The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.
If you admire hardcore entrepreneurs like Steve Jobs and Richard Branson, you’ll love Elon Musk: Tesla, SpaceX & the Quest for a Fantastic Future. I’m not much of a reader and I finished it in three days. It was literally too exciting to put down.
Elon Musk’s trajectory into the superstar entrepreneur spotlight has been relatively recent compared to Steve Jobs and Bill Gates. He was just ten years old when the PC was introduced into mainstream culture, but even at ten he showed unmistakable signs of greatness. In addition to being exceptionally intelligent, Musk was also an outstanding organizer, an exceptional thinker and a voracious reader. By the fourth grade, he had read through two complete sets of encyclopedias.
Unlike Gates and Jobs, who were driven by producing one project at a time in the evolution of the PC, Musk started with the premise that the only reasonable decision, when deciding your life’s course, is to make the future a better place for all mankind. So he set out to do just that.
While Gates and Jobs were born and schooled in the United States, Musk is a transnational, having been born in 1971 to a Canadian mother and a South African father and raised in South Africa.
He attended the local school system through high school and then attended the University of Pretoria for five months before moving to Canada to attend Queen’s University.
In 1992, he left Canada to study business and physics at the University of Pennsylvania; he graduated with undergraduate degrees in economics and physics.
He then moved on to Stanford University with the intent of earning a Ph.D. in energy physics, but the internet was exploding so he dropped out in order to create his first company.
Compared to Gates, who made his fortune on a single company he started and maintained control of, Musk started several companies before he found his ultimate success.
His first start-up, an online city guide called Zip2 that was partnered with the New York Times and the Chicago Tribune, was sold to Compaq Computer Corporation for $307 million in cash and $34 million in stock options. Elon got a $22 million pay day from the sale.
He then co-founded a second company, X.com, an early pioneering attempt at an online financial services company. A year later, X.com merged with Confinity, which had a branch called PayPal. The merged companies were renamed PayPal. In 2002, PayPal was acquired by eBay for $1.5 billion in stock; this time Musk received $165 million.
The two projects seemed necessary for Musk to accomplish, since nobody else was attending to them and since both are needed in order for human beings to have a brighter future, according to Musk’s way of thinking.
First, he wanted to build a rocket ship transportation company that would carry passengers into space on a regular schedule and enable the establishment of a human colony on Mars. To do so, Musk founded Space Exploration Technologies, or SpaceX, with $100 million of his own money. Musk is the CEO and CTO of the company, which develops and makes its own space launch vehicles and has revolutionized rocket technology.
SpaceX now has contracts with NASA and launches regular successful rocket trips to and from the International Space Station and is the largest private manufacturer of rocket engines in the world.
The second project Musk tackled was building an electric car, one that would hopefully become so popular that the world would abandon the internal combustion engine. In order to do so, Musk invested in Tesla Motors, and joined its Board of Directors, becoming the company’s chairman in February of 2004.
After the financial crisis in 2008, Musk became the CEO and product architect at Tesla Motors, (he currently remains in both positions). The Tesla Roadster was soon unveiled — an electric sports car that can accelerate from 0 to 60 mph in 3.7 seconds and is powered by a lithium ion battery. Tesla Motors also manufactures a Model S sedan and a Model X SUV.
Neither of these groundbreaking projects was easy. In fact, both SpaceX and Tesla Motors required many more millions of dollars than Musk himself could afford to put up, so he had to recruit investors and sell stock in order for these companies to survive.
In December of 2008, both of these dynamic start-ups were desperately in need of cash, and bankruptcy seemed the most likely outcome. Elon Musk himself has stated that he was exhausted and nearing a breakdown.
Then, over the Christmas week, SpaceX received a $1.6 billion contract from NASA and a renewed investment of $40 million in Tesla Motors, saving both the future of both companies.
Elon Musk drives his corporate teams as hard as any entrepreneur has in the past, including Steve Jobs, and he demands the impossible from them. You wouldn’t say working for him was cool or laid-back with Google-style perks like valet parking and multiple on-campus restaurant choices.
Yet he is clearly passionate about what he does—amazingly, Musk announced in 2014 that Tesla Motors will allow its technology to be utilized by anyone, in the hopes that more car manufacturers will begin producing additional types of electric cars.
Although the author of Elon Musk: Tesla, SpaceX & the Quest for a Fantastic Future, Ashlee Vance, set out to write Musk’s biography with or without his cooperation, Vance was eventually sanctioned by Musk, who granted him access to his friends and employees. The book is well researched and the details were checked by multiple sources.
This allowed Vance to accurately describe events in Musk’s personal life that Musk might not have wanted to be included. It makes Musk seem like a real guy, vulnerable and somewhat tragic during his most trying time.
Although his five sons live with him four days a week and he takes them with him in his private jet on special trips, he clearly puts his work and ambition ahead of a stable family life, like many a driven genius, including Jobs, Einstein and countless others.
Ashlee Vance has a healthy respect for Musk, as would anyone who understands the psyche of a man who has been driven from childhood to accomplish great feats. In Musk’s world, a simple premise propels him: to make the future on Earth both safe and viable.
It’s not wealth or power that motivates and consumes Elon Musk with ambition; rather, it’s his vision that mankind must live sustainably and find an alternative planet to live on, in case planet Earth sustains a cosmic, environmental or man-made catastrophic event.
There is much to learn about Elon Musk. He’s an amazing individual who now runs SpaceX, Tesla and Solar City. He’s definitely out to take us all for a ride, in the best sense of the phrase.
Updated August 9, 2016
People from all over the world form Delaware LLCs and Delaware corporations even though they operate their companies from their home state or country. Delaware has been recognized as having the strongest corporate law structure, and the advantages of forming your business in Delaware are extensive.
But what do you do if you have a company doing business in Florida as a foreign corporation?
If you are operating a Delaware corporation in Florida, your corporation will be domestic to Delaware but considered a foreign corporation doing business in Florida. People initially form a Delaware corporation and then register as a foreign entity in Florida (as the same business).
This process is called Foreign Qualification. This is the manner in which Florida grants you permission to operate your Delaware corporation there. It is a very important step that is sometimes forgotten, but if you fail to comply with Florida's local compliance regulations, you may be putting yourself and your company at risk.
Florida, like most states, has a specific set of requirements for Foreign Qualification: a state fee, an application process and a Certificate of Good Standing from Delaware. The Certificate of Good Standing can be no more than 90 days old.
Florida also requires that you have a Registered Agent; the Registered Agent will be required to sign the application. A Director or officer will also have to sign the application on behalf of the corporation. The document Florida returns to you is called a Certificate of Authority. This document is often used to obtain a business license, open a bank account or file a DBA in Florida.
Please keep in mind that applications and paperwork filed in Florida will be on the public record, unlike in Delaware. However, county filing and newspaper publication is not required, unless specifically mandated by the county of the Registered Agent.
Once your business is registered in Florida as a foreign corporation, you will be required to file an annual report. The cost of the annual report is $150, and is due by May 1 of the following year. Often, your Registered Agent will forward you the notice approximately 60 days before the due date. Please note that a Delaware corporation will still be responsible for Delaware Franchise Taxes as well, which are due by March 1.
Harvard Business Services, Inc. is a specialist in Foreign Qualification, and we register companies in Florida, as well as other states, every day. We can help you prepare the application, obtain a Certificate of Good Standing from Delaware and file all the necessary documents in Florida.
Generally, we can obtain your Certificate of Authority in about two business days. We are also able to act as your Registered Agent in Florida. For more information, or to register your Delaware corporation in Florida and start doing business in Florida, please call 1-800-345-2677, Ext. 6130.
In today’s competitive business world, any advantage that gives you an edge over the competition is worth researching and trying.
Here at Harvard Business Services, Inc., we routinely look for new software, products and services that can help us thrive in our industry.
The more efficient and productive each member of an organization can be, the higher the quality of service you are able to offer your customers. In return, your customers will benefit from a more enjoyable experience and be more likely to use your service again or refer others to you. It’s a win-win situation.
We have started to use a fantastic online business payment tool called Freshbooks. Freshbooks is an online cloud-based accounting software that is great for setting up new accounts, invoicing, reporting and tracking payments.
Freshbooks provides a secure, protected online payment gateway platform from which you can receive payments. In the high-tech world in which we live, much of our personal information lives in cyberspace.
It is both Android- and IOS-friendly, and it allows you to create an invoice online that can be sent to your clients via email.
This is how it works:
Your clients can utilize the software on their PC, Mac, smartphone, iPhone, tablet or iPad, and securely make a payment from anywhere in the world.
Freshbooks also keeps track of unpaid invoices. This feature can be instrumental when you need to follow up with accounts. Freshbooks offers you four options for organizing your accounts:
With this excellent administrative mechanism within the online payment tool, you’ll be able to prevent new and existing client payments from slipping through the cracks.
HARVARD BUSINESS SERVICES, INC. IS NOT AFFILIATED WITH FRESHBOOKS.
As business entity formation experts, we are often asked to explain the advantages of incorporating a start-up in Delaware.
Our answer typically entails the fact that Delaware's corporate law structure and legal environment are advantageous to corporations and LLCs.
In fact, the tiny state of Delaware is famous as the home of more than 65 percent of Fortune 500 companies.
A significant reason for this fact is the phenomenon known as the corporate veil.
The corporate veil is not unique to Delaware. The corporate veil is a legal concept “that separates the personality of a corporation from the personalities of its shareholders, and protects them from being held personally liable for the company's debts and other obligations.”
The corporate veil is essentially the concept that maintains corporate law throughout the world. Without the ability to act as its own entity, how else could companies transact business? The idea of a corporation or LLC acting as a separate entity and limiting the liability of the shareholders is what allows the business world to function.
The importance of the corporate veil in Delaware cannot be understated. Delaware possesses stacks of legal doctrine stipulating the separation of a corporation from its shareholders. This distance between investors and the corporations in which they have invested is what permits investors—aka shareholders—to feel comfortable in investing.
Delaware courts have been very reluctant to allow the piercing of the corporate veil. If a corporation is sued, its shareholders typically will not be held liable.
Piercing the corporate veil is defined as a situation in which a court decision puts aside limited liability and hold a corporation's shareholders or Board of Directors personally liable for the corporation's actions or debts.
Any Delaware corporation that is qualified to do business in another jurisdiction (through Foreign Qualification) can fall back on Delaware law structure; that is, a Delaware company can rely on the world-famous case law of the Delaware Court of Chancery in the case of any litigation.
Foreign qualification can play an important role in piercing the corporate veil, as a court in a state with less stringent corporate case law may rule differently when it comes to piercing the corporate veil.
In 2014, Cornell Glasgow, LLC vs Nichols demonstrated the Delaware Court of Chancery’s position where the Court recognized that closely held entities, such as the defendant's Delaware LLC, are under the complete control of their owners, and emphasized "that's why people form closely held entities, to cabin their exposure under contracts."
If contracting parties do not avail themselves of the frequently-used contractual protections — personal guarantees, security agreements and the escrowing of assets — then they cannot expect the Court of Chancery to hold owners personally liable by seeking to pierce the corporate veil.
The concept of the corporate veil is quite significant in any jurisdiction, but since Delaware remains the destination for start-up corporations and LLCs in the United States due to the Court of Chancery’s extensive case law on the subject.
Harvard Business Services, Inc. wants to brighten your summer with a great August discount on business formation packages.
Summer will soon come to an end, but here at Harvard, we think it is a great time to start your business. We are offering a fantastic discount to help get your business start-up off the ground while the days are still sunny and hot.
For the entire month of August, all of our Delaware LLC, corporation and limited partnership formation packages come with a $40 discount. The discount will be available starting at 12:00 AM ET on August 1, 2016 and will expire at 11:59 PM ET on August 31, 2016.
To apply the $40 discount, simply enter the word “Inc2016” when filling out our easy-to-use online order form.
All of our formation packages include the following:
You can easily view and compare all of our business formation packages. Our business formation specialists are standing by, ready to assist you by phone (302)-645-7400 or toll-free at 800-345-2677, by email, by live chat or directly on our online business formation order form.