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 you fully understand all your documents and important dates to keep your company in compliance.
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 specify 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 pushes the due date of the first Franchise Tax payment by a full year.
There are many other reasons company owners may opt for a specific effective date, such as a birthday, an anniversary or just 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.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
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There is 1 comment left for Business Terms for Delaware Companies
Muhammad Younas said: Friday, December 29, 2017What is needed to change an existing DE LLC into an S Corp?
HBS Staff replied: Friday, December 29, 2017This webpage outlines what is involved in changing an LLC into an S corporation:
https://www.delawareinc.com/llc/s-corporation-tax-status-for-your-llc/
Your accountant or attorney is best suited to help you with the paperwork.