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The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.

Top 10 Corporation & LLC Franchise Tax Questions
By Amy Fountain Tuesday, February 2, 2016

top 10 franchise tax questions

Whether it was to fulfill a dream or purely for investment purposes, you established a Delaware company, and now you may have concerns regarding the maintenance of your business entity and what you are required to do for it on a regular basis. One of the annual requirements is the filing of an annual Delaware Franchise Tax report.  Don’t let either word—“franchise” or “tax”—frighten you; Harvard Business Services, Inc. is here to answer the Top 10 Franchise Tax questions.

1. What is Franchise Tax? The term may make it seem like you own a Chipotle or Pizza Hut franchise, but that is not the case at all. “Franchise Tax” is just the term the Delaware Secretary of State gave to the annual fee.

2. Do I have to pay the Franchise Tax?  Yes. Every business entity that is formed in Delaware is required to pay Franchise Tax each year. 

3. Do I still owe Franchise Tax if my company does not have any profits that year?  Yes. Your company owes Franchise Tax every year, regardless of whether or not your company has started making money, opened a business bank account or filed a federal tax return. If your company is formed in the state of Delaware, you must pay the annual Franchise Tax.

4. Do I have to pay the tax if I just formed my company? Yes. The state levies the Franchise Tax in the same fashion as the IRS levies your income tax, meaning it is paid in arrears. So if you formed your company this year, the first Franchise Tax filing will be due the following year. You do not have to pay the Franchise Tax in the same year that your company was established.

5. Is the Franchise Tax the same as federal income tax? No. Delaware Franchise Tax is completely separate from your federal income tax filing. We will gladly provide assistance with your Delaware Franchise Tax filing; however, you will need to consult your CPA or Accountant for assistance with your federal income tax filing.

6. How much is my Franchise Tax? The amount due is dependent upon several variables.  If your company is an LLC or LP, then the standard, flat rate is $300 per year. If your company is a corporation, then the amount due will be between $225 and $180,000 annually. The exception would be an exempt entity, such as a religious organization, church or foundation, which only has to file an annual report at a reduced rate of $25. 

7. Why is the corporation Franchise Tax bill so high? Don’t fret—the vast majority of corporations pay somewhere between $225 and $400 for their Franchise Taxes each year.  Click here for a calculator to generate an estimate on how much your taxes may be.

8. When is the Franchise Tax due? The fee for a corporation is due by March 1 of every year; the fee for an LLC or LP is due by June 1 annually.

9. What happens if I don’t pay by the deadline? The state of Delaware will assess a late penalty, plus interest, for all late filings. For a corporation, the late penalty is $125 plus 1.5% monthly interest; for an LLC, the late penalty is $200 plus 1.5% monthly interest.

10. How can I file and pay my company’s Franchise Tax?  Just go to www.delawareinc.com/payft and complete the online form. 

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Customer Service Skills Matter
By Devin Scott Monday, February 1, 2016

customer service skillsEvery company that interacts with customers must, by default, offer customer service. The significant issue that some businesses fail to address, however, is what level of customer service they are providing. Great customer service can be the difference between a business that succeeds and a business that fails, regardless of the product or service being offered. Customers want what they want, and companies that would like to keep their customers happy should be placing immense value on each encounter with a customer. In the real world, however, how common is it that a customer actually receives quality customer service? Ask yourself the following questions:

  • How many times have you called a company and been left on hold for longer than five minutes?
  • How many times have you called a company, spoken with someone who could not help you, and then been transferred to someone else who could not help you?
  • How many times have you called a company and, after the unsatisfying and unhelpful phone call, told yourself that you would never again bother calling that company’s customer service?  

Unfortunately, the above circumstances have probably occurred more often than any of us would like them to. But why? Why is it that some (many?) businesses do not value customer service? It can’t be one bad employee. Likewise, it can’t be an entire untrained staff. Could it be the company does not value customer service at all? When we receive excellent customer service, it stands out, but that’s backwards; great customer service should not stand out—it should be the norm.

I recently had to call my cable TV vendor in regard to a billing issue. I was on hold for 20 minutes. After a representative finally answered the call, it took the rep five minutes to pull up my information. After explaining to her that I had been overcharged, she explained to me that she could not help me. I was then told I would be transferred to a supervisor. I sat on hold for another 20 minutes. When the supervisor finally answered the call, it took him another five minutes to access my information. He then told me all he could do was issue me a credit for one-third of what I was overcharged. When I asked if there was someone else I could speak to, he said no and told me to call back another time. So almost an hour into my phone call, they had not solved my problem. In fact, I was given the impression that they did not care about my problem or my service. It felt as if they just wanted me to go away. This was not a good customer service exchange; in fact, the level of customer service wasn’t even mediocre—it was awful.  

Good customer service is putting yourself in the customer’s shoes. It is listening to their concerns, and then figuring out the best way to help them. The customer is not always right, but when they are right, they deserve extraordinary customer service. When they are wrong, they still deserve good customer service. After all, customers are what keep your business growing.

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Dissolve a Corporation with Certificate of Dissolution
By Jeremy Reed Tuesday, January 26, 2016

close a corporation without a certificate of dissolutionDissolve a Corporation with a Certificate of Dissolution

After you have made the difficult decision to dissolve your Delaware corporation, there are a number of things you must do next in order to formally close your company. Make a checklist and make sure you:

  • Have a meeting of the Board of Directors and pass a resolution to dissolve the company
  • Have a meeting of the shareholders and resolve to dissolve the company
  • file final tax returns, state and federal
  • liquidate your company’s assets
  • close your business bank accounts
  • file a Certificate of Dissolution with the state of Delaware

Your corporation is not legally dissolved until you have filed a Certificate of Dissolution with the state. A filing specialist, such as Harvard Business Services, Inc., can assist you in obtaining the information required to assess your final Delaware Franchise Tax, which is necessary in order to complete the dissolution of your corporation. Once the Certificate of Dissolution is prepared, an officer of your corporation will need to sign it. Upon filing, the state will stamp and approve the document. Once these steps are complete, your corporation will be officially dissolved.

Close a Corporation without filing a Certificate of Dissolution

Some corporation owners do not want to pay the expense of filing the Certificate of Dissolution. There is an alternative to dissolving your corporation via Certificate of Dissolution—you can tell your Registered Agent to resign as the agent with the state. Once your Registered Agent files a Certificate of Resignation, the state of Delaware removes the Registered Agent and your corporation is no longer in good standing, causing it to go void after 30 days. Once this occurs, your company will be void and your company name becomes available in the state’s database for another business owner to choose.

Once your Registered Agent resigns, your corporation’s Franchise Tax will stop accruing. It is vital that you tell your Registered Agent to resign. If your Registered Agent does not resign and you simply stop doing business and ignore your late Tax notices, your company will continue to receive Franchise Tax notices as well as accumulate late fees and interest.

There is a fee associated with Harvard Business Services, Inc. resigning as your Delaware Registered Agent; please feel free to reach out to us for more information or any questions.

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Company Formation Documents, Defined
By Andrew Millman Monday, January 25, 2016

company formation documentsAs business formation experts for more than three decades, we at Harvard Business Services, Inc. are in a unique position to clearly define the various company formation documents you may receive upon forming  your new company.

When you file a General, Close, Public Benefit or Non-Profit Corporation, you receive a Certificate of Incorporation, which contains the Articles of IncorporationThe Certificate of Incorporation is evidence that a corporation has been filed with the state of Delaware. The Articles of Incorporation, which contain the company name, purpose, stock amounts and types, the address of the Registered Agent and the person incorporating the company, are defined as the basic charter of a corporation.

When you file an LLC (limited liability company), you receive a Certificate of Formation, which contains the Articles of Organization. The Certificate of Formation is evidence that an LLC has been filed with the state of Delaware. The Articles of Organization contain the name of the LLC and the address of its Registered Agent as well as any additional information the owners/members decide to include.

When you file an LP (limited partnership), you receive a Certificate of Limited Partnership, which contains the Articles of Limited PartnershipThe Certificate of Limited Partnership proves that an LP has been filed with the state of Delaware. The Articles of Limited Partnership contain the name of the LP, the address of its Registered Agent and the names and addresses of the general partners.

If you own a Delaware LLC, any type of Delaware corporation or a Delaware LP and you are asked to provide your Articles of Incorporation, they are located in your Certificate. 

There is a difference between a Certificate of Good Standing and a Certified Copy of the Certificate of Incorporation. The Certificate of Good Standing illustrates that your company is up-to-date on all its mandatory fees, such as your company's Franchise Tax and Registered Agent Fee, which means your company is considered to be in Good Standing with the state of Delaware. A Certified Copy, however, states that a document was indeed filed and this document is a true and correct copy of the original, filed document.

If you have any questions regarding your company’s incorporation documents, please feel free to call our helpful and experienced business formation specialists at 800-345-2677. 

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Registered Agent for Foreign Qualification
By Brett Melson Tuesday, January 19, 2016

registered agent for foreign qualificationThe state of Delaware is world-renowned by international investors, entrepreneurs, start-up titans, venture capitalists, lawyers, accountants, real estate investors and business owners for the strength of its corporate laws, the consistency of its Court of Chancery’s business decisions and the ease of operating and maintaining business entities. In fact, the state of Delaware consists of more corporate entities (1,114,000 as of Dec 31, 2014) than human residents.

The state of Delaware’s administration works diligently to ensure that Delaware maintains its reputation as “The Incorporation Capital” in order to attract new company formations from all over the world. Here at Harvard Business Services, Inc., most of the new business formations formed by clients within the United States comes from states other than Delaware, which automatically necessitates the local compliance matter called Foreign Qualification. The Foreign Qualification process allows a Delaware company to be governed under the Delaware Corporate Law Structure but still operate locally in another state. When a business owner files Foreign Qualification for a company doing business in another state, he/she must retain a Registered Agent in that state. While Harvard Business Services, Inc. is primarily known as the leading Registered Agent in Delaware, we also offer Registered Agent service in any state in the nation at a very low, competitive rate of $99 per company.    

In fact, we can also form companies in any state in the nation. If you need to form an LLC in California, a close corporation in Wyoming, a non-profit corporation in Delaware, a limited partnership in Massachusetts or a public benefit corporation in Maine, we can assist with any business formation in any state in the country. Thus Harvard Business Services, Inc. can guide you through the creation of your new business entity and act as your Registered Agent for the life of all your companies. We have assisted clients with business formations in every state in America, including Alaska and Hawaii.   

The Registered Agent plays a crucial role in keeping your company compliant and in good standing, which is why it is so important to have an experienced Registered Agent who has a knowledgeable, reliable customer support staff available to answer your questions.

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