Should You Reserve a Company Name in Delaware?

This is a question we hear almost daily. Traditionally, it’s easier (and less expensive) to just go ahead and file the new company without a name reservation.

However, in some rare cases, a name reservation may be a good solution. Maybe you have fallen in love with the company name and you want to make sure someone else isn’t going to beat you to the punch, but at the same time, you aren’t ready to move forward with filing your Delaware LLC or corporation quite yet.

In other cases, clients may have already determined that the birthday of the new company must be Jan.1, 2015, for example, and you want to secure the name until then. Whatever the case may be, if you have deemed it necessary to reserve the name you have a couple of options:

1. You can reserve the name with the Delaware Division of Corporations directly for $75, which will put a hold on it for 120 days. (Be sure to hold on to the reservation receipt.)
    
2. You can reserve the name through us, which will make things easier when you’re ready to file. (We’ll retain a copy of the reservation for you.)

Aside from scenarios such as these, in almost all cases, it’s often best to just move forward with the company registration.

Pros and Cons of the Delaware Name Reservation

Pros

• The first and only advantage is an important one. When you make a name reservation, you’ll ensure that no one else can swoop in and pounce on your name. It’s yours for 120 days so you can take your time forming your company.

Cons

• The $75 cost of the name reservation is non-refundable and the state does not apply this towards the cost of the company registration. If you decide you want to change the name you will pay the entire fee again. If you decide to change or modify the name at the last second, even slightly, it defeats the purpose of the name reservation.

• If you misplace the name reservation receipt, the state of Delaware may not allow you to file the company without it. If for any reason you cannot locate a copy of the receipt, you can pay an additional fee to transfer the name reservation to us. Alternatively, if you reserve the name through us, we will hold the reservation receipt for you.

• The name reservation may drastically delay the approval process. We generally have new company filings approved in two to three business days. A pending name reservation could delay the process by a week or more.

Example Name Reservation Scenarios

Scenario 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.

Scenario 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.

Scenario 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.

When you file your company through us, we check the name in real-time. If the name is available, we file the company almost instantly, which will then lock down the company name. We generally have the company to the state of Delaware and back, approved, within two to three business days.

If you have any questions regarding reserving the name for your new Delaware corporation or LLC, call us today at 800-345-2677. We’re ready to help you!