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Many Americans have suffered financial hardship under the current dismal economic conditions. While the extent of the hardship ranges widely, some people who own a business find themselves in a precarious situation. That is, they must decide whether to use the limited funds available to keep their business running, or to use the minimal resources for their personal expenses.
The decision how to manage the business and personal finances is completely up to each individual person and their unique situation. We have found that some clients choose to sacrifice the upkeep of their business for the sake of maintaining their personal assets. When this unfortunate choice has to be made, many clients ask if their personal credit will be affected by not paying their business bills.
An incorporated company that has the proper internal structure will typically have all of the company assets separate from the owner’s personal assets. Therefore, generally if there is an adverse circumstance that affects the business, the owner’s assets are typically safely protected.
Companies that are incorporated in the State of Delaware are required to pay two annual fees every year to maintain their Good-Standing corporate status. The first fee is the State of Delaware franchise tax and the second fee is for the registered agent service. Clients with limited funds wonder if non-payment of either of these fees will show up on their personal credit report.
If the franchise tax fees are not paid, then the State of Delaware will put the company in a “non good-standing” status and impose late penalties with interest. Failure to pay for two consecutive years will result in the company being voided. The Division of Corporations does NOT report non-payment to the credit agencies.
It is up to each individual registered agent as to how they proceed when payment is not received for their services. At Harvard Business Services we do NOT report non-payments to the credit agencies but we do file a formal resignation with the State of Delaware so that we no longer are required to act as the Registered Agent.
If you find yourself in a similar situation, please feel free to contact our office to further discuss any available options. We are glad to assist with any questions you may have and can be reached via telephone at 1-800-345-2677.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.