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Did you know that reserving your company name with the Delaware Division of Corporations can actually slow down the processing time of forming your company? Even if you save and are able to produce your name reservation receipt, the formation of your company can take up to 4 to 6 weeks if you reserve your name. Typically, turnaround time to form your company without reserving the name is about 2 days. This information is important in deciding whether it is worth it to reserve your company name.
Example 1: Ronnie reserves the name for his Delaware LLC with the Delaware Division of Corporations. He prints his reservation receipt because we will need it to file his company when he is ready. When Ronnie calls us to incorporate his new business, he has a couple options. He can have us file the standard turnaround time, which for him is now 4 to 6 weeks because he reserved the name, or he can expedite this order to 24 to 48 hours for an additional state fee of $125. This 24 to 48 hour turnaround time would have been no additional charge had he not reserve the name.
Example 2: Bobby reserves the name for his Delaware Corporation with Delaware Division of Corporations. He loses the receipt. This complicates things for Bobby because that receipt is needed for us to release the name from the state of Delaware. Bobby will now have to either change the name or pay an additional $75 to transfer the name reservation to us so we can file his company. This transfer can take 4 to 6 weeks. If he does not have 4 to 6 weeks to wait, then he must also pay the additional state fee of $125 to expedite the order to 24 to 48 hours. So Bobby paid $75 more than Ronnie for the same turnaround time just because he lost that receipt.
Example 3: Rickie does not reserve the name. He calls Harvard Business Services, Inc. and forms his Delaware LLC. His documents are filed on a same-day basis and he has the approved documents from the Delaware Secretary of State within 48 hours, without having to pay any additional fees.
So the important questions for most clients are these: How much time is there between your idea for the name and when you will call Harvard Business Services, Inc. to form the company? Do you think someone else will take your company name in that time period? How soon do you need your approved documents? Please keep these situations in mind before deciding to reserve your company name with the Delaware Division of Corporations.
For important information on choosing a company name, Three Easy Steps for Naming Your Company in Delaware may be helpful.
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.