Business Terms for Delaware Companies

By Andrew Millman Monday, May 23, 2016

BUSINESS TERMS FOR DELAWARE COMPANIES

 

If you own a Delaware company, there are several important date-related business terms you should be familiar with so understand all your company’s documents and important dates.

 

Business Terms for Delaware Companies

Date of Formation – Date of Formation is the day when the Certificate of Formation, which includes the Articles of Organization, is filed with the Delaware Secretary of State as you form a Delaware LLC.  Unless an alternate Effective Date is specified, this day is the official birthday of the LLC.

 

Date of Incorporation – Date of Incorporation is the day when the Certificate of Incorporation, including the Articles of Incorporation, is filed with the Delaware Secretary of State as you incorporate a Delaware Corporation.  Unless an alternate Effective Date is specified, this day is the official birthday of the corporation.

 

Perpetual Existence – Traditionally, Delaware LLCs, LPs, and corporations are designed to continue indefinitely and continuously, regardless of any change of members, shareholders, officers, Directors or partners, unless a predetermined length of existence is otherwise specified, or the company is administratively or voluntarily cancelled or dissolved.

 

Effective Date/Time – A specific date and/or time can be chosen to be the Effective Date and/or Effective Time of the filing, whether it’s the original Certificate of Formation, an amendment or the Certificate of Cancellation/Dissolution. Business owners do this for a couple of different reasons; the most common reason to create an Effective Date is when a person files a company in December but chooses an effective date of January 1 of the following year. (This extends the Franchise Tax deadline by an additional year.) There are many other reasons company owners may opt for a specific effective date, such as a birthday, an anniversary or a lucky number.

 

Date of Dissolution – Date of Dissolution is the day the Certificate of Dissolution is filed with the Delaware Secretary of State in order to formally close a Delaware Corporation, unless a different Effective Date has been specified.

 

Date of Cancellation – Date of Cancellation is the day the Certificate of Cancellation is filed with the Delaware Secretary of State in order to formally cancel a Delaware LLC, unless a different Effective Date has been specified.

 

Date of Amendment – Date of Amendment is the day the Certificate of Amendment is filed with the Delaware Secretary of State when a Delaware corporation, LLC or LP files an amendment in order to update the company name, increase the number of shares or add preferred shares.  

 

Fiscal Year-End/Closing Month –Fiscal Year-End, otherwise known as the end of the accounting year or the closing month, is the end of the actual business year. Some business owners follow the traditional calendar year, January 1 through December 31, while others choose an alternative business year, June 1 through May 31 of the following year, for example.

 

For a detailed explanation of some of the documents described above, please read Company Formation Documents, Defined.

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