The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.
There are significant differences between a non-profit corporation and a benefit corporation, no matter where the company operates.
The infographic below highlights the most important ten differences between non-profits and benefit corporations.
Why is Google a corporation and YouTube an LLC? Both, of course, chose Delaware as their corporate home, even though they are headquartered elsewhere.
So why did Google choose to form as a corporation and YouTube as an LLC?
The corporation vs LLC distinction is clearly defined by this one example of which the new generation of entrepreneurs should take full take advantage.
Please note, this is not a question of “which is right?” or "which is better?" It is, however, a matter of strategy.
YouTube actually started as a corporation, filing its Certificate of Incorporation with the Delaware Division of Corporations on October 3, 2005. On November 8, 2006, just 13 months and five days later, it converted its corporation into an LLC, which is one of the key advantages of Delaware companies: they can change from one form of entity to another, whenever they want.
Google, as you know, was incorporated in 1998 and is listed on the NASDAQ, after its 2004 IPO. Even though much of Google is owned by institutions, there are millions of individual shareholders in the company.
YouTube LLC, on the other hand, is owned by very few members. Nobody but the insiders know how few, and nobody but the insiders know who the owners are.
In addition, only the owners know the details of the company's finances, because no public disclosure is required; that’s the benefit of a Delaware LLC—your members, their ownership percentages and your financial valuation are private matters, of which only the company insiders are aware.
There is no public registration, no public disclosure and no federal requirement of any type that necessitates the owners of a Delaware LLC to reveal who they are on the public record.
Google chose to be a Delaware corporation so it could go public and raise money, which it did on August 16, 2004. Once it did so, it quickly became one of the richest companies in history. Google's rise to power created tens of thousands of millionaires and a lot of billionaires.
YouTube originally planned on following the Google, Inc. model, but they soon met the real Google people, as well as other investors, and found that cash was available to YouTube without going public.
If capable investors offer you a tremendous amount of money, why disclose who owns you? Why disclose your governance structure or your finances? Why be regulated by the Stock Exchange and the S.E.C.?
If you can get the investors without going to the public markets, you’re much better off keeping it simple. That was the YouTube approach beginning on November 8, 2006, and that’s what makes the company valuable to its owners...whoever they may be.
So, as the next successful entrepreneur, which would you choose?
Once you have set up a Delaware Exempt corporation—also known as a non-profit corporation—you will need to file an application for non-profit status with the IRS.
Part of your application should include your non-profit corporation’s mission statement. The mission statement is generally a statement of what your organization wants and aims to accomplish.
Your non-profit corporation’s mission statement can either be straightforward and simple or intensive and complex; however, since it is typically included in much of the non-profit corporation’s marketing material as well as funding requests, it should be as compelling as possible.
Simply stating that your goal is to “feed the hungry” is not a good idea; be smart, be strategic and be specific--you want to be sure your organization will stand out so as to raise as much money as possible for your charity.
Instead of a broad, undefined mission statement like “feed the hungry,” try one like this: “We aim to reduce the number of hungry people in the Mid-Atlantic region of Delaware through the funding of mobile soup kitchens.” See the difference?
Whether or not your corporation is considered a non-profit, as opposed to a for-profit entity, depends on your surplus income; any surplus income derived from a non-profit entity must be used to further the mission of the non-profit corporation.
In other words, any income left after payment for day-to-day operations cannot be transferred to shareholders, employees or directors of the corporation.
The next step that is essential to the 501 (c)(3) is the IRS application. The application is generally completed and filed with the IRS. You can process the application on your own or with the help of a tax professional or a certified public accountant. The IRS offers assistance via a 14-page instruction manual.
IRS Form 1023 is the application for Recognition of Exemption under Section 501(c)(3). This 31-page application is very intricate. There is also a 1023EZ form that can be processed, which is the streamlined application for Recognition of Exemption under Section 501(c)(3).
The IRS introduced the 1023-EZ to help small charities apply for the 501(c)(3) tax exempt status more easily. IRS Commissioner John Koskinen was quoted as saying:
“This is a common-sense approach that will help reduce lengthy processing delays for small, tax exempt groups and ultimately larger organizations as well. We believe that many small organizations will be able to complete this form without creating major compliance risks.”
With this new application, the process is easier and faster to complete.
We are happy to assist with the formation process of a non-profit corporation in Delaware. The application process takes about five minutes for us to complete by phone.
The most difficult questions our staff will ask is the name of the company you would like to create and the mission statement for your new non-profit corporation.
There are many daily, monthly and yearly tasks and responsibilities that go into running a successful company. Everyone gets busy and can lose track of time, or forget to take care of some little business details.
Perhaps you have not kept up with the annual Delaware filings for your company for several years, and now your company is not in good standing—it's in a void, forfeit or cancelled status.
This means that the company charter is no longer in good standing with the state of Delaware. In order to maintain full asset protection, your company must be in good standing with the state of Delaware at all times.
If you find yourself in one of these types of situations, you will need to decide whether it is best to renew your existing company or start fresh with a new company. Here are some factors to consider:
How long have you been incorporated?
However, if your company was just recently formed and doesn’t have much (if any) history, think about forming a new company instead. (Oftentimes you can utlize the same\original company name.)
Does your delinquent company have any outstanding loans, contracts, bank accounts or federal or state tax issues?
Did your company obtain an EIN (Employer Identification Number)?
However, under special circumstances, the IRS will allow an existing EIN to be transferred to a new company. Otherwise, a new EIN will have to be obtained when you form a new entity.
Did you file for Foreign Qualification (or a Certificate of Authority) for the company in your home state?
The Foreign Qualification would have been filed based on details from the original company formation; therefore, starting a new company would also result in filing a new Foreign Qualification.
These steps will help you determine if your company should be renewed or if you should simply start over with a new business entity.
Either way, Harvard Business Services, Inc. can provide the necessary details to restore your company back into a good standing status.
We will also gladly assist with the formation of a new company, obtaining a new EIN and/or filing for Foreign Qualification in your home state. We are available to help you get through the process as quickly and efficiently as possible.
Welcome to “Podcasts We Love,” a blog series about the most interesting, helpful, educational and entertaining business-related podcasts we enjoy. We’ll highlight either a podcast series or an individual podcast episode we believe offers sound advice to entrepreneurs and business owners. Feel free to agree, disagree or share your own favorite podcasts in the Comments section.
I believe podcasts are the easiest way we can improve upon ourselves. “Freakonomics Radio” is one of my favorite podcasts, and given the fact that it is often the number one podcast downloaded on iTunes, I am apparently not alone.
Recently, the “Freakonomics Radio” hosts, Stephen J. Dubner and Steve Levitt, posted a new episode called “How to Be More Productive” as part of the show’s Self-Improvement Month.
Productivity is the key to everything. The faster you can complete a task, the more time you can reserve for another activity, one you would actually prefer doing. The podcast explains, however, that there is a significant difference between simply being busy and actually being productive.
The reason for this, according to guest speaker and New York Times reporter Charles Duhigg, is that productivity means different things in different settings, and its fluid semantics can be summed up by “helping people figure out how to achieve their goals with less waste and less anxiety and less stress and more opportunity to actually enjoy what they want to enjoy.” Yes, this is a very broad definition, but that is because different individuals not only have different goals but also enjoy different things. As Duhigg points out, productivity for one person may mean replying to every email while for another it is an early morning workout.
Mr. Duhigg, who won a Pulitzer Prize for his New York Times series on Apple called “The iEconomy,” is also the author of Smarter Faster Better: The Secrets of Being Productive in Life and Business. The book explores the science of productivity, and Duhigg shares that while writing the book, he interviewed several hundred subjects and asked them what productivity means to them. Although they each possessed their own perspective, these seven concepts were repeatedly mentioned:
All of these notions are inherently linked to how people feel about productivity. Mr. Duhigg and the podcast’s hosts delve into each of these skills in more detail, as well as what makes a good team leader, so I recommend you listen to the podcast if you’d like to dive deeper.
Laszlo Bock, senior vice president of People Operations at Google (known as Human Resources to the rest of the working world) also joins the podcast for a bit. As Bock explains it, he is the person in charge of assuring Google employees are happy, productive and satisfied, and stay with the company. He discusses two productivity studies his department recently ran at Google; the first, Project Oxygen, was tasked with discovering whether or not middle managers actually matter—they do, it turns out. They then used the data and feedback they’d collected to help the lowest-performing and least successful managers improve (the advice they offered has led to progressively improved feedback on Google managers each year).
In the “How to Be More Productive” podcast on “Freakonomics Radio”, Bock and Duhigg share extensive knowledge about productivity, team work and the psychology behind both, and Stephen Dubner and Steve Levitt facilitate this engaging conversation about maximizing productivity in both your professional and personal life.
To listen to the entire podcast, head over to the Freakonomics website or just hit Play below to listen.