surprised how many will prefer virtual delivery.) An added bonus: if you didn't have them before, now you've captured current customer email addresses.
5. Try private electronic mail. Some big companies and government agencies are already taking advantage of new services such as Zumbox and Earth Class Mail, which allow you to send full-featured, clickable messages to customers' private electronic mailboxes for retrieval from wherever they are -- not just at home. This keeps your message out of clogged email inboxes.
Which state was domicile to more than 63% of the Fortune 500 companies and also the choice of 86% of all new Initial Public Offerings in 2011? You’re right. Delaware!
There isn’t just one reason why Delaware has long been the favored state for incorporating. This enviable position is because of the State’s total package of incorporation services, including fair and flexible laws, a responsive state government, and a unique court of Chancery that has 200 years of case law which has refined and literally defined “Corporate Law” for two centuries.
Delaware’s centuries old Court of Chancery has written most modern U.S. case law while interpreting Delaware’s General Corporation Law, which is known as the most usable and advanced business formation statute in the nation. The Delaware Division of Corporations in this business-friendly state provides state-of-the-art service to customers.
The Division’s 2011 Annual Report, summarized below, reviews progress, developments, and marketing efforts, which keep Delaware the premier state for incorporations.
The total package, combining Delaware’s General Corporation Law and LLC law, Court of Chancery, and Division of Corporations working together, make Delaware the leading home for entities today.
Now that you've formed a new Delaware LLC or Corporation, what's next? This is a popular question our new clients often ask. When forming a Delaware company, it will be a “domestic” company to Delaware and a “foreign” company to every other state in the United States.
Clients that form a Delaware company often operate their companies in other states as well as in other countries around the world, and therefore have local compliance matters in their home jurisdiction that need to be addressed.
The process of registering your Delaware company in another state is generally called “foreign qualification.” In other words, it is the way your home state gives you permission to operate with a Delaware company. It is their way of getting their “piece of the pie.” Clients will “foreign qualify” in order to make sure that their business is not only legal and valid in Delaware but in their home state as well.
One of the biggest misconceptions about Delaware is that once you form a Delaware company, you are done, and there is no need to qualify in your home state. Clients sometimes think that by forming in Delaware, they can escape compliance matters and/or fees in their home state or state of operation. This is not the case.
Please take note of these three areas when determining your local compliance requirements:
1. Taxation: One of the benefits of Delaware is that companies that file in Delaware but do not physically operate here often do not pay Delaware income tax. By qualifying the business in whatever state it is operating, hiring employees, or holding real estate, it becomes taxable in that state. It is a requirement by all states that a company register and pay taxes to the state in which it is physically operating. Most states will charge penalties and back taxes to companies that are caught operating without paying taxes.
2. Legality: While a Delaware company can operate in any state and any country in the world, it must comply with all local regulations in the jurisdiction. If not, the company may not withstand a legal challenge in that jurisdiction.
3. Banking: Often when opening a bank account, banks will require a Certificate of Authority in the state in which the bank account is being opened. Read more about opening a bank account for a Delaware company here.
It is our goal to inform our clients that they have compliance responsibilities in their home jurisdictions as well as Delaware, but we cannot advise you of all the local responsibilities in your particular jurisdiction. For compliance matters in any local jurisdiction contact the local Chambers of Commerce in your city, county and State.
We can, however, make filing your State “Foreign Qualification” a breeze. We offer Foreign Qualification services in all 49 states for Delaware companies and we discount the fee if you file your company through Harvard Business Services and then file the foreign qualification within three weeks of forming the Delaware company.
Due to new regulations of the Bank Secrecy Act, U.S. entities with any influence over a financial account located outside of the United States with a balance exceeding $10,000 will be required to report annually with the U.S. Treasury Department by filing form TD F 90-22.1 (FBAR).
The FBAR reporting requirement includes all U.S. LLCs--single member LLCs and multi member LLCs--even if they may be considered “Disregarded Entities” regarding tax matters.
There are no exceptions for entities owned by non U.S. nationals. LLCs with foreign owners exclusively are now required to file the FBAR. Although the U.S. Treasury has no jurisdiction over the foreign owners as private citizens of another country, acting in their own country, it can require the entity, which is a U.S. citizen for FBAR purposes, to file the form, and it clearly does this. There is also no exception for income source. Whether the income was earned outside the U.S. or transferred from the U.S. to the foreign account is not relevant with regard to the responsibility to file the FBAR.
All companies are required to file the report on or before June 30, 2012 for financial accounts active in 2011. Entities filing the FBAR will have to have a U.S. EIN (Employers ID Number).
We can assist with the filing of the FBAR report. If you would like our assistance in properly completing and filing these documents for you we must get started right away since a great deal of information and original signatures must be obtained for both the SS-4 and the TD F 90-22. In order to file the reports in a timely manner, we must receive all the necessary information and payment from you by June 1st, for each company.
The cost for this service between now and June 1st will be $230 per company. We will email the form to you for completion. You may then email the form back to us for a review by a filing specialist. We will then confirm if the form is fully completed by email and ask you to courier or mail the original form to us for filing. An original must be sent. Once received, we will UPS the documents to the proper place for filing.
As mentioned above, a US tax ID number (EIN) is required for this filing. If a number has not yet been obtained for your company, we can get one for you for just $95.
If you would like us to assist with the FBAR and/or EIN filing, please contact us at email@example.com. Or you may call our IRS specialist Nadine Jordan at 302-645-7400, Extension 6129.
It keeps getting easier to do business in Delaware! More than 800 business leaders and attorneys have downloaded the free eDelaware app, allowing immediate access to legal statutes of Delaware corporate and alternative law. Users of the Blackberry, iPhone and iPad will have full access to Article 8 and Article 9 of the Uniform Commercial code, as well as case summaries from Delaware’s Court of Chancery and Supreme Court.
“Since 2008, eDelaware has streamlined how Delaware corporate and business law is accessed in today’s fast-paced environment. Lawyers and business professionals using iPhones and Ipads who deal with Delaware corporate and alternative entity law will now have it available to them whenever and wherever they need it,” said Scott E. Waxman, a partner at Potter Anderson & Corroon LLP, Delaware’s oldest law firm.
Once downloaded, the statutes and case summaries are stored on the device to be accessed even when no wireless connection is available, while traveling or at a meeting. Updates will be sent automatically and will be available when eDelaware is accessed. An index is available to guide the user to specific statutes, sections, and summaries.
Iphone and Ipad users go to the App Store and download “eDelaware” app today!