The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.
If you are about to launch a start-up, you have no doubt asked yourself, “Do I need a business license?”
No matter what type of business you own—whether it’s in a physical storefront or based online—and regardless if it’s a small or large company, you are going to need to obtain and maintain a business license (possibly more than one).
Business licenses can be complicated, so we have put together a blog that addresses the often-confusing topic of business licenses.
What is a business license?
What is the point of a business license?
Who needs a business license?
Where can I get a business license?
How do I get a business license?
What happens if I do not obtain a business license?
What happens after I have my business license?
Our partnership with LicenseLogix makes it easy for new and existing businesses to obtain all the licenses and permits your business may need. Their Client License Information Center, or CLiC, makes it easy for you to manage the business license renewal process, thus avoiding late charges and fines.
Keep in mind that it is not just new businesses that have to think about business licenses. Existing businesses must be mindful as well. Many situations could cause your company to fall out of compliance. The following are circumstances in which the requirements of your existing business license could change, and your company could need to update its business license:
Business license compliance is an important aspect of owning a company, but it doesn’t have to be stressful or tedious, however, some governmental agencies are easier to deal with and more efficient than others.
When you form a Delaware company through Harvard Business Services, Inc., we want to ensure you receive the most value for your money—thus we believe in providing each Delaware company we form with a full year of Registered Agent service.
Up until now, the exact date on which your company was formed became your anniversary date; it also served as the due date for your annual Registered Agent Fee. For clients who have formed several business entities with us, however, it has become inconvenient to keep track of the exact day the month each company is due. Therefore we have listened to client feedback and updated our Registered Agent Fee due date policy.
Effective immediately, we are implementing a streamlined approach to the Registered Agent Fee due date process. Rather than pay your Registered Agent Fee on the exact anniversary day of your company’s formation, the Fee will now be due on the 28th day of the month in which your company was formed.
For example, let’s say we form your company March 18, 2016. The next time your Registered Agent Fee will be due is March 28th of next year. All that changes is the day of the month.
If you file a change of agent with Harvard Business Services, Inc., your annual Registered Agent Fee due date will be the 28th day of the same month the following year.
It will be easier for all of us to have one consistent monthly due date for all Delaware entities. Hopefully, this change will also alleviate any internal accounting issues our clients with multiple Delaware entities may be experiencing.
Our Promise Remains: Your annual registered agent fee is fixed at $50 per year for the life of your company. This has not changed.
And one more thing: don’t forget, you can pay your annual Registered Agent Fee any time you’d like via our website.
However, not in the state of Delaware. The only document required to be filed in Delaware to create an LLC is the Certificate of Formation.
Unlike other states, Delaware requires very little information to be made public in order to form an LLC.
The Certificate of Formation filed with the Delaware Secretary of State is required to contain only three items:
Information such as the member(s) name, address and the percentage of the business owned is not required to be provided to the state of Delaware and therefore is not part of the public record. This information is kept on file internally within the LLC's Operating Agreement.
The LLC's Operating Agreement can be altered as needed by the members, without filing the changes with the state of Delaware. Some of the typical changes people make are the removal or addition of a member or the change in percentage of a member's ownership.
The LLC's Operating Agreement must be amended to reflect that a new member is now part of the LLC, or to reflect the removal of a member, and all current members must sign the newly amended Operating Agreement, but you are not required to file the amended Operating Agreement with the state of Delaware.
Since there is minimal information on the Certificate of Formation filed with the state of Delaware, this information does not need to be filed or recorded with the state.
Your Delaware Registered Agent does not need to be informed of the change either; we only need to know if there is a change to the company's communications contact, address or phone number. So, unlike many other states, change of ownership for an LLC can be done quickly, easily and without incurring any fees.
Please see our Corporation vs LLC page for more detailed information.
Delaware has the strongest corporate law structure and the largest body of case law in America, and is recognized as possessing the most business-friendly environment in the country. This why over 64% of Fortune 500 companies and almost all new IPOs call the state of Delaware home.
Foreign Qualification is the process of registering your Delaware LLC or corporation, which is considered domestic to the state of Delaware and foreign to all other states, as a foreign entity in your company's home state.
If you plan to operate the business, open a bank account, hire employees or hold an asset in any state other than the state of incorporation, you may be required to file for Foreign Qualification. If you fail to do so, you may be jeopardizing your company.
Other states understand that Delaware’s corporate laws provide greater asset protection and more privacy and, because of this, many people choose to incorporate their companies in Delaware. A common misconception is that by incorporating in Delaware, people can avoid taxation and other financial obligations in their company's home state.
Generally, this is not true. In most cases, if a company generates revenue of any kind, there will be an inherent tax liability in their company's home state. States require that businesses operating within their jurisdictions are licensed, registered and pay taxes.
Filing for Foreign Qualification for your Delaware LLC or corporation in the states in which it operates will render it both legal and taxable.
Another common misconception is that if a company operates 100% online and there is no brick and mortar operation, Foreign Qualification isn't necessary. Again, in most cases, this is untrue. It may depend on where the servers are located and where the business banking is done (the latter is considered one of the primary activities of a company’s operations).
You’ve taken a positive first step by incorporating your company in Delaware, but make sure you meet all compliance obligations in your company's home state.
As Delaware business formation specialists, Harvard Business Services, Inc. is familiar with the Foreign Qualification process—the required documents, application, fees and time frames, which vary—for every state.
If you have any questions regarding the Foreign Qualification of your Delaware LLC or corporation, please contact us via live chat or phone at 800-345-2677).