Delaware Incorporation Handbook (14th Edition, 2013)

Table of Contents
UNDERSTANDINGNEWCOMPANYFORMATION,MADEEASY..........................................................................................5
INTRODUCTION:...........................................................................................................................................................................5
HOWTOSELECTTHEBESTSTATETOBEYOURCOMPANYSLEGALHOME................................................................................................6
Privacy.................................................................................................................................................................................6
MultipleStateRegistration.................................................................................................................................................7
SELECTINGENTITYTYPE.................................................................................................................................................................8
LLCs(Briefly).......................................................................................................................................................................8
StockCorporations(Briefly)................................................................................................................................................9
BEFOREYOUORDER...................................................................................................................................................................10
SelectingaName..............................................................................................................................................................10
OpeningaBankAccountandtheFederalEmployerIdentificationNumber(EIN)............................................................10
NEWCOMPANYREGISTRATION.....................................................................................................................................................11
RegisteredAgentServices.................................................................................................................................................11
CorporateKitsandOperatingAgreementKits..................................................................................................................11
DelawareVirtualOffice.....................................................................................................................................................11
SelectingaPackage..........................................................................................................................................................12
PlacingYourOrder............................................................................................................................................................13
PaymentOptions...............................................................................................................................................................15
REGISTERINGYOURNEWCOMPANY..............................................................................................................................................15
ProcessingTime................................................................................................................................................................16
Whattodowiththedocumentsyoureceive....................................................................................................................17
ADMINISTRATIONOFYOURNEWCOMPANY.....................................................................................................................................18
AnnualResponsibilities.....................................................................................................................................................18
AmendmentsandOtherChanges.....................................................................................................................................19
FORFEIT&VOIDStatusandRenewal&Revival................................................................................................................20
INFORMATIONFORINTERNATIONALANDOFFSHORECOMPANIES.................................................................................23
WHYISDELAWARESOPOPULARWITHOFFSHOREENTREPRENEURSANDINVESTORS?...............................................................................23
HOWTODETERMINEIFYOUHAVEUSSOURCEINCOME.....................................................................................................................24
25REASONSTOFORMADELAWARECOMPANY...................................................................................................................26
LIMITEDLIABILITYCOMPANIES(LLCS)...........................................................................................................................30
HowareLLCsManaged?..................................................................................................................................................30
HowareLLCsTaxedbytheIRS?.......................................................................................................................................30
HowareLLCsTaxedbytheSecretaryofStateofDelaware?...........................................................................................30
AdvantagesofDelawareLLCs..........................................................................................................................................31
WhataretheadvantagesofoperatingasanLLCfornonresidentnoncitizens?............................................................31
TheLLCasanalternativetoaPartnership.......................................................................................................................31
TheLLCasanalternativetoanSCorporation..............................................................................................................32
Isthereadownside?.........................................................................................................................................................32
CERTIFICATEOFFORMATION........................................................................................................................................................33
ThefollowinginformationwillbeincludedontheCertificateofFormation:...................................................................33
WhatistheOperatingAgreement?..................................................................................................................................33
SERIESLLC................................................................................................................................................................................34
HowareSeriesLLCsManaged?.......................................................................................................................................35
ThefollowinginformationwillbeincludedontheCertificateofFormationofaSeriesLLC.............................................35
SeriesAgreement..............................................................................................................................................................36
CORPORATIONS.............................................................................................................................................................37
HowareCorporationsmanaged?.....................................................................................................................................37
HowisaCorporationTaxed?............................................................................................................................................37
WhatisthebenefitofformingaDelawareCorporationfornonresidentnoncitizens?..................................................39
HowisaCorporationTaxedbytheSecretaryofStateofDelaware?...............................................................................39
CertificateofIncorporation...............................................................................................................................................43
WhataretheByLaws?.....................................................................................................................................................44
CLOSECORPORATIONS................................................................................................................................................................45
HowareCloseCorporationsManaged?............................................................................................................................45
NOTFORPROFITCORPORATIONS.................................................................................................................................................45
HowareNotforProfitCorporationsManaged?..............................................................................................................46
HowareNotforProfitCorporationsTaxedinDelaware?................................................................................................46
CertificateofIncorporation...............................................................................................................................................46
SCORPORATIONS......................................................................................................................................................................47
HowisanSCorporationtaxedbytheIRS?.......................................................................................................................47
HowisanSCorporationtaxedbytheSecretaryofStateofDelaware?...........................................................................47
WhomayelectSStatus?...............................................................................................................................................47
TheSCorporationasanalternativetotheCCorporation................................................................................................48
HOLDINGCOMPANIES...................................................................................................................................................51
HowareholdingcompaniestaxedinDelaware?..............................................................................................................51
MARINEHOLDINGCOMPANIES.....................................................................................................................................................51
Wherethevesselshouldberegistered?............................................................................................................................52
AIRCRAFTHOLDINGCOMPANIES...................................................................................................................................................52
PERSONALHOLDINGCOMPANY....................................................................................................................................................53
NAMINGYOURCOMPANY.............................................................................................................................................54
NAMINGCONVENTIONS..............................................................................................................................................................54
RESERVINGANAME....................................................................................................................................................................55
DBASDOINGBUSINESSASNAMES.........................................................................................................................................55
REGISTEREDAGENT.......................................................................................................................................................57
QUALIFICATION.............................................................................................................................................................59
HowdoIknowifIneedtoQualifyinastateIdobusinessin?.........................................................................................59
WhatistheproceduretoQualifyinanadditionalstate?.................................................................................................60
WhathappensaftermycompanyisQualifiedinanadditionalstate?.............................................................................61
OPENINGABANKACCOUNT..........................................................................................................................................62
SummaryofRequirementstoOpenaBankAccountintheUS.........................................................................................62
SummaryofRequirementstoOpenaBankAccountOutsidetheUS................................................................................62
ContactingYourBank........................................................................................................................................................62
EMPLOYERIDENTIFICATIONNUMBER(EIN)...................................................................................................................63
USCitizensandResidentAliens.........................................................................................................................................63
NonResidentNonCitizens................................................................................................................................................63
ITININDIVIDUALTAXIDENTIFICATIONNUMBER..........................................................................................................65
WhatisanITIN?................................................................................................................................................................65
HowdoIapplyforanITIN?...............................................................................................................................................65
WhatisanAcceptanceAgent?.........................................................................................................................................66
CERTIFICATES,APOSTILLES,LEGALIZATIONANDAUTHENTICATIONOFDOCUMENTS......................................................67
CertificateofGoodStanding.............................................................................................................................................67
CertifiedCopy....................................................................................................................................................................67
NotarizedTrueCopy..........................................................................................................................................................67
CertificateofIncumbency.................................................................................................................................................68
Apostilles...........................................................................................................................................................................68
LegalizationofDocumentsbyForeignConsulates............................................................................................................68
CONVERSIONS...............................................................................................................................................................68
DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|support@dbiglobal.com
3422OldCapitolTrail,Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818
ENTITYTYPECONVERSION.............................................................................................................................................69
Domestication...................................................................................................................................................................69
TaxStatusConversion.......................................................................................................................................................69
THEUNITEDSTATESPATRIOTACT..................................................................................................................................70
GOODSTANDINGPROTECTIONSERVICE.........................................................................................................................71
Corporations.....................................................................................................................................................................71
LLCs...................................................................................................................................................................................71
GLOSSARY......................................................................................................................................................................72
INDEX............................................................................................................................................................................80
SECTION ONE:
UNDERSTANDING NEW COMPANY
FORMATION, MADE EASY
Understanding New Company Formation, Made

Easy
Disclaimer:Thefollowingarticleisintendedtoprovidegeneralinformationabouthowtoincorporatein
DelawareorformanewDelawareLLCandisintendedforinformationalpurposesonly.Itisnotintendedtoreplace
theadviceofanattorneyortaxaccountantanddoesnotconstituteindividualizedlegaladvice,legalservice,ortax
advice.
Introduction:
Forminganewcompanyrequiressomeadvancedpreparation,butthatdoesn'tmeanithastobedifficult!This
informationisintendedtofamiliarizeyouwiththeprocessofcharteringanewcompany,inotherwords,howto
incorporateabusinessorhowtoformanLLC.Whenwesay"charteringanewcompany""incorporatingabusiness"
or"forminganewcompany"wearereferringtotheprocessoffilingtherequireddocumentsandregisteringthe
nameofthecompanywiththestateauthoritywhichcontrolsandoverseescorporations.Whenthisprocessis
complete,thenewcompanyisgrantedanofficialcharterauthorizingittooperateasabusinessinthestatewhereit
isregistered,enablingittotransactinterstatebusinessintheUS,andtoberecognizedasabusinessentityinforeign
countries.Youcouldthinkofthe"charter"asbeingsimilartoalicense.DBIcanhelpwitheverystepofthisprocess;
infact,we'lldomostofitforyou!
InthissectionoftheDelawareIncorporationHandbookwewilldiscusshowtocreateandregisteranew
DelawareLLCorDelawareCorporationingeneralterms.ThisinformationwillbedividedintoTopicalSections.Each
sectionwillbeginwithanintroductionofthebasicsineasytounderstandlanguage.FrequentlyAskedQuestions
(FAQs)alsoappearattheendofeachsection.MostofthisinformationappliestobothUSbasedclientsandclients
locatedoutsidetheUS;wehavemadeanefforttoidentifyinformationwhichmaybeofparticularinterestto
InternationalclientsandinformationwhichmaybeprimarilyofinteresttoUSbasedclients.
Ifyouareinterestedinreadingfurther,youwillfindthepagenumbersofarticleswithmore
indepthinformationlistedattheendofeachsection.
Q: IsitnecessarytohireanattorneytoIncorporateintheStateofDelaware?
A: TheservicesofanattorneyarenotrequiredtoIncorporateinDelawareorformanLLCin
Delaware.DBIwillcompleteandfilethedocumentsnecessarytoregisterthenew
companyintheStateofDelaware(and/orotherdesiredstates)andofferskitsforBy
LawsandOperatingAgreements.Pleasefamiliarizeyourselfwiththeprocessbyreading
thishandbookandaskingourIncorporationSpecialistsanyquestionsyoumayhave.If
youfeelyouneedlegaladvicewesuggestyoucontactanattorney;pleasecontactan
IncorporationSpecialistifyouwouldlikeareferral.
HowtoSelecttheBestStatetobeYourCompanysLegalHome
Whenyoudecidetoformanewcompanyyouhavealotofoptionstochoosefrom.Oneofthefirstdecisions
youwillmakeiswhatstateyouwanttobethe"legalhome"ofyourcompanycharter.Youcouldform(charter)your
companyinthestatewhereyourheadquartersorhomeofficewillbelocated,oryoucouldformyourcompanyina
statewithareputationforbeingmoreadvantageous.Thedecidingfactorsareusuallywhatcorporatelawsand
taxesapplyforagivenstate.
Youhavemostlikelyalreadyheardabouttheadvantagesofformingyourbusinessorholdingcompanyin
Delaware.AsofJanuary14,2013,morethan900,000USbasedandoffshorecompanieshadchosenDelawareas
theircorporatehome.Over60%oftheFortune500firmsandmorethan50%ofthecompaniestradedontheNew
YorkStockExchangeandNASDAQareCharteredasDelawareCorporations.
IfyouwouldliketolearnmoreabouttheadvantagesofforminginDelaware,pleaseseethe
25ReasonstoFormaDelawareCompanysectiononandthepublicationWhy
CorporationsChooseDelaware.
Privacy
ThissectionappliestobothUSbasedbusinessesandInternational/OffshoreCompanies,butmaybeofparticularinterestto
International/OffshoreCompanies.
OnefactorwhichisstronglyinfluentialinselectingthestateinwhichtobaseyourcompanysCharterisprivacy.
Manyofourclientsareveryconcernedabouttheprotectionoftheirsensitiveinformationandwishtokeep
informationsuchasownershipdetailsandhomeaddressesoutofthepublicrecord.WhetheryouareaclientofDBI
oraprospectiveclientdiscussingyourplansfortheorganizationofanewcompany,allofyourinformationis
completelyconfidential.Thepossibilityoftotalprivacyisapowerfulmotivatorandmovesmanyofourclientsto
selectDelawareasthelegalhomeoftheircompany.ADelawareLLCorDelawareCorporationisnotrequiredto
nametheDirectors,Officers,Owners,Shareholders,Members,orManagerswhenitisIncorporatedorOrganized.
PrivacyinDelawarestartswithdraftingtheCertificateofFormation(orCertificateofIncorporation).AllDBI
NewCompanyRegistrationpackagesincludethedraftingoftheCertificateofIncorporationorCertificateof
Formation.Next,theCertificateisfiledwiththeDelawareSecretaryofStateandthenewLLCorCorporationis
registeredintheDivisionofCorporationsInformationSystem.Thenamesoftheshareholders,Directors,Members
andManagersarenotrequiredtoappearontheCertificateofFormationofanLLCorCertificateofIncorporationof
aforprofitCorporationandthereforedonotenterthepublicrecordatincorporation.DBIhasadirectcomputer
connectiontotheregistrationsystem;whenweenterthenewLLCorCorporationintotheregistrationsystemthe
onlyinformationwegivewillbeourown,asRegisteredAgentandIncorporator(Organizer).
Ifyouelectnottohavethenamesoftheprincipalsappearinthepublicrecordwewillfurnishyouwithaprivate
documentwhichnamestheInitialDirectorsorInitialMembers,andwhichcanbeusedforpurposessuchasopening
bankaccountsandenteringcontracts.Thisdocumentwillbegiventoyoudirectlyandwillonlybeseenbythoseyou
personallyshowthedocumentto.OtherdetailsregardingOwners,Shareholders,Members,andManagerswillbe
recordedbyyouinyourownprivatecompanyrecordsandwillnotbefiledwithanyDelawareagencyormade
publicinanyway.
IfyouformaDelawareStockCorporationorNotforProfit,youwillberequiredtonametheDirectorsandone
OfficeroftheCorporationwhentheAnnualReportisdue.YouwillnotberequiredtonametheShareholders
(owners)oftheCorporation.Bearinmind,aDirectorisnotrequiredtobeanowneroremployeeofthe
Corporation.
IfyouformaDelawareLLC,youwillnotberequiredtofileanAnnualReportinDelawareandthenamesofthe
Members(owners)andManagersofthecompanywillnotenterthepublicrecord.
IfyouattempttoQualifyyourDelawareLLCorDelawareCorporationtotransactbusinessinanadditionalstate,
theForeignstatemayrequireyourecordownershipormanagementdetailsinthepublicrecordsofthatstate.
SomestateswhichrequiredisclosurebyDomestic(local)companiesdonotrequiredisclosureiftheapplicantisa
DelawareLLCorCorporation.
IfyouwouldprefertohavethenameandaddressoftheInitialMemberorInitialDirectorprintedonthe
CertificateofIncorporationorCertificateofFormation,youmayselectthisoptionwhenyouplaceyourorder.
Q: DoesDBIofferNomineeDirectors?
A: No,DBInolongeroffersthisservice.YoumaycontactanIncorporationSpecialistfora
referral.
Q: IfmynameisntprintedontheCertificateofIncorporation,howdoIprovethatIown
thecompany?
A: DBIwillprovideaResolutionbyIncorporatornamingtheperson(s)authorizedtoopen
bankaccountsandenterintocontractsastheInitialDirectororInitialMember,butthis
documentshouldbesupplementedbyproperlymaintainedcompanyrecords.Proofof
ownershipisrecordedintheprivateCorporaterecordsmaintainedbythecompanyin
theformofStockCertificatesorMembershipInterestCertificatesplustheShare
TransferLedgerorRegisterofMembers.
MultipleStateRegistration
ThissectionappliestoclientswhowillhavebusinessactivitieswithintheUnitedStates
WhenyoudecidetoIncorporateorformanewLLCyouhavealotofoptionstochoosefrom;thestateyou
selectasthehomeofyourCharterwillcontrolwhichoptionsyouhave.IfyouarelocatedintheUS,oneofthefirst
decisionsyouwillmakeiswhatstateyouwanttobethelegalhomeofyourCorporateCharterorLLCCharter.You
couldIncorporateinthestateyourbusinessislocatedin,oryoucouldformyournewLLCorCorporationinastate
withareputationforbeingmoreadvantageous,suchasDelaware.
ADelawareLLCorCorporationinGoodStandingwiththeSecretaryofStateofDelawarehastheConstitutional
righttotransactInterstateCommerce;meaningcommercethatoccursbetweenpartiesintwoormorestates.A
KentuckyresidentwithaDelawareLLCsellinghisproducttoacustomerinNewYorkisanexampleofInterstate
Commerce.Ifyouareregularlyconductingbusinesstransactionsbetweenyourselfandanotherpartywithinthe
bordersofthesamestate,youmayberequiredtoobtainthepermissionofthatstatetodobusinessthere.This
doesnotmeanyouhavetocreateanewcompanyineverystateyoudobusinessin.YoucanchooseDelawaretobe
thelegalhomeofyourcompanyCharter,andcanthenapplyforpermissionforyourDelawareLLCorDelaware
Corporationtodobusinessinadditionalstates.
TheprocessofapplyingforpermissiontodobusinessinanadditionalstateiscalledQualification.Qualification
inanadditionalstatemaynotberequiredineverycase;inadditiontotheexemptionforInterstatecommerce,
thereareotheractivitieswhichareoftenexemptfromrequiringQualificationinaparticularstate.
SeeQualificationsectionformoreinformationaboutregisteringyourDelawareLLCor
corporationasaforeignentityinanotherstate.
OfalltheadvantageousreasonstoformyourLLCorCorporationinDelaware,ifyouryoungUSbasedbusiness
haslimitedcashflowandcapital,youmaybeconsideringformingyourcompanyinanotherstate.Thisoptionis
popularwiththosewhofeelthattheywouldbenefitmorefromtheeconomyofsinglestateregistrationthanfrom
theprotectionsandbenefitsofregisteringasaDelawarecompany.AlthoughwespecializeinregisteringDelaware
Charters,ourIncorporationSpecialistsareexperiencedinperformingregistrationsandbusinessfilingsalloverthe
US.Wewouldbehappytoprovideyouwithaquoteifyouarethinkingofforminginanotherstate.
Q: DontIhavetohaveanaddressinDelawaretohaveaDelawareLLCorDelaware
Corporation?
A: No,youonlyneedtohaveaDelawareRegisteredAgent.DBIwillbeyourDelaware
RegisteredAgentandyourheadquarterscanbelocatedanywhere;evenoutsideofthe
stateoroutsideofthecountry.SeeRegisteredAgentsectionformoreinformation.If
youwishtopurchaseaDelawareaddresswhichyoumayuseforroutinebusiness
correspondenceweofferMailForwardingServicepackages,pleaseseeDelawareVirtual
OfficeunderNewCompanyRegistrationsection.
SelectingEntityType
ThenextoptionstoconsideraretheavailableoptionsforEntityType.StockCorporations,LLCs,Limited
PartnershipsandSoleProprietorshipsareallexamplesofdifferentEntityTypes.Letssubstitutetheword
companyforEntitytomakeiteasier.Differentrules,lawsandtaxesmayapplytoeachtypeofcompany.When
wecreateyournewcompany,wewillidentifywhattypeofcompanyweareformingwhenweregisterwiththe
state;sowewillneedtodecidewhichtypeofcompanyisthebestfitforyoubeforeweattempttoregister.The
decidingfactorsareusually:thetypeofliabilityprotection,themethodoftaxation,andthecomplexityof
administration.
LLCs(Briefly)
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.
ThecompanytypeourclientsselectmostoftenistheLimitedLiabilityCompany(LLC).Herearesomefeatures
oftheLimitedLiabilityCompany:
ADelawareLLCisnotrequiredtofileanAnnualReportorholdannualmeetings.
DelawareLLCsoffermultipleoptionsformanagementstructureanddistributionofprofitsandlosses.
AnLLCmaybeeligibletoelecttobetaxedbytheIRSasanIndividual,Partnership,SCorporationorC
Corporation.Thisdoesnotchangetheentity(company)type.AnLLCwhichhaselectedtobetaxedasan
IndividualorasaCCorporationisstillanLLC.
TheliabilityofallMembers(owners)islimitedtotheirinvestmentsintheLLC(unlesstheypersonally
guaranteeotherdebtincurredbytheLLC).
Nonresident,NoncitizensareeligibletoformanLLCinDelaware.
TheDelawareLLCTaxiscurrently$250ayearandisaflatratenotdependentincome,assetsoractivity.
StockCorporations(Briefly)
ThesecondmostpopulartypeofcompanyselectedbyourcustomersistheStockCorporation.Herearesome
featuresofaStockCorporation:
StockCorporationsprovidethemeanstolimitanownerspersonalliabilitytothemoneytheyhaveinvested
inthecompany.
Ourcustomersoftenselectthistypewhentheyplantohavemultipleinvestorsortoraisemoneyfromthe
publicbythesaleofstockshares.
NonresidentnoncitizensareeligibletoformstockCorporationsinDelaware(butarenoteligibletoelect
SCorporationtaxstatus).
TheDelawareFranchiseTaxiscurrentlyaminimumof$75forCorporationsauthorizinglessthan5,000
sharesplusa$50AnnualReportfilingfee.
Q: Iamnotafranchise,whyshouldIpayafranchisetax?
A: ThewordFranchiseasusedhereinDelawareFranchiseTaxmeansaspecial
privilegegrantedtoanindividualorgroup;especially:therighttobeandexercisethe
powersofaCorporationanddoesnotmeanachainofbusinesseslicensedbythe
originalstoreandoperatedpertheoriginalstorespatternundertheoriginalstores
tradename.
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BeforeYouOrder
Nowthatyouhavedecidedwhatstate(s)toregisterinandwhatentitytypeyouwouldliketoform,youare
almostreadytoplaceyourorder.Thereareonlythreethingsleftforyoutodoandtwoofthemarediscussedinthis
Topic.
SelectingaName
Wait!Dontregisterthatdomainnameyet!Beforeweregister,DBIwillchecktoseeifthenameyouwouldlike
foryournewcompanyisavailableinDelaware(oranyotherstate).Thereisnochargeforthisservice.Westrongly
cautionyouagainstregisteringadomainname,applyingforaTaxIDorsubmittinganapplicationforabusiness
licensebeforeithasbeendeterminedthatthenameyoudesireisavailableinthestate(s)inwhichyouintendto
register.
Thecompanynameconsistsoftwoparts:theTitlepartandtheSuffixpart.Forexample,inDBIGlobal,Inc.
theunderlinedDBIGlobalistheTitlepartandInc.istheSuffix.TheSuffixidentifieswhattypeofEntity
(company)thisis.Inc.andCorp.aretwowellknownSuffixesforCorporations;LimitedLiabilityCompanies
usuallyusetheSuffixLLC.TheSuffixpartisnotconsideredwhendeterminingifanameisavailable.Trytothinkof
twoorthreenamesyouwouldliketochecktheavailabilityof,bearinginmindthattheonlypartthatmakesa
differenceintheavailabilityistheTitlepart.
SeeNamingYourCompanyformoreinformationaboutNamingConventions(rules)and
tipsonhowtogetthenameyouwant.
OpeningaBankAccountandtheFederalEmployerIdentificationNumber(EIN)
Wewouldlovetobeabletotellyouexactlywhatdocumentationyourbankwillrequestwhenyougotoopen
anaccountinthenameofyourbusiness,butitvariesfrombankbranchtobankbranch.Somebranchesevenleave
thisdecisiontothediscretionoftheindividualbankrepresentatives.Ifyouplanonopeningabankaccountinthe
nameofyournewDelawareLLCorDelawareCorporationitisagoodideatocontactthebankyouwishtouseto
findoutwhatdocumentationtheyrequirebeforeyouplaceyourorderfornewLLCformationorIncorporation.
WecantellyouitwouldbetypicaltobeaskedforacopyofyourCertificateofIncorporation(orCertificateof
Formation),aCertificateofGoodStandingandphotoidentification.AndallUSbankswillrequireanLLCor
CorporationtohaveaFederalEmployerIdentificationNumber(EIN)toopenabankaccount.ThisisrequiredforUS
bankaccountsregardlessofwhetherthecompanywillactuallyhaveanyemployeesornot.DBIcanobtainanEIN
foryouatthesametimeweareregisteringyournewcompany.
SeetheOpeningaBankAccountsectionformoreinformation.Youllalsofindaworksheet
youcanrefertowheninterviewingthebanktofindoutwhatdocumentstheywillrequire.

SeetheEmployerIdentificationNumbersectionformoreinformationaboutEINs.
11
NewCompanyRegistration
ThefollowingsectionpertainstoDelawareformation,otherprocessesandtimeframesmayapplyforother
states.IfyouareinterestedinforminginastateotherthanDelaware,contactanIncorporationSpecialistformore
details.
RegisteredAgentServices
DelawarelawrequiresbothLLCsandCorporationstomaintainaRegisteredAgentinDelaware.TheRegistered
AgentreceivesanylegalnoticesdeliveredbyServiceofProcessonyourcompany.DBIwillbeyourDelaware
RegisteredAgentandthefirsttwelvemonthsofDelawareRegisteredAgentservicearefreewithyourpurchaseofa
NewCompanyRegistrationpackage.ThisishowyoucanbepermittedtohaveaDelawareLLCorCorporation
withouthavingabusinesslocationinDelaware.
AfterthefirstyearyouwillbechargedanAnnualRegisteredAgentRenewalfeeof$100forUSclientsand$120
forclientsoutsidetheUS.FailuretomaintainaRegisteredAgentwillresultinyourcompanyCharterbeingdeclared
FORFEITbytheDelawareSecretaryofState;thismeansyourcompanywouldbeinvalidandwouldloseitsrightto
functionasanLLCorCorporation.
SeeRegisteredAgentsectionformoreinformation.
CorporateKitsandOperatingAgreementKits
IfyourecallthesectiononPrivacy,thenyoualreadyunderstandhowimportantitistomaintaincompany
recordswithappropriatedocumentation.Insomecasesthecompanyrecordsyoumaintainaretheonlysourceof
proofavailabletosatisfytherequirementsofbanks,agenciesandotherswhowishtoverifythelegitimacyor
ownershipofyourcompanybeforeenteringintoarelationshipwithyou.Thesedocumentsarealsocrucialwhen
bringing,settlingordefendinglawsuitsandinsomecasesinsatisfyingIRSinquiriesintoelectedtaxstatus.
Butdontbeintimidated,weofferkitswhichsatisfyDelawarelawsandappropriatelyrecordtheownershipand
leadershipstructureofyournewcompany.InsideyourkityouwillfindStockCertificatesorMembershipInterest
Certificates,yourCorporateSealandamodelOperatingAgreementorByLawsinyourchoiceofaWordtemplateor
fillintheblankdocument.
DelawareVirtualOffice
12
ByservingasyourRegisteredAgentinDelawareyourDelawareLLCorDelawareCorporationisexemptfrom
beingrequiredtomaintainanyotherpresenceinDelawareforthepurposesofobtainingandretainingaDelaware
Charter;butyourRegisteredAgentsfunctionsarelimitedtoreceivingServiceofProcessandTaxNotices.Manyof
ourclientsdesireaDelawareaddresstheycanuseforbusinesspurposes.DBIoffersmultiplelevelsofservicefor
thosecompanieswhichdesireabusinessofficeormailforwardingserviceinDelaware.
Low Volume Mail Forwarding
DBIofferslowvolumemailforwardingforcompanieswhichdonotanticipatereceivingmorethanthree
piecesofmailpermonth.Thisisoftensufficientforabankstatementandincidentalmail.
Basic Mail Forwarding
ForcompaniesthatdesireaDelawareStreetAddresswithmailforwardingwhichcanbeusedasthe
companysbusinessaddressonwebsites,letterhead,businesscards,salesordersplusroutinebusiness
correspondence,basicmailforwardingisappropriateforthosewhoexpectupto25piecespermonth.
Basic Package Forwarding
ThisserviceisusedprimarilybycustomerswithoutaUSaddresswhowishtopurchasefromvendorswho
willnotshipoutsidetheUS.
Virtual Office
IncludestheBasicMailForwardingservicewithDelawareStreetAddressplusaDelawaretelephonenumber
withvoicemailandDelawarefaxnumber.Callscanbeforwardedanywhereintheworld.
Delaware Office Space (Time-Shared) with Signed Lease Agreement
IncludesaphysicalofficelocatedatCapitolOfficeCenter,3422OldCapitolTrail,Wilmington,DE19808,
USA.Youwillhaveaccesstophone,computer,conferenceroom,andreceptionarea.ThisDelawareoffice
spacefulfillstherequirementstoopenabankaccountaswellassecuritycompaniesregisteredinDelaware
needingaphysicallocation(DelawareCode1226).
DBIcannotforwardmailwithoutacompleted,notarizedandsignedUSPSForm1583:AppointmentofMail
ForwardingAgent.Theformwillbeprovidedtoyouattimeofpurchase.PleasecontactanIncorporationSpecialist
formoreinformation.Contactusifyouwouldlikeaquoteforhighvolumeservice.
SelectingaPackage
WeofferseparatepackagesforUSbasedclientsandforclientsoutsidetheUS.Ifyouhaveofficesbothinthe
USandoutsidetheUS,youmaycontactanIncorporationSpecialistandwewillhelpyouputtogetherthebest
optionsforacustompackage.Ifyouarenotsurewhichfeatureswouldbebestforyou,contactoneofour
IncorporationSpecialistsbyphone,chatoremailforhelp.Wewillbehappytoreviewtheavailableoptionswith
you.
13
Inselectingapackagethereareseveralcriteriatoconsider:
1. DoyouneedanOperatingAgreementKit(orCorporateComplianceKit)?
Theonlyreasonyoushoulddeclinethisoptionisifyoualreadyplanonmakingyourownarrangements
todocumentyourcompanyownershipandstructure.Theonlypackagesweofferwhichdonotincludea
KitaretheUSEconomypackages.
2. DoyouneedtoregisteryourDelawareLLCorDelawareCorporationinanadditionalUSState?
ThisonlyappliestocompaniesthatwilldobusinessinsidetheUS.SeeQualificationformore
information.ThisservicecomesstandardwiththeUSExecutivePackageandisavailableasanaddon
featureforotherpackages.StateQualificationFilingFeesareadditional.
3. DoyouneedaDelawareMailingAddress?
ThisoptioncomesstandardwiththeInternationalPlatinumPackageandtheUSExecutivepackageoris
availableasanaddontootherpackages.
4. DoyouneedanApostilleorGoldSealCertifiedCopyforyourCertificate?
Thisonlyappliestocompaniesthatwilldobusiness,bankingorinvestmentsoutsidetheUS.AnApostille
orGoldSealCertifiedCopycomesstandardwithallInternationalPackagesorcanbeorderedasanadd
onforUSpackages.
5. DoyouneedBusinessLicenseApplicationService?
ThisappliesonlytocompaniesthatwillhaveaphysicalbusinesslocationorhomeofficewithintheUS
andcomesstandardwiththeUSExecutivePackageorasanaddontootherUSPackages.
6. DoyouneedtoapplyforanEIN(FederalTaxID)?
IfyouareopeningabankaccountintheUS,oremployingwageearningemployeesintheUS,youwill
needanEIN.TheapplicationserviceisincludedintheUSEssentialPackage,theUSExecutivePackage,
theGoldInternationalPackagesandthePlatinumInternationalPackages.Youmayalsoaddtheservice
toyourorderseparately.
PlacingYourOrder
ThissectionappliestobothUSbasedandInternational/OffshoreCompanies
Foryourconvenience,youmayplaceyourorderthroughourwebsite,byfax,byphone,byemailorbymail.If
youdonotplaceyourorderthroughourwebsitewewillprovideyouwithanorderformtocompleteandsignthen
returntouswithpayment(theorderformsarefoundintheappendix).Youarewelcometoreturntheorderform
byfax,email,mailorcourier.
Tohelpyouprepare,belowyouwillfindalistoftheinformationwewillcollectwhenyouplaceyourorder.If
youareable,youarewelcometocompletethisinformationontheorderformandsenditin.Ifyouneed
assistance,IncorporationSpecialistsareavailabletoansweryourquestionsandhelpyouplaceyourorder;wewill
evenfillouttheorderformforyouifyoulike.
14
1. WhichEntityTypehaveyoudecidedtoform:LLC,Inc.,etc.?
2. HaveyoudecidedtoIncorporateinDelawareorformaDelawareLLC?Doyouneedtoregisteryour
Delawarecompanyinanyadditionalstates?
3. Ifyouhavenotalreadycontactedustochecknameavailability,bereadytosuggest23namesforyour
company.
4. DidyoudecidetohavethenameoftheInitialDirectororInitialMemberprintedontheCertificate,ordo
youpreferforthenamesoftheprincipalsnottoappearontheCertificate?
5. YouwillbeaskedtoprovidethenameandaddressoftheInitialMemberorInitialDirectorofthecompany.
IfyouelectednottohavethenameoftheprincipalappearontheCertificate,thisinformationwillgoona
privateresolutionnamingthepersonwiththeauthoritytoopenbankaccountsandentercontracts.You
mayprovideanyaddressforthispurpose,althoughwesuggestprovidingtheaddressontheInitialMember
orDirectorsphotoidentification.Ifyouwish,youcanpurchaseoneofourVirtualOfficepackageswhich
includeaDelawareStreetaddressthatcanbeusedforthispurpose.
6. Wewillneedthename,phonenumber,alternatephonenumber(ifany),emailaddressand/orfaxnumber,
andmailingaddressofthepersonwemaycontactwithquestionsaboutyourorder.Ifyouareorderinga
packagewhichcomeswithacompliancekit,wewillneedyourshippingaddressifitisdifferentfromthatof
yourcontactperson.WecannotshipacompliancekittoaPOBox.Ifyouwantyourrenewalbillingtogoto
theattentionofsomeoneotherthanthecontactpersonortoadifferentmailingaddress,pleasebeready
withyourbillingcontactsinformationaswell.Likewise,ifthereisaspecificpersonoraddresstowhichwe
shouldforwardtaxnoticesorlegaldocumentsdeliveredbyServiceofProcess,pleaseletusknowthefull
contactdetails.
7. DelawareBusinessIncorporatorswillbeyourRegisteredAgentinDelawareunlessyouinstructotherwise.
8. LLCswillbeformedwithPerpetualExistence(noexpirationdate)unlessyouspecifythatyouwanttheLLC
toexpireonaspecificdate.
9. StockCorporationswillbeformedwiththeGeneralPurposeStatementunlessyouinstructotherwise.The
GeneralPurposeStatementis:ThepurposeoftheCorporationistoengageinanylawfulactoractivityfor
whichCorporationsmaybeorganizedundertheGeneralCorporationLawofDelaware.Ifyouwishtousea
specificPurposeStatement,youwillneedtoprovideuswiththeexactlanguageofthestatementyouwishto
substitute.
10. StockCorporationswillauthorize1,500sharesofcommonstockwithoutparvalueunlessyouinstruct
otherwise.Authorizingmorethan5,000sharesofstockmayincreaseyourAnnualFranchiseTaxdueand
mayresultinanincreasedfilingfee.Authorizingmorethan1500sharesatzeroparvaluewillresultinan
increasedfilingfee.PleasecontactanIncorporationSpecialisttocalculatethefilingfeeifyouwillauthorize
morethan1,500shares.
11. YouwillbeaskedtoselectaNewCompanyRegistrationpackage.IfyouareIncorporatingorforminganew
LLCinastateotherthanDelaware,pleasecontactanIncorporationSpecialistforaquoteaspricevariesby
state.
12. YouwillhavetheopportunitytoselectadditionalservicessuchasaCertificateofGoodStanding,Business
LicenseApplicationService,EINApplicationService,CertifiedCopies,MailForwardingandApostillesatthe
15
timewhenyouplaceyourorderforaNewCompanyRegistrationPackage.Someoftheseserviceswill
requiretheprovisionofadditionalinformation.Pleaseseethecorrespondingpagefordetails.
Q: HowmanyofficersanddirectorsarerequiredformyDelawareCorporation?
A: OnepersoncanbebothanofficerandaDirector.Delawarecorporatelawfacilitates
settingupaonepersonCorporation.NeitherOfficersnorDirectorsneedtobelistedin
theCertificateofIncorporation,butthenamesandaddressesofallDirectorsmustbe
listedontheDelawareAnnualReport.DelawareLLCsneedaminimumofoneMember
oroneManager.DelawareLLCsarenotrequiredtofileanAnnualReport.
Q: MustanofficerofthecompanysigntheCertificateofIncorporationor
CertificateofFormation?
A: No;DBIwilldesignateamemberofitsstaffastemporaryIncorporatororOrganizer,
whosedutiesandfunctionsareautomaticallyterminatedfollowingthefilingofyour
Incorporationdocuments.Thereisnoextrachargeforthisservice.Ifyouprefertohave
anOfficer,DirectororMemberofthecompanysigntheCertificate,pleaseadviseusof
yourpreferencewhenyouplaceyourorder.
PaymentOptions
IfyouwillbeorderingonlineyouwillhavetheoptiontopaybyCreditCardorPayPal.Foryourconvenience,we
acceptVisa,MasterCard,DiscoverandAmericanExpress.Ifyouprefertoorderbysubmittinganorderformviafax,
emailormail,youmaycompletethecreditcardpaymentauthorizationoftheorderform,includingthesecurity
codeofthecreditcardandthesignatureoftheaccountholder.Alternately,youmayencloseapersonalor
companycheck,oramoneyorderbymailorcourier.IfyouwishtomakepaymentbyWesternUnionorbankwire
transfer(includeanadditional$35.00fee),pleaseforwardthetransmittaladvicefromthemoneytransferagent
withyourorderformandallow310daysforthemoneytobedepositedinouraccount.Paymentinfullisrequired
beforeyourordercanbyfulfilled.
RegisteringyourNewCompany
Oncewereceivepaymentforyourorder,wewillbetakingcareofallthedocumentationrequiredtoformand
registeryournewDelawareLLCorCorporation.ItwillnotbenecessaryforyoutosignorpreparetheDelaware
incorporationdocuments.Ifyouorderqualificationinanadditionalstateitmaybenecessaryforyoutosignand
returnanapplicationformafterweprepareitforyou;wewillletyouknowifthisisrequiredforyourstate.Ifyou
ordermailforwardingserviceyouwillberequiredtosignandreturnaUSPostalServicemailforwarding
authorizationwhichwewillprepareforyou.IfyouareanonresidentnoncitizenandyouorderEINobtainment
servicewewillprepareanapplicationforyoutosignandreturnbyemailorfax.
16
ProcessingTime
OurhoursofoperationareMondaythroughFriday,8:30a.m.to5:00p.m.USEasternStandardTime.Youare
welcometoplaceyourorderwheneveritisconvenientforyou.Whetheryousubmityourorderonlineoronan
orderform,anyinformationyousubmitwillbekeptstrictlyconfidential.
IfyourorderforanewDelawareLLCorDelawareCorporationisreceivedduringnormalbusinesshours,wewill
registeryourcompanyintheDelawareCorporateInformationSystemassoonaswereceiveyourpaymentand
reviewyourorder.YournewcompanylegallyexiststhemomentwetypeyourregistrationintotheDelaware
CorporateInformationSystem.Thisprocessisoftencompletewithinlessthananhour,buteveninthecaseof
extremelyhighordervolume,weguaranteethatyournewDelawareLLCorCorporationwillberegisteredwithin24
hours(excludingweekends,holidaysanddeclaredemergencies).
WedontadvertisethatyournewcompanywillberegisteredwithinthreeminutesbecauseatDBIyourorder
willbereviewedbyatrainedIncorporationSpecialistbeforeyourcreditcardischarged.Ifoneofourexperienced
IncorporationSpecialistsseesapotentialproblemyouwillbenotifiedrightawaybyphoneoremail.
AfterweregisteryournewDelawareLLCorCorporationintheDelawareregistrationsystem,theDivisionof
CorporationswillreturnacopyoftheCertificateofIncorporationorCertificateofFormationbearingastampstating
thefilingdateandtimeplusthefilenumberassigned;thisisknownasaplaincopyandisincludedwithyour
purchaseofaNewDelawareregistrationpackageatnoadditionalcharge.(TheInternationalPackagesincludea
CertifiedCopyofyourCertificateofIncorporationorCertificateofFormationwithanApostilleorandGoldSeal.)
ForUSorderswetypicallyreceivethestampedCertificateofIncorporationorCertificateofFormationfromthe
CorporationsDivisionwithinapproximately24hours.Ifyourorderwasreceivedbefore12:00PMESTwewilloften
receiveyourstampedCertificatebackfromtheCorporationsDivisionthenextmorning,butthesetimeframesare
subjecttotheCorporationsDivisionsworkvolumesoweadviseyoutoallow13businessdays.Ifyouneed
guaranteed24hourprocessingorsamedayserviceyourordercanbeupgradedtoexpeditedserviceforan
additionalfee.
ForinternationalorderswetypicallyreceivetheApostilleorGoldSealCertifiedCopywithin35businessdays.If
youneedthedocumentfastercontactusforaquoteonexpeditedservice.
WewillemailthestampedCertificateofIncorporationorCertificateofFormationtoyouassoonaswereceiveit
fromtheState.BecauseCorporationsandLLCsareregisteredelectronicallyinDelaware,thescannedimagewe
emailyouislegitimateforuse.ScannedimagesofCertifiedCopiesandCertificatesofGoodStandingarealso
legitimateandbearauthenticationnumberswhichtherequestormayverifybycontactingtheDelaware
CorporationsDivisionverificationsectionoftheirpublicwebsite.
ForUScustomersthehardcopyofyourdocumentswillalsobesentbyUSFirstClassMailatnoadditional
charge;lookforyourdocumentstoarriveinaDBIenvelope.Yourdocumentsmaybeenclosedinaplasticsleeve
behindacoverletter,dontthrowthemaway!CorporateKitsandOperatingAgreementkitsareshippedseparately
toUSaddressesbyUPSandareusuallyreceivedwithinthreetofivebusinessdaysorless.ShippingtoUSaddresses
isfree!
17
CorporateKitsshippedoutsidetheUSaretypicallyreadyforshipmentbyFedExInternationalorDHLwithin57
daysandtimeintransitandshippingcostvarybydestination.Shippingfeemustbepaidinadvanceforshippingto
nonUSdestinations.AlldocumentsincludedwiththeDelawareInternationalIncorporationorLLCPackageswillbe
enclosedinthesameshipmenttoreduceshippingcost,unlessyouinstructotherwise.
Q: DoIhavetowaitfortheoriginaldocumentsbeforemynewcompanysignsacontractor
opensabankaccount?
A: ThestateofDelawaredoesnotreturnoriginaldocumentsafterfiling.Scanned
documentsareaslegitimateasanoriginaldocument,soyoucanopenabankaccount
orenteracontractassoonasyoureceiveyourscanneddocumentsbyemail.Iftheparty
youareworkingwithrefusestoacceptyourscanneddocumentitispossibletoordera
CertifiedCopyfromtheStatewhichwillbearanauthenticationnumber.Various
expeditedservicelevelsareavailable.ContactinIncorporationSpecialistforassistance.
Whattodowiththedocumentsyoureceive
IfyouordertheGold,PlatinumorExecutivepackage,yourcompliancekitwillarriveassembled.Itwillonlybe
necessaryforyoutoprintyourOperatingAgreementorByLawsandyourMinutesofFirstMeetingandfilethemin
theappropriatetabsoftherecordsbinder.
Otherwise,youwillreceiveyourCertificateofIncorporationorCertificateofFormation,togetherwiththe
resolutionnamingtheInitialDirectororInitialMember,plusanyadditionaldocumentsyouorder,inawhite9x12
envelopedeliveredbyFirstClassUSMail.Insidetheenvelopeyouwillfindasleeveprotector.Yourdocumentsare
insidethesleeveprotectorbehindacoverletter;dontthrowthemaway!FilethesedocumentsinyourCorporate
ComplianceKitorOperatingAgreementKitbehindtheprovidedsectiondividers.Completeinstructionsare
providedwiththecoverletter.
Yourcompliancekitisimportant!IfyoudidnotorderakitpleaseSeetheAppendixformoreinformationabout
theCorporateCompliancekitandtheOperatingAgreementkit,orcontactanIncorporationSpecialisttolearnabout
therisksofnotproperlydocumentingtheorganizationandownershipofyourcompany.
TheStateofDelawaredoesnotkeeprecordsofwhotheMembersorShareholdersofyour
companyare(notever,notanywhere).Thispreservesyourprivacybutitalsorequiresyour
vigilantupkeepofyourowncompanyrecords.AlthoughDBIwillhaveanindicationofwho
theInitialDirectororInitialMemberofyourcompanyis,thisisnotproofofownership!Ifa
disputeweretoariseregardingtheownershipordistributionrightsofanownerofyour
company,yourowncompanyrecordsmaybetheonlysourceofevidencetosupportyour
claim.WestronglysuggestthatyoustoreyourCorporateKitorOperatingAgreementKitina
safeorsafetydepositboxandobservethesameprecautionsthatyouwouldindefending
againstpersonalidentitytheft.
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Q: IpresentedthedocumentyougavemewhichnamesmeastheInitialDirector,butthe
bankwantsadditionaldocumentation.
A: Ifyouareworkingwithabankoragencywhichdoesnotaccepttheevidenceofyour
companyrecords,DBIcanprepareaStatementbyIncorporator(alsoknownasa
BusinessStatementorCertificateofIncumbency)whichisanotarizedstatement
attestingtotheorganizationofyourcompanyandisusuallyacceptedbymost
authoritieswhohaverequestedadditionalinformation.PleasecontactanIncorporation
SpecialistforanEstimate.
Administrationofyournewcompany
DelawareCompaniesareamongsttheeasiestintheworldtoadminister.TheDelawareStateLegislaturestrives
togiveyouasmuchflexibilityaspossibleandDBImakesiteveneasier!Pleasetakeamomenttofamiliarizeyourself
withthefewresponsibilitiesyouwillhaveafterIncorporatingorOrganizinganLLCinDelaware.
AnnualResponsibilities
Corporations
FileAnnualReportwiththeDivisionofCorporationsbeforeMarch1steachyear.
PayDelawareFranchiseTaxtoDiv.ofCorporationsbeforeMarch1steachyear.
PayDBIAnnualRegisteredAgentServiceRenewalfeeonanniversaryofformation.
PayStateandFederalCorporateIncomeTax,ifany.
IfyourCorporationisregisteredinadditionalstatesyoumayhaveadditionalreportsandortaxesdueeach
year.
Holdannualshareholdersmeeting*.Meetingsmaybeheldonlineorbyphone.
o ScheduletheMeeting
o SettheAgenda
Resignationand/orAppointmentofDirectors,ifany
Approvalofauditedaccounts
Approvaloftheannualbudget
Majorbusinessitemstobeconsidered
o SendoutAnnualMeetingNoticesandProxyCardstoallshareholders.
o HavetheSecretarykeeptheMinutesoftheMeeting.FiletheminutesintheCorporaterecords
binderanddistributecopiestoshareholders.
*ExcludingCloseCorporationsandSoleShareholder/SoleDirectorCorporations
Thereareunscrupulouscompaniesinseveralstatesthatsendoutsolicitationswhichlooklikeofficial
noticesinstructingyoutofiletheMinutesofyourAnnualMeetingwithastateagency.YourAnnual
MeetingNoticesandMinutesarenotfiledwiththeSecretaryofStateoranyotheragency.Theyare
maintainedbyyouinyourprivatecorporaterecords.(CorporationsdohavetofileanAnnualReport
eachyear,thisisnotthesameasMinutes.Ifyoureceivesomethingthatlookslikeanofficialnotice
andyouhavequestionsaboutitsauthenticity,pleasefaxoremailittoyourIncorporationSpecialist.
Wewilladviseyouifthenoticeislegitimateandifyouneedtocomplywithit.
19
LLCs
PayannualDelawareLLCTaxbeforeJune1steachyear.
PayDBIAnnualRegisteredAgentServiceRenewalfeeonanniversaryofformation.
PayStateandFederalCorporateIncomeTaxorPersonalIncomeTax,ifany.
IfyourLLCisregisteredinadditionalstatesyoumayhaveadditionalreportsandortaxesdueeachyear.
DBIofferstheGoodStandingProtectionProgramtobothLLCsandCorporationssoyouwont
havetoworryaboutfilingyourtaxontimeormissingaRegisteredAgentRenewal.
Q: Ihaventstarteddoingbusinessyet;doIstillhavetofileareportandpaytaxes?
A: Yes.YouarepayingfortheprivilegeofhavingacompanyCharteredin
Delaware;theDelawareFranchiseTax(orDelawareLLCTax)isnotanincometax.Ifyou
dontwantyourDelawareChartertobecancelled,youwillhavetopaytheFranchiseTax
orLLCTaxwhetheryourcompanyisactivelyconductingbusinessornot.Thetaxisdue
everyyearuntilyoufileaCertificateofDissolutionoraCertificateofCancellation.
AmendmentsandOtherChanges
IfyouneedtomakeachangetoyourCertificateofIncorporationorCertificateofFormation,anAmendment
mustbefiledwiththeDivisionofCorporations.DBIoffersthisservice.YoumayamendyourByLawsorOperating
AgreementyourselfandarenotrequiredtofilethatamendmentwiththeState.
ChangesthatrequireanAmendmenttobefiledwiththeState:
NameChange
Authorizemoreorlesssharesofstock(forCorporationsonly)
AuthorizeanewClassofStock(forCorporationsonly)
AnychangetothewordsprintedontheCertificateofFormationorIncorporation
ChangeofRegisteredAgent(forLLCs)
ChangesthatdonotrequireanAmendmenttobefiledwiththeState:
ChangestotheOperatingAgreementorByLaws
ChangestotheOfficers,Directors,Shareholders,MembersorManagers
AuthorizemoreorlessLLCMembershipunits
Q: OurCertificateofIncorporationnamessomeonewhoisnolongera
Director;dowehavetofileanAmendment?
A: ItisnotnecessarytoamendthecertificatetochangeaDirectororMember;although,if
youwishtodoso,youmayamendthedocumentforafee.ContactanIncorporation
Specialistformoreinformation.
20
Q: DoIhavetonotifyyouorthestateofDelawarewhenthereisachangeintheofficers,
directors,membersormanagersofthecompany?
A: TheDirectorsandprincipalofficerofaDelawareCorporationarereportedonan
AnnualReportfiledannuallywiththeDelawareSecretaryofState(SoS);itisnot
necessarytoreportthechangeuntilthenextAnnualReportisdue.TheDelawareSoSis
notnotifiedofchangesoftheMembersorManagersofanLLC.Allchangestothe
principalsandOfficersshouldberecordedintherecordsthecompanymaintainsatits
headquarters(mainoffice).Ifachangeofownershipwillresultinachangeofcontact
informationitisnecessarytonotifyDBIASAPsothatthetransmissionofyourtaxnotices
andServiceOfProcessisnotinterrupted.Thebestwaytonotifyusofachangeincontact
informationisbyemail.
FORFEIT&VOIDStatusandRenewal&Revival
FORFEITandVOIDStatus
akaAdministrativeDissolution,InvoluntaryWithdrawal
IfacompanyfailstopayforRegisteredAgentServicerenewal,DBIwillresignasRegisteredAgentinDelaware.
IfaDelawareCorporationorLLCfailedtomaintainaRegisteredAgentinDelaware,thecompanyCharterwillbe
declaredFORFEITbytheSecretaryofState.
IfaDelawareLLCorDelawareCorporationfailstopayDelawareFranchiseTaxorDelawareLLCTaxin
consecutiveyears,thecompanyCharterwillbedeclaredVOIDbytheSecretaryofState.
IfacompanyisdeclaredVOIDorFORFEIT,thecompanywillbecomeinvalidandwilllosetherighttotransact
businessasanLLCorCorporation.TheLLCorCorporationwillalsolosetherighttoExclusiveUseofthecompany
name.IfanothercompanyregisterswithyournamewhileyourcompanyisVOIDorFORFEIT,youcannothavethe
namebackevenifyoufileforRenewalandRevival.Ifanothercompanyhastakenyournamewhileyourcompany
wasVOIDorFORFEITDBIcanhelpyouRenewwithanewname;youwillbepermittedtokeepyouroriginal
IncorporationDate.PleasecontactyourIncorporationSpecialistsifyouhavequestionsaboutthis.
RenewalandRevival
akaRestoration
IfyourcompanyisdeclaredVOIDorFORFEIT,thecompanyChartercanberestoredtoGoodStandingbyfilinga
CertificateofRenewalandRevivaltogetherwithanydelinquentDelawareLLCTaxesorFranchiseTaxes(andAnnual
ReportsforCorporations).ContactanIncorporationSpecialistforacalculationofdelinquenttaxdueand/orunpaid
RegisteredAgentServiceRenewalfees.DBIwilldrafttheCertificateofRenewalandRevivalandpreparethe
necessaryAnnualReportsforCorporationsusingtheAuthorizedSharesMethodofFranchiseTaxCalculationatno
additionalcharge.CorporationsthatfileusingtheAssumedParValueCapitalmethodmayeitherpreparetheirown
delinquentAnnualReportsorpayDBIsAnnualReportPreparationandfilingfee.LLCsdonotfileannualreports.
21
IfyourcompanywasIncorporatedinDelawareoryourLLCwasformedinDelawareandyour
businessislocatedinanotherstateinwhichyouQualifiedasaForeignCorporation,you
cannotallowyourDelawareCorporationorDelawareLLCtogoVOIDorFORFEIT.Ifyour
CorporationorLLCisVOIDorFORFEITinDelawarethenyourcompanyhasnorighttodo
businessinanystateuntilitisrestored.IfyounolongerwishtoberegisteredinDelaware,
contactanIncorporationSpecialistaboutthepossibilityofConvertingyourDelawareLLCor
Corporationtoanotherstate.
Dissolution&Cancellation
AkaWindingUpBusiness,Closing
IfyounolongerintendtoconductactivitywithyourCorporation,itisnecessarytolegallydissolvethe
CorporationbyfilingtheappropriatedocumentswiththeDelawareSecretaryofState;thisprocedureisknownas
Dissolution.ShareholdersarenotlegallyentitledtotheirshareoftheCorporation'sremainingassetsafterclose
ofbusinessuntilithasbeenlegallydissolvedbyfilingtheCertificateofDissolutionwiththeSecretaryofState.
Furthermore,youdonotwanttaxliabilitytocontinuetoaccrueonacompanyyoudonotplantouseanymore.For
LimitedLiabilityCompaniestheprocessisthesame,butisreferredtoasCancellation.
Thefinaltaxliabilityforanypreviousoutstandingyearsplusthecurrentyearmustbepaidatthesametimethat
thecompanyfilesitsCertificateofDissolutionorCertificateofCancellation.Taxwillnotbeprorated.Contactan
IncorporationSpecialistforacalculationoffinaltaxdue.DBIwilldrafttheCertificateandprepareAnnualReports
forCorporationsusingtheAuthorizedSharesMethodofFranchiseTaxCalculationatnoadditionalcharge.Annual
Reportsmustbespecialorderedforcurrentyearfiling;yourIncorporationSpecialistwilldothisforyou.
CorporationsthatfileusingtheAssumedParValueCapitalmethodmayeitherpreparetheirownfinalAnnualReport
orpayDBIs$55AnnualReportPreparationandfilingfee.LLCsdonotfileannualreports.
Toavoidadditionaltaxliability,youmustcontactDBItofileyourCertificateofDissolution(or
CertificateofCancellation)bynolaterthanthelastbusinessdayofDecemberofthecalendar
yearinwhichyourcompanyresolvedtoclose,regardlessofyourFiscalYearend.
Disclaimer:ThishandbookisintendedtoprovidegeneralinformationabouthowtoincorporateinDelawareorformanew
DelawareLLCandisintendedforinformationalpurposesonly.Itisnotintendedtoreplacetheadviceofanattorneyortax
accountantanddoesnotconstituteindividualizedlegaladvice,legalservice,ortaxadvice.Norepresentationsorwarranties,
expressorimplied,aregivenregardingthelegal,taxorotherconsequencesresultingfromtheuseofourservices,includingbut
notlimitedtoinformationand/orforms.TheinformationsuppliedbyDBIissuppliedonlywiththeunderstandingthatDBIand
itsemployees,agentsand/orrepresentativesarenotengagedinrenderinglegalservices,legaladvice,ortaxadvice.DBI
expresslydisclaimsanyliability,lossorriskincurredasaconsequence,directlyorindirectly,oftheuseandapplicationofanyof
thecontentsofthisinformation.
22
SECTION TWO:
INFORMATION FOR INTERNATIONAL
AND OFFSHORE ENTREPRENEURS
23
Information for International and

Offshore Entrepreneurs
DBIhasaspecialrelationshipwiththeinternationalcommunity.Wevebeenhelpinginternationalandoffshore
investorsandentrepreneurswiththeirspecialneedssince1986.DBIsexperienceinthisareagreatlyexceedsthat
ofmanyDelawareservicecompaniesandunlikemostservicesompanies,weofferspecialpackagesforInternational
andOffshoreclients.
WhyisDelawaresopopularwithoffshoreentrepreneursandinvestors?
TherearemanyadvantagestoformingaDelawareLLCorCorporation.Herearejustafew:
WiththehelpofDBI,youcanformaDelawareUSALLCorCorporationwithoutevercomingtotheUnited
Statesevenifyouarenotaresident,andevenifyouarenotacitizen.
Ifyouareanonresidentnoncitizen,andhavenoOperations(businessactivity,employees)intheUSand
noUSSourceofIncome(suchasrentalproperty)youcanlegallyavoidallUSFederalIncomeTaxesand
DelawareStateIncomeTaxes.Seebelowformoreinformation.
ThereisnoStateSalesTaxinDelaware.
Delawarehasnoadvaloremorvalueaddedtaxes(VATs),andnotaxesonbusinesstransactions(TBTs).
Delawarehasnousetax,inventoryorunitarytax.
ThecontractualflexibilityofaDelawareLLCisunmatchedbyanyotherU.S.statesLLCstatute,andoffers
benefitstypicalofmanyoffshorejurisdictions,i.e.theGermanGmbH.
DelawareLLCsdonotrequirethenameoftheMembersorManagerstobedisclosedontheCertificateof
FormationandarenotrequiredtofileanAnnualReport.TheownersoftheLLCwillnotberecordedinthe
publicrecord.
DelawaresCourtofChanceryisaworldleaderinUSandInternationalbusinesslaw.
Delawarescorporatelegalsystemstrivestoprovideacorporatelegalclimateconducivetothegrowthand
profitabilityoftheover900,000companiesCharteredasDelawareCorporations.Ourstatelegislative
philosophyistogivecompaniesfreedomtodefinetheirownpracticesofoperationswheneverpossible,
withsensitivitytotheprioritiesofcompanyownersandofficers.
SeenextpageforachartonHowtoDetermineifyouhaveUSSourceIncome.
24
How to determine if you have US Source Income
ItemofIncome
FactorDeterminingSource
Salaries,wages,othercompensation
Whereservicesperformed
Businessincome:Personalservices
Whereservicesperformed
Businessincome:Saleofinventorypurchased
Wheresold
Businessincome:Saleofinventoryproduced
Whereproduced(Allocationmaybenecessary)
Interest
Residenceofpayer
Dividends
WhetheraU.S.orforeigncorporation*
Rents
Locationofproperty
Royalties:naturalresources
Locationofproperty
Royalties:patents,copyrights,etc.
Wherepropertyisused
Saleofrealproperty
Locationofproperty
Saleofpersonalproperty
Seller'staxhome(butseePersonalProperty,inChapter2
ofPublication519,forexceptions)
Pensions
Whereserviceswereperformedthatearnedthepension
Scholarshipsfellowships
Generally,theresidenceofthepayer
Saleofnaturalresources
Allocationbasedonfairmarketvalueofproductatexport
terminal.Formoreinformation,seesection1.8631(b)of
theregulations.
*Exception:PartofadividendpaidbyaforeigncorporationisU.S.sourceifatleast25%ofthecorporation'sgross
incomeiseffectivelyconnectedwithaU.S.tradeorbusinessforthe3taxyearsbeforetheyearinwhichthedividends
aredeclared.
YouwillfindagreatdealofinformationabouthowtoformanewDelawareLLCor
CorporationinthesectionoftheHandbooktitledUnderstandingNewCompanyFormation
MadeEasy.
25
Q: Howisitpossibleforanonresident(alien)noncitizentoformaUSAcompany?
A: DelawarelawpermitsnonresidentnoncitizenstoformDelawareLimitedLiability
Companies(LLCs)andCCorporations.Youdonotneedtoshowusyourpassportand
youdonothavetocometotheUSA.
Q: DontIneedtohaveabusinesslocationinDelawareUSA?
A: No;youonlyneedtohaveaRegisteredAgentintheStateofDelaware.DBI
willbeyourRegisteredAgentinDelawareandthefirst12monthsofourRegisteredAgent
ServiceisfreewiththepurchaseofoneofourNewCompanyRegistrationPackages.
Q: CanyouprovidemewithaDelawareaddress,telephonenumberand
FaxnumberthatIcanputonmywebsite?
A: Yes;wecanprovideyouwithaDelawareaddress,asuitenumberatthe
CapitolOfficeCenterinWilmingtonDelawareUSA,whichyoucanputonyourwebsite,
orderformsandbusinesscards,andwhichyoucanuseinyourroutinebusiness
correspondence.ThisserviceisnotthesameasRegisteredAgentService.OurVirtual
OfficeisavailableforpurchaseseparatelyandBasicMailForwardingisincludedwiththe
PlatinumNewCompanyRegistrationPackage.Wecannotforwardmailuntiltheapplicant
returnstheUSPSform1583authorizingustoserveasyourMailForwardingAgent.Our
LegalOfficeIdentitypackagealsoincludesaDelawaretelephonenumberandfax
numberwhichcanbeforwardedtoyouanywhereintheworld.PleaseseeMail
ForwardingServices/VirtualOfficeformoreinformation.
26
25 REASONS
TO FORM A DELAWARE COMPANY
1. YoucanformaDelawareLLCorCorporationbyinternet,fax,ormailWITHOUTEVERCOMINGTO
DELAWARE.DBIcanelectronicallyregisteryournewCorporationorLLCinDelawarewithinaslittleasanhour
fromreceiptofyourinternetorderorsignedorderformwithpayment(onordersreceivedduringbusiness
hours).
2. Delawarescorporatelegalsystemstrivestoprovideacorporatelegalclimateconducivetothegrowthand
profitabilityoftheover900,000companiescharteredasDelawarecorporations.DelawaresCourtof
Chanceryisanequitycourtoflimitedjurisdictionwhichexistssolelytoadjudicatecorporatelitigation.For
morethan220yearstheChanceryCourthasbeendecidingcorporatedisputesinvolvingmanyofthelargest
corporationsintheworld,andhasdevelopedafullyestablishedcorpusofcaselawandlegalprecedentwhich
arecitedbybusinessscholarsandattorneysalloverthecountryandaroundtheworld.DelawaresCourtof
Chanceryisoneofthemostimportantcorporatelawcourts,secondonlytotheSupremeCourtoftheUnited
Statesinitsimpactoncorporatelaw.InadditiontotheinfluentialroletheDelawareCourtofChanceryplays
inshapingthecorporatelegallandscape,Delawarescorporatelawsareregularlyreviewed,revisedand
simplifiedbytheDelawareStateBarAssociationandtheDelawareLegislature.KnownasTheFirstStatefor
itsroleasthefirststatetoratifytheU.S.Constitution,Delawareremainsonthevanguardoflegalinnovation
beingamongthefirststatestoadoptlegislationallowingforthecreationofLimitedLiabilityCompanies(LLCs)
andSeriesLLCsandtheconvenienceofelectronicsignatures.
3. Delawarecompaniesmayberegisteredwithoutdisclosingthenamesoraddressesoftheownersinthe
publicrecord;CorporationsarenotrequiredtoidentifyShareholdersontheCertificateofIncorporationand
DelawareLLCsarenotrequiredtoidentifyMembersontheCertificateofFormation.DelawareCorporations
arerequiredtoidentifyDirectorsonanAnnualReport,DelawareLLCsarenotrequiredtofileanAnnual
Report.
4. ADelawaredirectorshieldlawpermitsDelawarecorporationstosheltertheirdirectorsliberallyfrom
personalliabilityinconnectionwiththeiractionsasboardmembers.
5. Delawareiswidelyregardedbyinternationalentrepreneursandinvestorsasafavorabletaxclimate:
ThereisnosalestaxinDelaware.
ThereisnostatecorporateincometaxinDelawareongoodsorservicesprovidedbyDelaware
corporationsoperatingoutsideofDelaware.
ThereisnostatecorporatetaxoninterestorotherinvestmentincomeinDelaware,whenearnedbya
DelawareHoldingCompany.
Delawarehasnopersonalpropertytax.TherearenoStaterealpropertytaxes,andthelocalrealproperty
taxesareverylow.
27
Delawarehasnoadvaloremorvalueaddedtaxes(VATs).
Delawarehasnotaxesonbusinesstransactions(TBTs).Delawarehasnousetax,inventoryorunitarytax.
ThereisnoStateofDelawareinheritancetaxonstockofDelawarecorporationsoperatingoutsideof
DelawareheldbynonresidentsofDelaware.
TherearenoDelawarecapitalsharesorstocktransfertaxes.
Delawaredoesnottaxincomefromintangibleproperty.
6. Thedirector(s)ofaDelawarecorporationarepermittedtosetthesalespriceonanystockthecorporation
issuesanddesirestosell.
7. Delawarecorporationsmaypurchasesharesoftheirownstock,hold,sellandtransferthem.
8. ThereisnominimumcapitalinvestmentrequiredtoformaDelawareCorporationorLLC.Yourinvestment
maybeaslowaszero.
9. TheliabilityofashareholderofaDelawarecorporationislimitedbytheamountofhisinvestmentinthe
corporationplusthecorporatetaxliabilityprovidedthatthecorporationhasconducteditsbusiness
accordingtoallapplicablestateandfederallaws.
10. Thedirector(s)ofDelawarecorporationsmaydeterminewhatpercentageoftheconsiderationreceived
fromtheissueoftheirstockistobeconsideredcapital.Thisisimportantbecauseitgivesthedirectors
greaterflexibilityregardingtheuseoffundsobtainedinapublicoffering,sothatlargeamountsarenottied
upinthecapitalaccount.
11. TheByLawsorOperatingAgreementofyourDelawareCorporationorLLCmaybeformulatedoraltered
anytimebyitsDirectorsorMembers.
12. YourDelawarecorporationmayownwithoutlimitationsastoamountorvaluestocks,bondsor
securitiesofothercorporationslocatedinDelawareoroutsideofDelawareaswellasrealandpersonal
property.ThismeansthatyournewDelawareCorporationcanbesetupas,orlaterbecome,acorporate
holdingcompanyorrealestateholdingcompany.
13. YourDelawarecorporationcanbesetuptobeanallpurposecorporationtoconductmultipletypesof
business,tomanufactureand/ormarketanyproducts,toofferallkindsofservices,simultaneouslyor
sequentially.AllyouhavetodoisincludeabroadstatementofpurposeinyourDelawareCertificateof
Incorporation(CorporateCharter)suchas:Thepurposeofthiscorporationistoengageinanylawfulactor
activityforwhichCorporationsmaybeorganizedundertheGeneralCorporationLawofDelaware.This
permitsyourDelawarecorporation,forexample,tostartoutasarealestateholdingcompany,addyour
spousesretailbusinesstoitsactivitiesandlaterbecomeamanufacturerofpackagedgoodsallwithout
havingtoalteryouroriginaldocumentationorfilenewcorporatedocuments.
28
14. Quarterlyorannualmeetingsmaybeheldanywhereorifyouprefer,meetingsmaybeheldentirelyonline,
attheoptionoftheboard.Inlieuofsuchformalmeetings,director(s)and/orshareholdersmayactby
unanimousconsent.DelawareLimitedLiabilityCompaniesarenotrequiredtoholdannualmeeting.
15. YourDelawarecorporationstockcanbeprivatelyownedorpubliclytradedonanystockexchangeanywhere
intheworld,whenproperlyregistered.
16. YoudonothavetomaintainaDelawarebusinessofficeaddressasidefromtheaddressofyourDelaware
RegisteredAgentwhichisrequiredforserviceofprocess.However,ifyouwouldliketohaveaDelaware
businessaddresswhereyoucanreceivebusinessmail(otherthanserviceofprocess),DELAWAREBUSINESS
INCORPORATORS,INC.offersaVirtualOfficepackagewhichincludesaDelawareMailingAddresswithmail
forwardingplusaprivateDelawarephonelineandfaxservice.
17. DelawarehasahighlyspecializedandexpertcorporatebarthatisveryfamiliarwithDelawarecorporatelaw
andwhichappearsregularlybeforejudgesoftheCourtofChancery.Studentsinlawschoolsnationwide
typicallystudyDelawarecorporationlawstatutesandDelawarecorporatecaselawintheircorporatelaw
courses.
18. NonCitizenNonResidentsoftheUSAmayformDelawareCCorporationsandLLCs.Noncitizenresidentsof
theU.S.mayalsoformSCorporations.(CanonlybedoneifthenoncitizenshasanITIN.)
19. DelawarepermitsSCorporations,which,withthefederaltaxlawsof1986,canbeveryadvantageous.
20. WithDBIasyourDelawareRegisteredAgent,yourDelawareCorporationorLLCmaybeheadquarteredin
anystateorterritoryoftheUnitedStatesorinanycountryintheworld.
21. OnesingleindividualmaysimultaneouslyholdalloftheexecutiveofficesandtitlesofaDelawarecompany,
suchasPresident,CEO,Director,etc.DelawarepermitsyoutobeaonepersonCorporationoronemember
LLC.(CanonlybedoneifnoncitizenshasanITIN.)
22. TheDelawareDivisionofCorporationsistheleaderinprovidingservicebasedonitsmanyyears
experienceanditsphilosophyofdeliveringcustomerserviceonparwiththebestprivatefirms.
23. Delawarecorporationsarepermitted,underappropriatecircumstances,topaydividendsoutofnetprofitsif
thereisnosurplus.
24. TheDelawarecorporatefranchisetaxisminimalandquitecompetitivewithotherstates(only$75/yearfor
Delawarecorporationswith5,000sharesorless).Thereisanadditional$50filingfee.Allfeeschargedbythe
StateofDelawaretocorporationsarekeptdeliberatelylowtoattractincorporationbusinessamajorsource
ofrevenuefortheState.
25. 50%ofallU.S.publiclytradedcompaniesand63%oftheFortune500arecharteredinDelaware.
29
SECTION THREE:
REFERENCE INFORMATION
30
Limited Liability Companies (LLCs)

ALimitedLiabilityCompany,orLLC,isaTypeofEntity(company)whichisoftendescribedasahybrid
betweenaCorporationandaPartnership.TheLLCfeaturestheliabilityprotectionofaCorporation,inthatthe
liabilityofallmembersislimitedtotheirinvestmentsintheLLC(unlesstheypersonallyguaranteeotherdebt
incurredbytheLLC),butismoreflexibleinrespecttomanagementstructureandisusuallyconsideredtooffer
greatereaseofadministration.
How are LLCs Managed?

ThemanagementofaDelawareLLCisalmostunlimitedlyflexible.DelawareLLCscanbemanagedbythe
Members(owners)orbyManagers(employeesoragentswhodonotholdanownershipstakeinthecompany).
Memberscanbedividedintoclassesorcanallholdthesamevotingrightsorentitlements.Anydegreeof
restrictionsorrightscanbeassignedtoaMember,ManagerorClassofMembers.Herearesomeexamples:All
Memberscanbegivenequalvotingrightsandissuesarerequiredtobedeterminedbymajorityvote;oroneperson
canbegivenabsolutecontrolwhiletheotherMembershavenovotingrightsandaresilentpartners;oraSingle
MemberLLCautomaticallypassesalldecisionsbyunanimousconsent.Otherarrangementsarealsopossibleand
canbedefinedintheOperatingAgreement.IfthemembersoftheLLCdesire,theycanevenformaBoardof
DirectorsandappointOfficers,althoughthisisneithertraditionalnornecessary.
How are LLCs Taxed by the IRS?

TheLLCisthemostflexibleentity(companytype)currentlyinexistence.LLCscanbetaxedseveralways.Aone
MemberLLCis,bydefault(unlesstheLLCelectsotherwise),taxedbytheIRSasaDisregardedEntity;whichmeans
theprofitsandlossesoftheLLCarereportedontheMemberspersonalincometaxreturnandnoCorporateIncome
Taxreturnisfiled.AnLLCwithtwoormoremembersistaxed,bydefault,asaPartnership,whichisalsotaxedasa
DisregardedEntity:taxableincomeandlossesPassThroughtoitsmembers.Althoughtheincomeandlossesare
reportedoneachpartnerspersonalincometaxreturn,apartnershipmustalsofileaninformationalreport,form
1065andScheduleK1.AnLLCmayalsobeeligibletoelecttobetaxedasanSCorporation,seeourarticleaboutS
Corporationsformoreinformation.Theadvantagesofbeingtaxedinthismanneraretheavoidanceofdouble
taxationthatwouldoccurifthecompanywereaCCorporationplusthepossibilityofbeingtaxedatalowerrate.
AnLLCmayevenbeeligibletoelecttobetaxedasaCCorporation,ifitdesires.ACCorporationmaybetaxedata
higherrate,butsomeMembersprefertofullydeductHealthInsuranceandLifeInsuranceBenefitsastheOwner
EmployeeofaCCorporationmaydo.
How are LLCs Taxed by the Secretary of State of Delaware?

LLCspayaflattaxof$250.00annuallytotheSecretaryofStateofDelawaretomaintaintheirDelawareCharter.
Thistaxhasnorelationtoassets,incomeoractivitylevel.TheDelawareLLCtaxisduebeforeJune1steachyearand
isneverproratedforanyreason.IftheDelawareLLCTaxisnotreceivedbytheSecretaryofStatebythelastdayof
March,a$200.00penaltyisassessedwith1.5%interestpermonth.IftheLLCTaxisnotpaidforconsecutiveyears,
theDelawareCharterisdeclaredVOID;thecompanybecomesinvalidandhasnorighttotransactbusinessor
investmentsasanLLC.
31
Advantages of Delaware LLCs

AsofDecember1997,allstates,plustheDistrictofColumbia,havepassedlawsgoverningtheadministration
andoperationofLLCswithintheirjurisdictions.ButDelawareLLCsdopossesssomeuniquebenefits:
OnepersonLLCsarepermittedbyDelawarestatute.
DelawareLLCsmayhaveperpetuallife,thismeansthecompanysCharterdoesnotexpire.
DelawareLLCsmayberegisteredwithoutincludingthenamesoftheMembers/Managersandarenot
requiredtofileanAnnualReport.
What are the advantages of operating as an LLC for non-resident noncitizens?
ANonResidentAlien(NRA)usuallyisonlysubjecttoU.S.IncomeTaxonU.S.SourceIncome(pleasefollow
linkforatable).GenerallyforeignsourceincomereceivedbyanonresidentalienisnotsubjecttoU.S.
taxation.Therefore,anonresidentnoncitizenwithnoOperations(nobusinessactivity,noemployees)
withintheUS,andnopropertyintheUS,paysnoUSFederalIncomeTax.Furthermore,ifyouronlyU.S.
businessactivityistradinginstocks,securities,orcommodities(includinghedgingtransactions)througha
U.S.residentbrokerorotheragent,youarenotconsideredengagedinatradeorbusinessintheUnited
States.[Source:http://www.irs.govwebsite,November18,2009]
ADelawareLLCisnotrequiredtodisclosethenamesoftheMembersontheCertificateofFormationand
doesnotfileanAnnualReportinDelaware.TheidentityoftheMembersisnotpublicrecord.
TheDelawareLimitedLiabilityCompanyActdoesnotrequirethatalimitedliabilitycompanyagreementbe
inEnglish.
The LLC as an alternative to a Partnership

AnLLCisverysimilartoaPartnership:amultimemberLLCistaxedasaPartnershipbydefault(althoughitmay
electotherwise),anditisgovernedbyanOperatingAgreementwhichissimilarinmanywaystoaPartnership
Agreement;buttherearedistinctreasonstoconsideranLLCasanalternativetoaPartnership:
EachmemberenjoysLimitedLiability,ascomparedtotheriskofunlimitedliabilitythatgeneralpartners
mustfaceinapartnership.
Unlikelimitedpartners,LLCownersmayparticipateincompanymanagementwithoutfearoflosingtheir
protected,limitedliabilitystatus.
LLCmembersmaybeabletoavoidtheI.R.S.passivelosslimitationsandtakefederalincometaxdeductions
forlossescausedbythebusinessabenefitoftenunavailabletolimitedpartners.
AnLLCownermayobtainadditionaltaxadvantagesfromaspecialstepupoption,previouslyavailable
onlytopartnerships,underSection754oftheInternalRevenueCode.
32
The LLC as an alternative to an S-Corporation

InDelaware,SCorporationisataxstatus,notanEntityType.Infact,anLLCcanbetaxedasanS
Corporation.Forthepurposesofthisdiscussion,wewillfocusonthedifferencesbetweenanLLCtaxedasa
DisregardedEntityandaStockCorporationwhichelectsSCorporationstatus.SeeourarticleaboutSCorporations
foradetaileddescriptionoftheSCorporation.BecauseanLLCisbydefaultaPassThroughentityfortax
purposes,theMembersofanLLCautomaticallyenjoytheliabilityprotectionofaCorporation,withtheavoidanceof
doubletaxationthataSoleProprietororPartnershipenjoys,withouthavingtoelectSCorporationstatusasa
CorporationseekingPassThroughstatuswouldhavetodo.Furthermore,theLLCcanenjoyPassThroughstatus
withouthavingtocontinuouslypasstheteststhataCorporationelectingSCorporationstatusmustpassto
qualify.ThisisonereasontheLLCisapopularalternativetoCorporationselectingSCorporationstatus;hereare
someothers:
MembershipisnotlimitedtoNaturalPersonsasisthecasewithSCorporations.Corporations,Limitedor
GeneralPartnerships,estates,charitableorganizationsandpensionplansareallpermittedtobeMembers
ofanLLC.
UnlikeanSCorporation,anLLCdoesnotlimitthenumberofMembersto100.
UnlikeanSCorporation,anLLCdoesnotbarforeignpersonsfromMembership.
ThelawallowstheinclusionofliabilitiesoftheLLCinordertoincreasebasisfortaxpurposes(asinthecase
ofapartnership).
PaymenttoaretiringMembermaybestructuredsoastoallowpartofthepaymenttobedeductedasan
expensetotheLLC.
AnLLCmayown100percentofthesharesofStockofanotherCorporation,whereastheSCorporationis
limitedtoowning80percent(withtheexceptionthatoneSCorporationmayown100percentofa
subsidiarySCorporation).
AnSCorporationislimitedtooneshareclass,whileanLLCmayformseparateandmultipleclassesof
Memberswithdissimilarvotingordistributionrights.
LLCownersmayobtainadditionaltaxlossesfromtheirallowableindividualpercentagesofcertaincompany
liabilities,ratherthansolelythroughdirectloans,asrequiredinthecaseofSCorporations.
Is there a downside?
Thebenefitsforowneremployees,suchashealthcareorlifeinsurance,areonlypartiallydeductiblefrom
theseMembersindividualfederalincometaxreturns,iftheLLCistaxedasaPassThroughentityorS
Corporation.ThisistypicallynotaprimaryconcernforentrepreneurswhoareconsideringanLLC.
UnlikesharesofStock,MembershipunitsofanLLCcannotbepubliclytraded.
IfyouaretryingtoraiseCapital,somepotentialinvestorsmaybelessfamiliarwithLLCsandtheLLCs
MembershipInterestShareversustheCorporationsStockShare.
33
Certificate of Formation
LimitedLiabilityCompanieswillbecreatedbyfilingtheCertificateofFormation.Thisdocumentissometimes
calledtheArticlesofOrganizationorArticlesofFormation.DBIwilldraftthisdocumentforyou.Anyinformation
neededfromyouwillbeobtainedfromyourinternetorderororderform.
The following information will be included on the Certificate of Formation:

1. ThenameoftheLLC
2. ThenameandaddressoftheRegisteredAgent
3. IfthenameoftheMemberistobeprintedontheCertificateitwillappearastheThirdarticle;ifnot,the
powersoftheMemberwillbeArticleThreeandsoon
4. ThepowersoftheInitialMemberareoutlined
5. ThedurationoftheLLCisgiventobeperpetual
6. ThesignatureoftheOrganizer
DBIwillactastheOrganizerofyourLLC.TheOrganizerhasthepowertorepresentthecompanyasanagent
duringtheprocessofcreation.TheOrganizerhastheauthoritytoprepare,signandfiletheCertificateofFormation
andanyotherneededdocuments.TheOrganizersauthorityendswhentheLLCisregisteredandtheInitialMember
orManagerisappointed.AnOrganizerisnotanownerorofficer.
OurgoalistoincludetheminimumamountofinformationnecessaryontheCertificateofFormation.Any
additionalprovisionscanbeindicatedintheOperatingAgreement;byincludingadditionalprovisionsinthe
OperatingAgreementratherthantheCertificateofFormation,wecanavoidthenecessityoffilinganAmendment
totheCertificateofformationifanyoftheadditionalprovisionschange.Wecanalsoavoidcostlyperpagecharges
whichaddupwhenyoufileamultiplepageCertificateofFormation.Filingtheminimumprovisionsallows
maximumflexibilityandeconomy.IfyouwantadditionalprovisionsincludedonyourCertificate,wewouldbehappy
toaccommodateyouifyousupplytheexactlanguageoftheadditionalarticles.
What is the Operating Agreement?

MostArticlesofOrganization,alsoknownasaCertificateofFormation,aredeliberatelyspareindetail,
definingonlytheminimumtraitsrequiredtoestablishtheLLC.ThereasonforthisistoallowtheLLCtodefineits
ownprovisionsinitsOperatingAgreement;whichsavestheLLCfromhavingtofileanAmendmentwiththeStateif
achangeisneeded,andkeepstheorganizationaldetailsofthecompanyprivate.
AnOperatingAgreementissimilartotheByLawsofaCorporationinthatitdefinesthespecificsofthe
regulationoftheofthecompanysbusinessandissimilartoaLimitedPartnershipAgreementinthatitdefinesthe
termsthattheMemberswilladheretoregardingadmissionofnewmembers,assignmentofinterest,appointment
ofvotingrightsanddissolutionoftheassociation.
YourpurchaseofaNewLLCRegistrationPackage(excludingtheBasicpackage)includesanOperating
AgreementKitwhichcomeswithyourchoiceofamodeltemplate(MicrosoftWord.docorWordPerfect.wpd),ora
fillintheblanksform.
ThefollowingstandardArticlesareincludedinthemodelOperatingAgreement:
1. Definitions
2. OrganizationoftheCompany
3. Members(Status,RightsandDutiesof)
4. ManagementoftheCompany
34
5. Managers(Status,RightsandDutiesof)
6. Officers
7. Capital
8. DistributionstoMembers
9. ProfitsandLosses
10. AdmissionandWithdrawalofaMember;TransferofMembersInterest
11. ConversionandMergerwithOtherEntities
12. Dissociation,Dissolution,WindingUp&Termination
13. BooksandReports
14. Miscellaneous
IfyouwishtoincludeadditionalprovisionspleaseindicatethatyouwanttheWord.docorWordPerfect.wpd
template.Youarefreetoalter,addordeleteanymaterialyouwish.DBIdoesnotalter,addordeleteprovisions
fromthemodeltemplate,ifyouwishtoalterthetemplateandyoudonotfeelcompetenttodosowithout
assistance,pleaseconsultanattorney;youmaycontactanIncorporationSpecialistifyouwouldlikeareferral.
PleasenotethatalterationstoprovisionsregardingContinuityofLife,Centralizationof
Management,FreeTransferabilityofInterest,orLimitedLiabilitymayresultintheIRStaxing
yourLLCasaCorporation.Pleasecontactaqualifiedtaxprofessionaland/orattorneyifyou
havequestionsregardingtheseprovisions.
Series LLC
ASeriesLLCisaLimitedLiabilityCompanythatallowsformultiplesubcompaniesunderoneumbrella.
ThesesubcompaniesaresometimescalledminiLLCsorunits,butthetechnicaltermwouldbeSeparate
Series.Wellcontinuetousesubcompanies;itsalittlelessconfusing.
EachsubcompanyorSeparateSeries,properlyformed,hasallthefeaturesofaregularLLC,andeachis
independentoftheother.Thedebts,liabilitiesandobligationsofonesubcompanyareenforceableonlyagainstthe
assetsofthatsubcompany,andnotagainsttheumbrellaLLCoranyothersubcompanyintheSeries.Letsreview
thatinplainEnglish,welluseanexamplewhilewereatit:
TomJonesplanstopurchasethreeapartmentbuildings.HeregistersaSeriesLLCwellcallTJ
PropertiesLLC.HisCertificateofFormationcontainsthenecessaryclausestoinvoke
separateliabilityprotection.TomcompletesanOperatingAgreementforTJPropertiesLLC
andaSeparateSeriesAgreementforeachofthethreesubcompanies.Thesubcompanies
areCloverleafApartments,SeriesAofTJPropertiesLLCLamplighterPatioHomes,SeriesB
ofTJPropertiesLLCandMainStreetEfficiencies,SeriesCofTJPropertiesLLC.Each
propertyistitledinthenameofitscorrespondingsubcompany.
Afteraflood,thefirstfloorunitsofMainStreetEfficienciesdevelopadangerousmold
problemandseveralsicktenantssue.ThejudgefindsagainstMainStreetEfficienciesandthe
rulingexceedstheassetsoftheMainStreetsubcompany.FortunatelyforTom,heproperly
setupaSeparateSeriesAgreementforeachsubcompany,eachcompanysassetswere
separatelyheldandhemaintainedseparateanddistinctrecordsforeachsubcompany.The
35
assetsofLamplighterPatioHomesandCloverleafApartmentsaresafe,asaretheassetsofTJ
PropertiesLLC;theyareprotectedfromtheliabilityofMainStreetEfficiencies.
IfTomJoneshadheldalloftherentalpropertiestogetherinonetraditionalLLC,hispersonalassetswouldbe
protectedfromthemoldjudgment,buttheassetsoftheothertworentalpropertieswouldbeenforceabletosatisfy
thejudgment.TomcouldformthreetraditionalLLCs,onetoholdeachproperty;butthenhewouldhavethe
expenseofregisteringandmaintainingthreeLLCsinsteadofone.
Whichbringsustoanimportantpoint,thesubcompaniesunderyourSeriesLLCumbrellawillnotbe
individuallyregisteredinDelaware.Thisofferstremendoussavingsbecausesetupandmaintenancefeesarepaid
onlyfortheUmbrellaLLCandnoteachsubcompany.However,thisalsomeansyoudonothaveexclusiverightto
thenamesofthesubcompaniesunlessyouregisterthemastrademarksorregisterthemasanalternatenameina
jurisdictionwhichgrantsexclusiverightstouseofaregisteredalternatename.Manyjurisdictionsdonotgrant
exclusiverightstoalternatenames.ThisisnottypicallyanissueofconcernforapropertyholdingSeriesLLC,butif
yourintentionistoholdbusinessenterprisesinyourSeries,itisasubjectforconsideration.
SeriesLLCsarerelativelynewlegalcreatures.SomeUSstatesandforeigncountriesdonotrecognizethe
DelawareSeriesLLC,whileotherStates,suchasCalifornia,recognizeeachsubcompanyasaseparateLLCandthus
subjecttoseparateregistrationandstatetaxation.Becausetheyareamorerecenttypeofentity,theDelaware
SeriesLLCdoesnothavethevastbodyofcaselawaDelawareCorporationorTraditionalLLCenjoys.Thismeans
thattherearepotentiallyareasoflawwhichremainundefined;thecourtwillruleonthesesituationsastheyoccur.
Asaconsequence,whiletheyoffertremendousopportunity,theymaynotbetheappropriatevehicleforall
entrepreneursandinvestors.Forquestionsbearingonfederalandstatetaxliability,bankruptcy,creditorsrights
andenvironmentalliabilityyoushouldconsultaqualifiedtaxprofessionaland/orattorney,andbeasspecificas
possiblewhendescribingtheparticularsofyourbusinessorinvestments.PleasecontactanIncorporationSpecialist
ifyouwouldlikeareferral.
How are Series LLCs Managed?

EachsubcompanycanhaveitsownMembersand/orManagers,andmaypursueitsownbusinessobjectives.As
withallDelawareLLCs,DelawarelawallowstremendousfreedomofcontractbetweenMembers;eachsub
companymayoptfromanalmostunlimitednumberofmanagementstructuresandmaydefineitsownrules
respectingthevotingrightsofMembersandhowDistributionswillbetaken.AswiththetraditionalDelawareLLCs,
corporateformalitiessuchasminutesandannualmeetingsarenotrequired.
The following information will be included on the Certificate of Formation

of a Series LLC
1.
2.
3.
4.
5.
ThenameoftheUmbrellaLLC
TheaddressoftheRegisteredOffice
ThenameandaddressoftheRegisteredAgentinDelaware
ThenoticethattheLLCisaSeriesLLCandtheclauseinvokingseparateliability
ThesignatureoftheAuthorizedPerson(Organizer)
36
Series Agreement
LikethetraditionalLLC,aSeriesLLCisdefinedbyanOperatingAgreementandeachsubcompanyhasitsown
SeparateSeriesAgreement.SeetheOperatingAgreementsectionofthetraditionalLLCformoreinformation
aboutLLCOperatingAgreements.
ASeparateSeriesAgreementistheOperatingAgreementofthesubcompany,andeachsubcompanymust
haveitsown.TheSeparateSeriesAgreementcontainsthefollowing:
1. ThenameoftheUmbrellaLLCandofthesubcompany
2. ThenamesoftheMembersofthesubcompany
3. Statementthatthenewsubcompanyiscreated
4. Separateliabilityclause
5. TheindividualtraitsofthesubcompanysuchasBusinessPurposeandInvestmentGuidelines,andany
distinctManagementguidelinesoranyotheritemfoundinatraditionalLLCOperatingAgreementwhichis
uniquetothissubcompany.
6. Thesignaturesofallthemembersofthissubcompany
Ifthefollowingcriteriaarenotmet,theLLCwillnotberecognizedasaSeriesLLCandthesub
companieswillnotberecognizedasseparateentitiesandwillnothaveseparateliabilityprotection:
1. TheCertificateofFormationmustidentifytheLLCasaSeriesLLCandmustinvokeaseparate
liabilityclause,ormustbeamendedtodoso.
2. TheOperatingAgreementmustidentifytheLLCasaSeriesLLCandmustdefinetheprovisions
oflimitedliabilityandseparateorganizationtobeenjoyedbyeachSeparateSeries(sub
company).TheOperatingAgreementoftheUmbrellaLLCmustbesignedbythemembersofthe
UmbrellaLLC.
3. EachsubcompanymusthaveitsownSeparateSeriesAgreementwhichmustbesignedbythe
membersofthatsubcompany.
4. Eachsubcompanymustmaintainitsownseparateanddistinctrecords.
5. Theassetsofeachsubcompanymustbeheldseparatelyinthenameofthesubcompanyand
inthesubcompanysownaccount.
Q:
CanIgetanEINforeachSeparateSeriesinmySeriesLLC?
A:
IRSPrivateLetterRuling200803004establishedthateachSeparateSeriesinaSeriesLLCmay
obtainitsownseparateEIN.ItisbestpracticeforeachSeparateSeriestohaveitsownbank
accountorbrokerageaccounttosatisfythebelowcriteriaforestablishingseparateliability:
1. EachSeparateSeriesmustmaintainitsownseparateanddistinctrecords.
2. TheassetsofeachSeparateSeriesmustbeheldseparatelyinthenameofthesubcompany
andinthesubcompanysownaccount.
Therefore,ifaSeparateSerieswillholdassetsinabankaccountorbrokerageaccountitwillbe
necessarytoobtainanEINforthatSeries.
37
Corporations
ACorporationisabusinessentity(typeofcompany)whichisregisteredwithastategovernmentandentitledto
treatmentasanartificialperson,bywhichrightitmaysueorbesuedinacourtoflawwithprotectionforthe
shareholdersandofficersfrompersonalclaims,unlesstheycommitfraud.Thismeansthat,unlessashareholder
personallyguaranteesadebtoftheCorporation,orcommitsfraud,herriskoflossislimitedtotheamountof
moneysheinvestedintheCorporation;herpersonalassetsareprotectedfromliability.CorporationsandLLCsare
similarintheliabilityprotectionofferedtoownersandofficers.
ACorporationwhichisnotaCloseCorporationandisnotanSCorporationmaybecalledaCCorporationora
GeneralCorporationwhenitisnecessarytodistinguishit.TodistinguishbetweenaforprofitCorporationanda
notforprofitCorporation,aforprofitCorporationmayalsobecalledaStockCorporation.Thefollowingsection
willfocusonForProfitCCorporations.
HowareCorporationsmanaged?
InsmallercompaniestheownertendstowearmanyhatsandinDelawarethisisperfectlylegal;theownermay
beasoleshareholderandDirectoraswellasservingasthetitularPresident,SecretaryandTreasurerallatthesame
time!Thatsaid,theorganizationoftheCorporationismorerigidthanthatoftheLLC.Inthecaseofanew
Corporation,theexpectedseriesofeventswouldbeasfollows:
ApersonrepresentinganewcompanythatwishestoincorporatecontactsDBI.UponpurchasingDBIsservices,
DBIbecomestheIncorporator.DBIdrafts,signsandfilestheIncorporationdocumentsactingasanagentonbehalf
ofthenewCorporation.WhentheIncorporationiscomplete,DBIsservicesasIncorporatorareautomatically
terminated.ThelastthingDBIdoesinitsroleasIncorporatorisofficiallyappointtheInitialDirector.Theperson
whowillserveasInitialDirectorwillbeindicatedbythepersonplacingtheorderforIncorporationservices.
TheInitialDirectorisoftenthefounderoftheCorporation,although,theInitialDirectordoesnothavetobean
ownerorofficer;theInitialDirectorcouldbeamanager,CPAorattorneyforexample.ItistheInitialDirectorsduty
tofinishsettinguptheorganizationofthenewCorporationafterithasbeenIncorporated.TheInitialDirectorhas
theauthorityissuestockcertificatestotheownerstorecordtheirownershipshareandtocallameetingofthe
shareholderstoelecttheBoardofDirectors.TheInitialDirectormayremainaDirectororhisservicesmayendafter
otherDirectorsareappointed.InmanycasestheInitialDirectorstaysonandbecomestheChairmanoftheBoardof
Directors.
OncetheBoardofDirectorsisappointed,theBoardratifiestheByLawsandappointstheOfficersofthe
Corporation.MostroutineoperationaloversightisdelegatedtotheOfficers,butmajorpolicymustbedecidedbya
resolutionoftheBoardwhichiseitherapprovedbyamajorityofthevotingshareholders,orinthecaseofaSole
Owner/SoleDirectorbyUnanimousDecision.ACloseCorporationisexemptfromformalBoardMeetingand
Resolutions,asareLLCs.
How is a Corporation Taxed?

ACCorporation,thatis,aCorporationwhichdoesnotelectSCorporationstatusandisnotaNotFor
Profit,istaxedasitsownentity;thatistosay,theCorporationistaxedseparatelyfromandinadditiontothe
38
personalincomeoftheShareholders(owners),andistaxedataCorporaterate.ACCorporationmustfileitsown
incometaxreturneveryyearonform1120.InadditiontotheincometaxtheCCorporationmustpay,any
distributionsmadetothestockholders(alsoknownasdividends)aretaxedonthepersonalincometaxreturnsof
theshareholdersattheshareholderspersonalincometaxrate.ThisiswhatiscommonlyknownasDouble
Taxation.BecausetheCorporationmaydeductreasonablesalariesbeforecalculatingincometax,alargeportionof
theincomepaidtoOwneremployeesisnotsubjecttodoublefederalincometax,however,boththeCorporation
andtheEmployeemustpayFICAtaxonthesewagesearned.Asidefromliabilityprotection,lowercorporaterates
ofincometaxationareoneofthebenefitstoIncorporatingaSoleProprietorshiporPartnership.Anotherdifference
tobearinmindbetweenCorporatetaxationandpassthroughtaxationisthatundistributedprofitsofa
Corporationmaybeaccumulateduntaxediftheyarerelatedtothereasonableneedsofthebusiness.
2010CorporateIncomeTaxRates
$TaxableIncome
CCorp.
$0$50,000
15%
$50,000$75,000
25%
$75,000$100,000
34%
$100,000$335,000
39%
$335,000$10,000,000
34%
$10,000,000$15,000,000
35%
$15,000,000$18,333,333
38%
$18,333,333+
35%
2010MarginalPersonalIncomeTaxRates
$TaxableIncome
Married/Joint
$TaxableIncome
Single
$16,750$68,000
15%+$1,675
$8,375$34,000
15%+$837.50
$68,000$137,300
25%+$9,362.50
$34,000$82,400
25%+$4,681.25
$137,300$209,250
28%+$26,687.50
$82,400$171,850
28%+16,781.25
$209,250$373,650
33%+$46,833.50
$171,850$373,650
33%+41,827.25
$373,650+
35%+$101,085.50
$373,650+
35%+$108,421.25
IftheIRSdeterminesthatretainedearningsarenotrelatedtothereasonableneedsof
thebusiness,thoseaccumulatedearningswillbetaxedat39.6%.
IfyourCorporationisprofitable,butpaysnodividendsandpayssalariessignificantly
higherthanindustrystandards,theIRSmaydeterminethatyourCorporationis
disguisingdividendsassalaries;andwillconsequentlydisallowaportionofeligible
salarydeductionsandapplypenaltieswithinterest.
PersonalServiceCorporations(thosewhoseemployeesspendatleast95percentoftheir
timeinthefieldofAccounting,ActuarialScience,Architecture,Consulting,Engineering,
Health,LaworPerformingArts)aretaxedataflatrateof35percentofnetprofits.
39
What is the benefit of forming a Delaware Corporation for non-resident

non-citizens?
ACCorporationwithnoemployees,owners,propertyoroperationsintheUnitedStates,andnoUSsource
incomewillpaynoFederalUSCorporateIncomeTax.SeeAppendixAformoreinformationaboutdetermining
sourceofincome.
How is a Corporation Taxed by the Secretary of State of Delaware?

TheannualtaxduetotheSecretaryofStateofDelawareforthepurposeofmaintainingaDelawareCharteris
knownastheDelawareFranchiseTax.ThewordFranchise,asusedinthiscase,meansaspecialprivilegegranted
toanindividualorgroup;especially:therighttobeandexercisethepowersofaCorporationanddoesnotmean
achainofbusinesseslicensedbytheoriginalstoreandoperatedpertheoriginalstorespatternundertheoriginal
storestradename.DelawareCorporationsauthorizing5,000sharesorofstockorlessmayusetheAuthorized
Sharesmethodandwillpaytheminimum$75franchisetaxregardlessofincomeoractivity.TheFranchiseTaxrates
forcompaniesauthorizing5,001sharesormorearediscussedbelow.
ItisalsonecessaryforCorporationstofileanAnnualReport.Thereisa$50AnnualReportfilingfeeforProfit
Corporationsanda$25AnnualReportFilingFeeforNonProfits.TheDelawareAnnualReportisfiledonlineat
www.corp.delaware.gov.ThefollowinginformationmustbeincludedontheAnnualReport:
1. ThephysicallocationoftheheadquartersoftheCorporation.ThisaddressmaybeanywhereintheUSorin
theworld;itisnotrequiredtobeaDelawareaddress.IfyourCorporationhasnoheadquarters,youmay
giveyourhomeaddress.YouarenotpermittedgiveaP.O.Boxortheaddressofamailforwardingservice.
2. Thephonenumberofanycompanyrepresentative.
3. ThenamesandaddressesofallDirectors.AllCorporationshaveatleastoneinitialdirector,ifthatperson
hasresignedandhasnotbeenreplaced;astatementthattherearenocurrentdirectorsmaybegiven.Itis
permissibletogiveabusinessaddressorhomeaddress.
4. ThenameandaddressoftheOfficerwhoisauthorizingthefilingoftheAnnualReport.Thisisusuallythe
PresidentorCEObutotherofficesareacceptable.IftherearenoofficerscurrentlyservingaSoleDirectoror
theChairmanoftheBoardofDirectorsmaysign.IftherearenoOfficersorDirectorspleasecontactan
IncorporationSpecialistforassistance.
5. ThesignatureoftheauthorizingOfficer.Thisisusuallyanelectronicsignature:ifyouarefilingyourself
onlineyouwillsimplytypethename,ifDBIisfilingforyoutheelectronicsignaturewillappearas
/s/FirstNameLastNameforexample/s/JohnDoe.
TheFranchiseTaxandAnnualReportaredueeveryyearbeforeJune1st.Thismeanspaymentmustbereceived
bytheSecretaryofStateofDelawarenolaterthanthelastdayofFebruaryofanygivenyear.LateAnnualReports
andFranchiseTaxarepenalized$100.00andsubjectto1.5%interest.DBIoffersataxpreparationservicefor
$55.00pertaxyearandalsooffersanautomaticrenewalandtaxpaymentprogramcalledGoodStandingProtection
Service.SeetheformssectionintheAppendixformoredetailsortoenroll.
TherearetwomethodsofcalculatingtheFranchiseTax.Companiesauthorizing5,000sharesofstockorless
mayusetheAuthorizedSharesmethodandwillpaytheminimum$75.00franchisetaxregardlessofincomeor
activity.
40
DelawareFranchiseTax:AuthorizedSharesMethod
AuthorizedShares
AnnualFranchiseTaxDue
15,000shares
$75.00
5,00110,000shares
$150.00
Eachadditional10,000sharesorportionthereof
Add$75.00
Maximumannualtax
$180,000.00
Assumed Par Value Capital Method

Companiesauthorizingmorethan10,000sharesmaywishtousetheAssumedParValueCapitalMethod.
Tousethismethod,youmustgivefiguresforallissuedshares(includingtreasuryshares).Forthispurposeitis
importanttounderstandthedifferencebetweenIssuedSharesandAuthorizedShares.TheAuthorizedSharesare
thesharesauthorizedtobeissuedbythecompanyatthetimetheCharterwasregisteredoruponamendmentof
theCharter.Thisisthenumberofsharesacompanymaypotentiallyissue.AstockisIssuedwhenitissold,
transferredorassignedtoanowner,ashareholder.IssuedSharesincludesTreasuryShares.TreasurySharesare
anysharesofstockwhichwerepreviouslyissuedtoashareholderandsubsequentlyboughtbackfromthe
shareholderbytheCorporationitself.WhileitisnotnecessarytoreportincomeforeithermethodofFranchiseTax
calculation,itisnecessarytoreporttheTotalGrossAssetsifyouwishtofileusingtheAssumedParValueCapital
Method.TotalGrossAssetsshallbethose"totalassets"reportedontheU.S.Form1120,ScheduleL(FederalReturn)
relativetothecompany'sfiscalyearendingthecalendaryearofthereport.ThetaxrateundertheAssumedPar
ValueCapitalMethodis$350.00permillionorportionofamillion.Iftheassumedparvaluecapitalislessthan
$1,000,000.00,thetaxiscalculatedbydividingtheassumedparvaluecapitalby$1,000,000.00thenmultiplyingthat
resultby$350.00.Ifyourcompanyhasauthorizedsharesatzeroparvalueitwillbenecessarytocontactthe
DelawareSecretaryofStateCorporationsDivisionFranchiseTaxDepartmentforacalculationofFranchiseTaxdueif
youwishtoemploytheAssumedParValueCapitalMethod.
Regulated Investment Companies Franchise Tax

RegulatedInvestmentCompaniespayonadifferentscaleprescribedunderSection503(h),theGeneral
CorporationLawoftheStateofDelaware.
Estimated Franchise Tax

Corporationswhichpayfranchisetaxesinexcessof$5,000.00annuallymustmakequarterlypayments,
dueandpayableJune1st,September1st,December1standMarch1st.
Foreign Corporations Franchise Tax

CorporationsCharteredinanotherstatethatarequalifiedinDelawareasForeignCorporationsmustfilean
annualreportbeforethe30thdayofJuneeachyear;theannualreportfilingfeeforForeignCorporationsis$125.00.
Iftheannualreportisnotfiledbeforetheduedateapenaltyof$125.00isassessed.
41
FranchisetaxisproratedONLYinthecaseofI.Anamendmentbeingfiledwithinthattax
yearwhichincreasesordecreasesthenumberofAuthorizedSharesorII.ACorporation,
whichowesmorethantheminimumfranchisetax,dissolves,transfersoutofstateor
country,orconvertstoadifferententitytype.IfyourCorporationowestheminimum
FranchiseTax,yourannualtaxwillnotbeproratedforanyreason.
Franchisetaxisdueregardlessofwhetheryourcompanywasactivelytransacting
business.
YourDelawareFranchiseTaxandAnnualReportaredueeveryyearbeforeJune1st.
AlthoughDBIwillsendyouanoticeeachyear,likeFederalIncometax,thistaxisdue
everyyearatthesametimeandyouareresponsibleforfilingontimeregardlessof
circumstances.Westronglysuggestyoumarkyourcalendaraccordingly.Itisnot
necessarytohaveacopyofyourtaxnoticetopayyourDelawareFranchiseTaxortofile
yourDelawareAnnualreport,butifyouhavenotreceivedyournotice,orhavelostyour
notice,youmaycontactDBIbeforeJune1stforareplacement.Itisveryimportantthat
younotifyDBIifyouraddressorcontactinformationchanges.
IfyourcompanyfailstopayDelawareFranchiseTaxfortwoconsecutiveyears,your
companyCharterwillbedeclaredVOIDforfailuretopaytaxes.Thismeansthatyour
companyCharterisinvalidandyoudonothavetherighttotransactbusinessasa
Corporation.
Notethat,underDelawarelaw,thesharesofanypersoninanyCorporationwithallthe
rightstheretobelongingoranypersonsoptiontoacquirethesharesorhis/herrightor
interestinthesharesmaybeattachedfordebtorotherdemands.Somanyoftheshares,
orsomuchoftheoption,rightorinterestthereinmaybesoldatpublicsaletothe
highestbidderasshallbesufficienttosatisfythedebtorotherdemand,interestand
costs,uponanorderissuedthereforebythecourtfromwhichtheattachmentprocess
issued,andaftersuchnoticeasisrequiredforsalesuponexecutionprocess.Whileyour
personalliabilityislimitedtoyourinvestmentinthecompany;youcanloseyour
investmentinthecompany.
Other Delaware State Taxes

ManyentrepreneursandInvestorsarealreadyawareofthemanytaxbenefitsofaDelawareLLCoraDelaware
Corporation.FollowingaresomefactsregardingtaxesonDelawareCCorporations:
DelawareStateTaxesyouwillnotowe:
NoDelawareStatePersonalIncomeTaxforshareholderswhoresideoutsidethestate.
NoStateSalesTaxongoodsandservicespurchasedinsidethestate
NoDelawareStateCorporateIncomeTaxforDelawareCorporationsheadquarteredandoperatingoutside
Delaware.
42
DelawareStateTaxesyoumayowe:
Ifyouhaveaphysicaloffice,store,factoryorothercenterofoperationslocatedwithinDelaware,youmayowe
DelawareStateCorporateIncomeTax.Asaruleofthumb,ifyourCorporationproducesaproductorservicewithin
thestateofDelaware,youmayoweDelawareCorporateIncomeTaxonthoserevenues,eveniftheyaresoldoutof
state.IfyouhaveoperationsinDelawareyoumayalsooweDelawareCorporateIncomeTaxonrevenuefrom
productsandservicessoldwithinthestateofDelaware,evenifthoseproductsandserviceswereproducedoutside
thestate.
DelawareevaluatesthreetypesofactivityindeterminingwhatportionofincometaxwillbesubjecttoDelaware
CorporateIncomeTax:
1. CorporatesalesattributabletoDelaware
2. PropertylocatedinDelawareand
3. PayrollincurredinDelaware
Q: WhatisthedifferencebetweenParValueandNoParValuestock?
A: ParValuestockcertificatescarryastatedmoneyvalueontheirface.In
Delaware,parvaluestockmaybeissuedonlyinreturnforconsiderationssuchas
money,propertyorservicesofvalueatleastequaltothevalueofthesharesissued.Ifpar
valuesharesarepurchasedwithproperty,thevalueofthepropertymustbeestablished
byanindependentlicensedappraiserandthevalueofthesharesexchangedforthe
propertymaynotexceedtheamountoftheappraisal.Iftheparvaluesharesare
exchangedinreturnforservices,suchservicesmustalreadyhavebeenperformed,and
theymustbevaluedatthegoingrateforsuchservices.Suchvaluemustthenbetreated
asserviceincomebytheserviceprovider.NoParValuestockhasnostatedvalue.Such
sharesmaybesoldforwhatevertheinvestoriswillingtopay.NoParValuemayalsobe
expressedasZeroPar($0.00)andWithoutParValue.Theactualmarketvalueofan
establishedCorporationthathasbeenoperatingforsometimehas,ofcourse,norelation
tothefaceamountofthestock,whetheritisparvalueornoparvaluestock.Themore
profitablethecompanyandthemoreassetsitaccumulatesandthebetteritsprospects,
themoreeachshareofcommonstocktendstobeworthinthemarketplace.
Q: Doesonestockcertificateequaloneshareofstock?
A: No; One stock certificate can represent any number of shares up to the amount
authorized, as stated on the Certificate of Incorporation. The Certificate has a
blank space to be filled in with the number of shares it represents by the
corporate officer issuing the stock. If you purchase one of our New Company
Registration Packages that comes with a Corporate Kit you will receive Stock
Certificates with the name of your company printed on them. The kit comes
with a template so you can print the name of the shareholder and the number
of shares on the Stock Certificate using your printer.
43
Certificate of Incorporation
StockCorporationsandNotforProfitCorporationswillbecreatedbyfilingtheCertificateofIncorporation.This
documentissometimescalledtheArticlesofIncorporation.DBIwilldraftthisdocumentforyou.Anyinformation
neededfromyouwillbeobtainedfromyourinternetorderororderform.
The following information will be included on the Certificate of Incorporation of a

General Stock Corporation
1.
2.
3.
4.
ThenameoftheCorporation
ThenameandcompleteaddressoftheDelawareRegisteredAgent
TheGeneralPurposeoftheproposedCorporation
AstatementregardingtheAuthorizedShares,statingthenumberofsharesauthorizedandparvalueor
statingnoparvalue.
5. ThenameandaddressoftheIncorporatorandoptionally,thenameandtheaddressoftheInitialDirector;if
thenameoftheDirectorwillnotbeincludedthenthefiftharticlewillonlyfeaturethenameandaddressof
theIncorporator.
6. AstatementaffordingtheDirectorsofthecompanythebroadestliabilityprotectionallowableunder
Delawarelaw.
7. ThesignatureoftheIncorporator
DBIwillbeyourIncorporator.AnIncorporatorhasthepowertorepresentthecompanyasanagentduringthe
processofcreation.TheIncorporatorhastheauthoritytoprepare,signandfiletheCertificateofIncorporationand
anyotherneededdocuments.TheIncorporatorsauthorityendswhentheCorporationisregisteredandtheInitial
Directorisappointed.AnIncorporatorisnotanownerorofficer.
Youwillfindadditionalinformationabouttheseitemsinthefollowingsections:
NamingYourCompany
RegisteredAgent
Glossary:AuthorizedShares,ParValue
OurgoalistoincludetheminimumamountofinformationnecessaryontheCertificateofIncorporation.Any
additionalprovisionscanbeindicatedintheByLaws.ByincludingadditionalprovisionsintheByLawsratherthan
theCertificateofIncorporation,wecanavoidthenecessityoffilinganAmendmenttotheCertificateof
Incorporationifanyoftheadditionalprovisionschange.Wecanalsoavoidcostlyperpagechargeswhichaddup
whenyoufileamultiplepageCertificateofIncorporation.Andfinally,byincludingthemajorityoftheinformationin
theByLawsratherthanthepubliclyfiledCertificateofIncorporation,theinformationregardingtheorganizationof
yourCorporationremainsprivate.Filingtheminimumprovisionsallowsmaximumflexibility,privacyandeconomy.
AlthoughmostDelawareCorporationsprefertofollowtheminimumprovisionsmodel,itispossibletoinclude
additionalprovisionsontheCertificateofIncorporation.Ifyouwantadditionalprovisionsincludedonyour
Certificate,pleasesupplytheexactlanguageoftheadditionalarticlestobeincluded.Followingaretheadditional
provisionswhichcanbeincludedontheCertificateofIncorporation:
8. Theperiodofitsduration,whichisusuallystatedasperpetual.
9. Whetherornotcumulativevotingofsharesisauthorized.
10. ProvisionsregardingByLaws.
11. ProvisionsregardingthesaleorpurchaseoftheCorporationsstock.
44
12. Provisionsspecifyingspecialvotingrightsandpreferences.
13. Provisionslimitingordenyingtoshareholdersthepreemptiverighttoacquireadditionalortreasuryshares
oftheCorporation.
14. ProvisionsfortheregulationoftheinternalaffairsoftheCorporation.
15. Anyotherprovisionsrequiredtodefineorplaceparametersontheinternalorexternalorganization,
financialstructureoractivitiesoftheCorporation.
IfyouaredraftingyourownCertificateofIncorporationandwishforDBItoserveasyour
DelawareRegisteredAgentyoumustcontactusbeforetheCertificateofIncorporationis
filed.
What are the By-Laws?

TheByLawsareadocumentwhichsetsforththerulesadoptedbytheDirectorsfortheoperation,organization
andconductoftheCorporation.ByLawsspecifyhowtheCorporationwillconductitsmeetings,howDirectorsand
Officerswillbeelectedorappointed,howitwillhandleresignations,andwillelaborateonthedutiesofofficersand
thevotingrightsofshareholders,amongstotherinformation.TheByLawsofaCorporationarenotregisteredor
filedwiththeStateofDelaware;theyshouldbeproperlymaintainedbytheCorporationandfiledsafelywiththe
CorporationsotherprivateCorporaterecordssuchastheSharesTransferRegister.YourCorporationsByLawsmay
somedaybecrucialtoresolvingunforeseenproblemssuchasabsenteeOfficersorDirectors;toresolving
shareholderdisputes;defendingorapplyingfortaxstatus;andbringing,settlingordefendinglawsuits.DBIoffers
modelByLawstemplatesorfillintheblankformsaspartoftheCorporateKitavailableseparatelyoraspartofyour
purchaseofaNewCompanyRegistrationPackage.
ThefollowingtopicsareaddressedintheByLawstemplateavailablewiththepurchaseofyourNewCompany
RegistrationPackage:
1. MeetingofShareholders
2. BoardofDirectors
3. Officers
4. SharesofStock
5. Dividends
6. FiscalYear
7. CorporateSeal
8. Amendments
9. WaiverofNotice
10. InterestedDirectors
11. FormofRecords
IfyouwishtoincludeadditionalprovisionspleaseindicatethatyouwanttheWord.docorWordPerfect.wpd
template.Youarefreetoalter,addordeleteanymaterialyouwish.Pleasecontactaqualifiedtaxprofessional
and/orattorneyifyouhavequestionsregardingtheseprovisions.DBIdoesnotalter,addordeleteprovisionsfrom
thestandardtemplate,ifyouwishtoalterthetemplateandyoudonotfeelcompetenttodosowithoutassistance,
pleaseconsultanattorney;youmaycontactanIncorporationSpecialistifyouwouldlikeareferral.
45
Close Corporations
ACloseCorporationisaCorporationwhichsetscertainlimitationsonthesale,holdingandtransferofitsshares
ofstock.InDelaware,aCloseCorporationislimitedtothirtyshareholders.TwocommonreasonstoformaClose
CorporationaretoseekandmaintainSCorporationtaxstatusfromtheIRSand/ortoeaseadministrationfora
smallbusiness,frequentlyafamilybusiness.Restrictionsonthetransferofstockarefrequentlyemployedasaway
ofmaintainingSCorporationtaxstatus;forexample:Atypicalrestrictionprohibitsthetransferofrestricted
securitiestononresidentaliens.Anothertypicalrestriction,knownasFirstRefusalrequiresapotentialsellerto
offerthestocksharestotheCorporationanditsexistingshareholdersbeforeofferingthestocksharesforsaleto
anyoneelse.FirstRefusalcanpotentiallyprotectsharesofafamilybusinessfrombeingsoldtosomeoneoutsidethe
familyorsharesofanSCorporationfrombeingsoldtoapartythatwouldcausetheCorporationtoloseitsS
status.
How are Close Corporations Managed?

CloseCorporationsarenotrequiredtoholdanannualmeetingoftheBoardofDirectors;decisionseffecting
shareholderscanbegovernedbyaShareholderAgreementratherthanaBoardofDirectors.AShareholder
AgreementissimilartoanOperatingAgreementoraLimitedPartnershipAgreementanddefinesthespecificsofthe
regulationoftheofthecompanysbusiness.
ThefollowinginformationwillbeincludedontheCertificateofIncorporationofaCloseCorporation:
1. ThenameoftheCorporation
2. ThenameandcompleteaddressoftheDelawareRegisteredAgent
3. TheGeneralPurposeoftheproposedCorporation
4. AstatementregardingtheAuthorizedShares,statingthenumberofsharesauthorizedwithorwithoutpar
value.
5. ThenameandaddressoftheIncorporatorandoptionally,thenameandaddressoftheInitialDirector;ifthe
DirectorisnotnamedthefiftharticlewillonlyfeaturethenameandaddressoftheIncorporator.
6. Astatementlimitingthenumberofshareholdersto30
7. Astatementthatthesharesofstockaresubjecttooneormorerestrictionsonthetransferofstock
8. AstatementthattheCorporationwillnotmakepublicstockofferings.
ThespecificlimitationsonthetransferofstockmaybemadeintheByLaws.
Not-for-Profit Corporations
Alsoknownas:NonProfit,NonStockCorporationor501(c)3
WhenweusethetermNotforProfitCorporationwearetypicallyreferringtoaCharteredCharitableor
ReligiousOrganization.ANotforProfitCorporationisnottaxexemptuntilithasbeengrantedTaxExemptstatus
bytheIRSafterfilingform1023.TobeTaxExempt,theCorporationmustmeetspecificrequirements:
1. Typically,theCorporationdoesnotauthorizeorissuesharesofstock.
2. TheCorporationisorganizedandoperatedexclusivelyforReligious,Educational,Charitable,Scientificor
Literarypurposes,orforTestingforPublicSafety,toFosterNationalorInternationalAmateurSports
Competition,orforthePreventionofCrueltytoChildrenorAnimals
46
3. Nopartofthenetearningsofasection501(c)(3)organizationmay,bypracticeorcustom,benefitaperson
havingapersonalandprivateinterestintheactivitiesoftheorganization,suchasthecreatorofthe
Corporationorthecreator'sfamily.
4. Theorganizationisrestrictedinhowmuchpoliticalandlegislative(lobbying)activitiestheymayconduct.
PoliticalOrganizationsusuallyfileunderanexemptionotherthan501(c)3.
DBIwilldraftyourCertificateofIncorporationwiththeappropriatelanguage(seebelow)andfileyour
CertificateofIncorporationinthesamemannerthataForProfitStockCorporationisfiled.AftertheNotforProfit
Corporationisregisteredbyus,youwillthenneedtoapplytotheIRSforTaxExemptStatus.Contactan
IncorporationSpecialistifyouwouldlikeareferraltoaqualifiedtaxprofessional.FormoreinformationaboutTax
ExemptStatusseetheIRSpublicationTaxExemptStatusforYourOrganizationathttp://www.irs.gov/pub/irs
pdf/p557.pdf.
How are Not-for-Profit Corporations Managed?

ThemanagersofaNotforProfitCorporationaretypicallyknownastheBoardofTrustees.Thepowersand
responsibilitiesoftheBoardofTrusteesareoutlinedintheNotforProfitCorporationsByLawstogetherwith
specificationsonhowtheTrusteeswillbeelectedandhowlongtheywillserve.ThedutiesoftheTrusteeswill
typicallyincludeoverseeingtheoperationoftheorganizationtoensurethatthepurposeoftheCharitable
Organizationisupheld;managingthereceiptofdonations;investmentandmanagementofassetsandoperating
funds;budgeting;andprojectplanning.
How are Not-for-Profit Corporations Taxed in Delaware?

NotforProfitCorporationsareexemptfrompayingDelawareFranchiseTaxandpayareducedannualreport
filingfeeof$25.00.AnnualReportsareduebeforeMarch1stofeachyearandarefiledonlineat
www.corp.delaware.gov.
Certificate of Incorporation
ThefollowinginformationwillbeincludedontheCertificateofIncorporationofaNotforProfitCorporation:
1. ThenameoftheCorporation
2. ThenameandcompleteaddressoftheDelawareRegisteredAgent
3. ThePurposeStatementsettingforthpurposesinkeepingwiththoselistedaseligibleby501(c)3andbarring
thoseactivitiesorpracticesrestrictedunder501(c)3
4. AstatementthattheCorporationshallhavenosharesofstock
5. ThenameandaddressoftheIncorporatorandthenameandaddressoftheInitialDirector.NotforProfit
CorporationsarerequiredtoincludethenameandaddressofatleastoneDirector;theydonothavethe
optionofomittingthisinformation.
FormoreinformationabouttheOrganizationandAdministrationofNotforProfitssee
http://www.idealist.org/info/Nonprofits
47
S-Corporations
AnSCorporationisanentitythatmakesavalidelectiontobetaxedunderSubchapterSofChapter1ofthe
InternalRevenueCodebyfilingform2553withtheIRSwithinthetimeaffordedandbypassingtheeligibilitytests.
AlthoughwecommonlyrefertothemasSCorporationsnotallsuchcompaniesareCorporations;LLCscanelect
SStatustoo!InDelaware,anSCorporationisnotanentitytype,itisataxstatus(insomestatesanS
Corporationisbothanentitytypeandataxstatus).AcompanytypicallyelectsSStatustoavoidthepenaltyof
DoubleTaxationthatwouldoccurifthecompanyweretaxedasaregularCorporation(CCorporation).
DoubleTaxationoccurswhenCCorporationincomeissubjected,first,tocorporateincometax,andisthen
taxedasecondtime,aspersonalincome,whencorporateearningswhichhavealreadybeentaxedarereturnedto
theshareholdersintheformofdividends
How is an S-Corporation taxed by the IRS?

IfSStatusisgranted,companyearningsarenottaxedatthecorporatelevelbytheIRS;andarenotsubjectto
thecorporatealternativeminimumtax.Allcorporateincomepassesdirectlythroughtotheshareholdersin
proportiontotheirindividualownershipofsharesintheCorporation;thisincomeisthentaxedonlyonceat
personalrates.WhenwesayPassThroughwemeanthattheincomeorlossesofanSCorporationaredeemedto
bethepersonalincomeorpersonallossesofitsshareholders,reportedontheirpersonaltaxreturns.
CapitallossesoftheSCorporationcanbeusedbytheshareholderstooffsetotherpersonalincome,providing
thattheydonotdeductasalossanyamountexceedingtheirindividualinvestmentsin,orloanstotheCorporation
taxbasis.Suchlossesmaybecarriedforwardindefinitelyforpossiblelateruseifnotcurrentlyusable.
How is an S-Corporation taxed by the Secretary of State of Delaware?

RespectingtheannualtaxpaidbyanentitytotheDelawareSecretaryofStateforthepurposeofmaintaininga
validCharterissuedbytheStateofDelaware,anSCorporationistaxedinthesamemannerasaCorporationifitis
registeredasaCorporationandistaxedinthesamemannerasanLLCifitisregisteredasanLLC.
Who may elect S Status?

ACorporationorLLCisonlyeligibletoelectSStatusifitpassesallofthefollowingtests:
1. TheCorporationorLLCmustbeCharteredinaUSStateorTerritory,suchasDelaware.
2. TheCorporationorLLCmustfileForm2553ontime.(Formoreinformationaboutthefilingdeadlinessee
IRSPublicationi2553InstructionsFilingForm2553athttp://www.irs.ustreas.gov/pub/irspdf/i2553.pdf)
3. Allofitsshareholdersmusteitherbenaturalpersonsorestatesofdeceasedpersonsintheprocessof
administration.OtherCorporationsandpartnershipsarenotpermittedtobeshareholdersunlesstheyare
exemptunderprovisionssuchas501(c)3forCharitableOrganizations;orunlesstheyareanSCorporation
holdinga100%shareofasubsidiarySCorporation.
4. AllofitsshareholdersmusteitherbeUSCitizensorUSResidentAliens.USResidentAliensmustresideina
USstate;AliensresidentinaUSterritoryarenoteligible.Anonresidentaliencannotbeashareholderofan
SCorporation.Analienisalsoknownasaforeignnationalornoncitizen.
48
5. TheCorporationmusthaveonlyoneclassofstock,althoughthatclassmaybedividedintoVotingandNon
Votingshares.InthecaseofanLLC,allownermembersmusthaveidenticalrightstodistributionand
liquidationproceeds.
6. TheCorporationmustnotbeaSection585bank,asubchapterLinsurancecompany,asection936
possessionSCorporation,noraDomesticInternationalSalesCorporationorformerDISC.
7. TheCorporationmustfollowacalendartaxyearunlessitcanjustifyareasontodootherwise,suchas
seasonalbusiness.
8. EachshareholdermustconsenttotheSStatuselection.
9. TheCorporationmusthavelessthan100shareholdersorLLCMembers.Inthiscase,amarriedcouplewho
holdstockasTenantsinCommon,JointTenants,orCommunityPropertyarecountedasone
shareholder;unlessbothspousesalsoholdsharesofstockindividuallyinadditiontojointly,inwhichcase
theyarecountedastwoshareholders;ifonlyonespouseholdsadditionalsharesindividuallytheyareonly
countedasoneshareholder.Twounmarriedshareholdersholdingstockjointlyarecountedastwo
shareholders.
AnexistingSCorporationwillloseitstaxstatusifanyoftheaboverulesarebroken.
FollowingaresomeexamplesofactionsthatcouldresultinacompanylosingitsS
Corporationstatus;thisisnotintendedtobeacompleteorcomprehensivelist.
AnSCorporationmayloseitsSCorporationstatusif:
Stockissoldortransferredtoanonresidentalien.
AnotherCorporationpurchasessharesoftheSCorporation,withtheexceptionof
oneSCorporationholding100percentofasubsidiarySCorporation.
Thenumberofshareholdersexceeds100.
Asecondclassofstockisissued.NotethatifyourSCorporationsshareholderslend
toomuchmoneytotheCorporation,ratherthaninvestingthemoneyinstockas
capitalatrisk,theIRSmayneverthelessdeemtheloantobeaninvestmentinstock
andrulethatstocktobeofadifferentclassthantheoneoriginallyissued.
ACloseCorporationisformedwithstipulationsintheCertificateofIncorporationandBy
LawswhichmaypreventunintentionallossofSstatusduetosaleortransferofstock,see
theclosecorporationsectionformoreinformation.
The S-Corporation as an alternative to the C-Corporation

What are the advantages of an S-Corporation?
WhileLLCsandCCorporationsmayeachbeeligibletoelectSStatus,forthepurposesofthisdiscussion,we
arefocusingontheSCorporationasanalternativetotheCCorporation.BelowaresomefeaturesoftheS
Corporationeligibleentrepreneursmayconsideradvantageous:
YoucanpayyourselfashighasalaryasyouwishwithoutrunningtheriskthattheIRS.willconsideritoutof
linewithcomparablesalariesinyourindustry.
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IfyouhaveaonepersonSCorporation,youneednotbeconcernedabouttheIRSdecidingthatyouarea
personalholdingcompanyandsubject,therefore,toadditionaltaxation.(Thisisadistincthazardforone
personoperatorsofsometypesofenterprises.)
Avoidanceofdoubletaxationofcapitalgains,shouldtheCorporationoranyofitsassetsbesold.
StockholderemployeesofSCorporationsmayparticipatealongwithotheremployees(orindividuallyinthe
caseofaonepersonCorporation)inqualifiedretirementplanssetupbytheSCorporation.UndertheTax
EquityandFiscalResponsibilityAct(TEFRA),SCorporations,CCorporationsandpartnershipsaretreated
withfewsignificantdifferenceswithrespecttoqualifiedretirementplans.TheSCorporationcantakeatax
deductionforthefullamountofitscontributiontotheplan.Inthecaseofshareholderemployees,the
contributionmadeontheirbehalfmustbereasonablewhencomparedtocompensationtheyreceive.The
employee(shareholderornot)isnotrequiredtoincludeasincomeeithertheSCorporationscontributions
orthesubsequentearningsfromtheinvestedcontributionsuntilsuchtimeashe/shereceivesadistribution
fromthequalifiedplan.
SCorporationsareusuallypermittedtousethecashaccountingsystem,whichisthesimplest.Morethan
halfofallsmallfirmsintheUSAaretaxedasSCorporations.
What are the limitations of S-Corporation status?

BelowaresomefeaturesofSCorporationsthateligibleentrepreneursshouldbeawareofwhenmakingthe
decisionbetweenanSCorporationandaCCorporation:
SCorporationsmayownsubsidiariesbuttheymustnotownmorethan80percentofanonSCorporation
subsidiarysstock.Theyarepermittedtoown100percentofanotherSCorporation.
FringebenefitspaidtoshareholderswhoowntwopercentormoreoftheSCorporationsstocksuchas
medicalreimbursementplansandgrouptermlifeinsurancearenotdeductiblecorporateexpensesunder
thelatestfederaltaxlaws,unlesssuchexpensesarereclassifiedaswageincometothegreaterthantwo
percentowners.
WhileSCorporationincomeisexemptfromcorporatetaxatthefederallevel,notallstatesandterritories
exemptsuchCorporationsfromstate(orterritorial)corporatetaxes.Statesandterritoriesthatdonot
recognizeSCorporationtaxstatusofSCorporationsincorporatedinand/oroperatingintheirjurisdiction
include:TheDistrictofColumbia(Washington,DC),NewHampshire,andTennessee.Thesejurisdictions
requireSCorporationstopaystatetaxesatCCorporationrates.SomestatestaxSCorporationsonpartof
theirincome,oncapitalgainsand/oronexcesspassiveincome,suchstatesinclude:Massachusetts,
Indiana,Kentucky,Idaho,MaineandWisconsin.Michigan,California,NewJerseyandNewYorktaxboththe
SCorporation'sprofitandtheshareholder'sproportionalsharesoftheSCorporation'sprofits.Inthese
statestheSCorporationisdoubletaxedinamannersimilartoaCCorporationthatdistributesallofits
profitsasdividends.ThemajorityofthestatesimposestateincometaxesonthesharesofincomeofS
Corporationsoperatingintheirstate,whichpassthroughtoshareholderswhoresideoutofstate.Some
states,includingDelaware,requirethatanSCorporationwithholdstateincometaxesfromdistributionsto
nonresidentshareholders.(Inadditiontoaddingtotheaccounting/bookkeepingworkload,thismightresult
innonproratedistributionswhichinturncouldleadtoanI.R.S.findingthatyourCorporationhasmore
thanoneclassofstock,inwhichcaseitcouldcausearetroactiveterminationofyourfederalSCorporation
election.)
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WithanSCorporation,shareholdersaretaxedontheirsharesofcorporateearningswhethertheytake
theseearningsasdividenddistributionsorretaintheearningsintheCorporation.Allearnings(profits)must
passthroughtoshareholders,atleastonpaper.Inotherwords,eventhoughthecorporateprofitsfora
givenyearremainphysicallyinthecorporatebankaccounttobuildupworkingcapital,forexampleand
arenevertransferredtotheshareholder(s),eachshareholdermustneverthelesspaypersonalincometaxon
his/hershareofthoseprofits,whichwillbeconsideredbytheIRStobe:(1)individualincomeand(2)paidin
capital.
Q: Improbablynotgoingtomakeanymoneymyfirstcoupleofyearsinbusinessdueto
startupcosts,doIstillhavetopaytaxes?
A: AcompanyregisteredinDelawaremustpayanannualtaxtotheSecretaryof
StateofDelawaretomaintainitsCharterissuedbythisstate;thistaxisnotdependenton
youractivitylevelorprofits.Ifyouregisteredinanyadditionalstatesyoumayowea
similartaxand/orannualfilingfeeinthosestates.IfyourLLCorCorporationisbeing
taxedasaDisregardedEntity,PartnershiporSCorporationthenyourlosseswillpass
throughandmaybeclaimedonyourpersonalincometaxreturnasanoffsettoother
sourcesofincomeyoumayhave.Theselossesmayevenbecarriedforwardtofuture
returns.
Q: InwhatcircumstancesisitparticularlydesirabletoconsiderelectingS
Corporationstatus?
A: Ifyoualreadyhaveorplantostartaonepersonorcloselyheldbusinessorprofessional
activity,withprobablelossesduringthefirstyear/secondyearstartupperiodresulting
frominitialinvestmentsinequipment,doingbusinessmaterialsorinventory,heavy
operatingexpenses,lowsalesorotherincome,etc.TheSelectionpermitsthepass
throughofoperatinglossestoshareholderswhomayhaveincometooffsetsuchlosses.If
youalreadyhaveabusinesswithahightaxableincomethatdistributesthemajorityofits
earningsasdividendsandthathaslowcapitalspendingrequirements.Note:Any
companythatchangesitscorporatestatusgenerallyispreventedbyFederaltaxlawfrom
switchingbackforfiveyears.
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Holding Companies
WhenwesayHoldingCompanyweareusuallyreferringtoacompanywhichdoesnotproducegoodsor
servicesitself,ratheritsonlypurposeisowningsharesofothercompaniesorcertainassetssuchasYachtsand
PrivateAircraft.
How are holding companies taxed in Delaware?

CorporationswhoseactivitieswithinDelawareareconfinedtothemaintenanceandmanagementoftheir
intangibleinvestmentsoroftheintangibleinvestmentsofCorporationsorbusinesstrustsregisteredasinvestment
companiesundertheInvestmentCompanyActof1940,asamended(15U.S.C.80a1etseq.),andthecollectionand
distributionoftheincomefromsuchinvestmentsorfromtangiblepropertyphysicallylocatedoutsideofDelaware
areexemptfromcorporatetaxationbytheStateofDelaware.Forthepurposesofthisstatute,intangible
investmentsaredeemedtoincludewithoutlimitationinvestmentsinstocks,bonds,notesandotherdebt
obligations(includingdebtobligationsofaffiliatedCorporations),patents,patentapplications,trademarks,trade
namesandsimilartypesofintangibleassets.
Incertainsituations,flowthroughincomederivingfromalimitedpartnershipinterest,mayqualifyasincome
fromanintangibleinvestment.TherearealsospecialsituationsthatcanprovideDelawareStateCorporateTax
savingswhenformingaleasingcompanyorliquidatingacompany.AHoldingCompanyorganizedinDelawareasan
LLC,inordertomaintainavalidDelawareCharter,willowetheDelawareSecretaryofStateanannualLLCTaxof
$250whichisaflatfeenotrelatedtoassets,capitalgains,profitsoractivities.AHoldingCompanyregisteredasa
CorporationinDelaware,inordertomaintainitscompanyCharter,willowetheSecretaryofStateofDelawarea
minimumof$125inFranchiseTaxandAnnualReportfilingfees.
Marine Holding Companies

AMarineHoldingCompanyisanLLCorCorporationprimarilycreatedforthepurposeofholdingayacht,boator
othermarinevessel.Thereareseveralreasonstoconsiderthisoption.
1. LimitedLiability
Ifthevesselisregisteredinthenameoftheholdingcompany,itlimitsyourpersonalliabilitytothatofa
stockholderoftheCorporation(orMemberofanLLC).Delawarelawpermitsdirectors(andMembers)to
avoidpersonalliabilitytothecompanyfornegligentacts.
2. TimeShareandothergroupownershiparrangements
RegisteringavesseltoaMarineHoldingCompanygreatlysimplifiesarrangementswherebyagroupof
individualsororganizationsshareownershipanduseofthevessel.Thetermsofusearedefinedinthe
OperatingAgreementorByLawsoftheMarineHoldingCompanyandthosepersonsororganizations
entitledtouseorownershipshareofthevesselbecomeShareholders(ifaCorporation)orMembers(ifan
LLC).Participantsmaywithdraworenterthearrangementsimplybysellingorbuyingastockshareor
membershipinterest.ThistransactionisprivateanddoesnotaltertheregistrationoftheHoldingCompany.
3. Sellingthevessel
IftheMarineHoldingCompanyholdsonlyonevessel,thevesselmaybesoldtoanewownerbyselling
theMarineHoldingCompanyinitsentirety.Thisisaccomplishedbysimplytransferringthestocksharesor
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membershipinterestovertothenewowner(s).Thisformofsalemaybeveryattractivetoaprospective
purchaserbecausetitletotheyachthasnotchangedhandsitisstillregisteredtotheCorporation.You
shouldconsultwithaDelawarecorporatelawyerandacertifiedpublicaccountant,todetermineifataxon
youryachtwillbedueinthestatewhereyouryachtisprincipallyused.Insomecases,nosalestaxmaybe
assessableonthetransfer,andnoreregistrationcostsareincurred.IfyourMarineHoldingCompanyholds
multiplevesselsandwillonlysellone,thenewownerwillneedtoreregisterthevessel.Asales/usetaxmay
bedue,undercertaincircumstances,tothestateofprincipaluse,butthetaxdueuponsalewillbeduein
thenameoftheMarineHoldingCompany,ratherthaninyourpersonalname.
4. TaxDeductions
Youryachtmaybeusedfortaxdeductiblebusinessentertaining.Aswithotherincometaxmatters,the
applicationoftaxlawsvarydependingonanindividualsfactsandcircumstances.
Where the vessel should be registered?

AvesselmaybeanassetofaDelawareMarineHoldingCompanyregardlessofwherethevesselisnumbered
andregistered.FederalandDelawarelawrequirethatboatsberegisteredintheStateofprincipaluse.Thekeyis
watersofprincipaluse.ShouldyouuseyourboatonanotherStateswatermoretimesthanitisusedinDelaware
waters,youshouldregisteryourboatinthatState.DelawaresPortofWilmingtonisadeepwaterportwhichhas
beeninusebyAtlanticOceanfaringvesselsforover200years.IfyouwillberegisteringyourvesselinDelaware,DBI
cancompletethisprocessforyou;infact,ourNewMarineHoldingCompanyRegistrationpackagesincludea1or3
yearvesselregistrationwiththeDelawareDivisionofFish&Wildlife(theauthoritywhichnumbersandregistersall
Delawaremarinevesselsincludingoceangoingvessels).
Anexcellentreferencethatprovidescomprehensiveguidanceforthebusinessuseofyachts,
includingthegeneralrulesforentertainmentfacilities,personaluse,depreciationand
recordkeepingforyachts,aretwomanuals,entitledTaxGuidefortheBusinessUseofYachts,
VolumeIandVolumeII:CharterOperations,byMikeKimball,CPA,RogerA.Smith,CPA,Dr.
KarenS.Lee,J.D.,CPA,whichareavailablefromDelawareBusinessIncorporators,Inc.
Aircraft Holding Companies

AnAircraftHoldingCompanyisanLLCorCorporationprimarilycreatedforthepurposeofholdinganairplane
forpersonalorcommercialuse.Thereareseveralreasonstoconsiderthisoption.
1. LimitedLiability
RegisteringanaircraftinthenameofaDelawareCorporationorLLClimitsthepersonalliabilityofthe
Directors,ShareholdersorMembersoftheAircraftHoldingCompany.
2. TaxDeductions
Whenoperatingyouraircraftasabusiness,andwhencertainproceduresarefollowed,theowneris
entitledtowriteoffmaintenance,fuel,hangarexpenseanddepreciation(aircraftcanbedepreciatedovera
fiveyearlife),andoffercertaintaxsavingadvantages.Whileallbutdepreciationisanoutofpocket
expense,thetaxreductionthatcanbeobtainedisarealcostsavingsfromfederalincometax.Please
consultyourtaxadvisoraboutthetaxramificationsofowningapersonalorcommercialaircraft.
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3. TimeShareandothergroupownershiparrangements
RegisteringaplanetoanAircraftHoldingCompanygreatlysimplifiesarrangementswherebyagroupof
individualsororganizationsshareownershipanduseoftheplane.Thetermsofusearedefinedinthe
OperatingAgreementorByLawsoftheAircraftHoldingCompanyandthosepersonsororganizations
entitledtouseorownershipshareoftheplanebecomeShareholders(ifaCorporation)orMembers(ifan
LLC).Participantsmaywithdraworenterthearrangementsimplybysellingorbuyingastockshareor
membershipinterest.ThistransactionisprivateanddoesnotaltertheregistrationoftheHoldingCompany.
4. Sellingtheairplane
IftheAircraftHoldingCompanyholdsonlyoneplane,theplanemaybesoldtoanewownerbyselling
theAircraftHoldingCompanyinitsentirety.Thisisaccomplishedbysimplytransferringthestocksharesor
membershipinterestovertothenewowner(s).Thisformofsalemaybeveryattractivetoaprospective
purchaserbecausetitletotheplanehasnotchangedhandsitisstillregisteredtotheCorporation.Insome
cases,nosalestaxmaybeassessableonthetransfer,andreregistrationcostsmaynotbeincurred,consult
aqualifiedtaxadvisorand/ortheFAAfordetails.
DBIdoesnotofferAircraftregistrationservicewiththeFAA,butourNewAircraftHoldingRegistrationPackage
doescomewithavirtualDelawareaddresswithlimitedmailforwarding.PleasecontactanIncorporationSpecialist
ifyouhaveanyquestions.
PersonalHoldingCompany
IntheUnitedStates,apersonalholdingcompanyisdefinedinsection542oftheInternalRevenueCode.A
Corporationisapersonalholdingcompanyifbothofthefollowingrequirementsaremet:
1. PersonalHoldingCompanyIncomeTest.Atleast60%oftheCorporation'sadjustedordinarygrossincome
forthetaxyearisfromdividends,interest,rent,androyalties.
2. StockOwnershipRequirement.Atanytimeduringthelasthalfofthetaxyear,morethan50%invalueof
theCorporation'soutstandingstockisowned,directlyorindirectly,byfiveorfewerindividuals.
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Naming Your Company

Naming Conventions
Whenregisteringacompany,youwillbecomingupwithanamethatcombinesthetitleofyourcompanywith
anendingsuffix.Theendingsuffixinformspeoplewhatkindofcompanythisis.Forexample,DBIGlobal,Inc.has
thesuffixInc.whichisanabbreviationofIncorporated.TheIncorporatedsuffixmeansthiscompanyisa
Corporation.Likewise,DBIGlobal,LLChasthesuffixLLCwhichisanabbreviationofLimitedLiability
Company.AnLLCisadifferenttypeofentitythanaCorporation.Youarerequiredtouseasuffixattheendofyour
companyname(title).Itisnotpossibletoregisteryourcompanywithoutasuffix.
ThefollowingsuffixesareavailableforusebyLLCsinDelaware:
LimitedLiabilityCompany,LLC,L.L.C.
ThefollowingsuffixesareavailableforusebyDelawareCorporations:
Inc.,Incorporated,Corp.,Corporation,Co.,Company,Ltd.,Limited,Association,Assoc.
ANotforProfitmayuseanyofthesuffixeslistedaboveforaCorporation,oritmayuseoneofthefollowing
suffixestraditionallyusedbyNonStockandNonProfitOrganizations:
Club,Foundation,Fund,Institute,Society,Union,Syndicate.
YoucannotusethewordsBankorTrustinthenameofyourcompanywithoutprior
writtenapprovaloftheDelawareStateBankingCommissioner.Youcannotusethewords
UniversityorCollegewithoutthepriorwrittenapprovaloftheDelawareStateEducation
Commissioner.Mostotherstateshavesimilarlaws.ContactanIncorporationSpecialistfor
detailsregardingobtainingapproval.
Ifyouareinterestedinregisteringanamethatmaybesimilartothenameofacompanythatalreadyexistsin
Delaware(oryourhomestate)youmaymakethenameuniquebyaddingadistinguishingword.InDelaware
thedistinguishingwordmaybeaddedtothebeginningorendofthename.
John Smith owns a street sweeper manufacturing plant in Florida. He is interested

in registering his company in DelawareHis first choice, Smith Sweepers, Inc. is
already registered in Delaware by another company. John can add words to
Smith Sweepers to make his company name unique.
For example, he may be able to register his company as Smith Street Sweepers,
Inc. or Smith Sweepers of Florida, Inc.
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Changingthesuffixwillnotmakeanameavailableifitisalreadytaken.Forexample,ifthere
isalreadyacompanyregisteredasSmithSweepers,Ltd.Johnwillnotbeabletoregister
thecompanyasSmithSweepers,Inc.
ContactanIncorporationSpecialistifyouneedhelpnamingyourcompany.
Reserving a Name
TheofficeoftheDelawareSecretaryofStatemaintainsrecordsofthenamesofallCorporations,LLCsandother
entities,whichhavebeenreservedorregisteredasadomesticorforeignentityunderthelawsofDelaware.The
nameyouselectmustbecheckedagainsttheserecordstobecertainthatitisdistinguishablefromthem.DBIwill
checkyournameavailabilityinDelawareorotherstatesforfree.TheSecretaryofStateofDelawarenowcharges
$75foranamereservationwhichisvalidfor120days.Ifthedesirednameisavailable,DBIcanplacethename
reservationforyouthroughourdirectconnectiontotheDelawareCorporationsInformationSystem.
IfyoureserveacompanynameyourselfonthestateswebsiteitwillcauseDBItobeUNABLE
toregisteryourCorporationorLLCthroughourdirectconnectiontothestateinformation
system.IfyoufilethenamereservationyourselfDBIwillbeUNABLEtooffer13business
dayservice.Processingtimewilltakeapproximately3weeksunlessyoupayanadditional
feeforexpeditedservice.
Thisissuecanbeavoidedbyoneoftwomethods:1)DBIcanfilethenamereservationfor
youthroughourdirectcomputerconnectiontothestateinformationsystem.2)Youcan
saveexpenseandhasslebysimplyallowingDBItoregisteryournewcompanyinsteadof
makinganamereservation.Thiswayyourcompanynamewillbeprotectedfromuseby
othersbutyouwillnothavetopayanadditional$75.DBIcanactinthecapacityof
IncorporatororOrganizerandholdyourcompanyinanunusedstateuntilyouarereadyto
nameyourofficersorstartyourbusinessactivities.Whenyouarereadytobeginusingthe
companyDBIsdutiesasIncorporatororOrganizerwillendandDBIwillissuetheresolution
namingyourInitialDirectororInitialMember.
DBAs Doing Business As Names

AkaTradeName,FictitiousName,AlternateName,AssumedName
Inmanyjurisdictionsitispermissibleforyourcompanytoconductbusinessunderadifferentname,without
filinganamechangeamendment,providedthatyouregistertheadditionalnamewiththeappropriateauthorityfor
thatjurisdiction.TheregistrationmaybefiledwiththeState,CountyorCity,dependingonwhereyouintendtodo
businesswiththedifferentname.Theprocessisusuallyinexpensiveandfairlyquick.Inmostcasesafterregistering
youwillhavetherighttogiveyourothernameonyourbusinesscards,buildingandvehiclesignage,orderforms,
advertisements,andevenacceptchecksandmadepayableinyourothername.Ideallyyourbankaccountandlegal
contractsshouldincludebothyourlegalnameandyourpermissibleothername.
If Delaware Business Incorporators, Inc. wanted to do business in Wilmington

Delaware under the name Del Bus Inc Global, we would register a Fictitious
Name with the Clerk of Courts of New Castle County. Our checks would read
Delaware Business Incorporators, Inc. DBA Del Bus Inc Global.
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Asidefromthedesiretouseanothernameforyourownreasons,yourcompanymayberequiredtodobusiness
inanotherstatebyadifferentnameinafewcircumstances:
Ifyournameisnotpermissibleinthatstatebecauseitbreakstheestablishedcompanynaminglaws.For
example:IfDelBusIncLLCwantedtoqualifytotransactbusinessinNewJersey,wewouldhavetoapply
forauthorityinNJunderanalternatenamebecauseNewJerseylawdoesnotallowLLCstousethe
abbreviationIncintheirname.SoourApplicationforAuthoritywouldread:DelBusIncLLCDBAinNew
JerseyasDelBusIncorporatorsLLC
IfyournameisalreadyregisteredinthatstatebysomeoneelsewhohasExclusiveUserightstothatname.
ExclusiveUsemeansnooneelseinthatjurisdictionmayuseyourname.Forexample,IfDBI,Inc.wanted
toregisterasaForeignCorporationwithAuthoritytoTransactBusinessinOhio,andtherewasalreadya
companyregisteredinOhioasDBI,Inc,wemightregisterinOhioasDBI,Inc.DBAinOhioasDBI,Inc.of
Delawareorperhaps,DBI,Inc.(USA)oranyothernamethatisnttakeninOhio.
Somestatesrequireyoutoincludetheappropriatesuffixafteryourotherpermissiblename(DelBusIncDBA
DBIInc)andothersrequirethatyoudonotincludeasuffix(DelBusIncDBADBI)!AnIncorporationSpecialistwill
helpyouwiththedetailsifyouwishtouse,orarerequiredtouseanothername.
InmanyJurisdictionsyourotherpermissiblenameisnotaffordedExclusiveUse
rights,unlikethelegalnameyouregisteredunderwhenthenewCorporationwas
IncorporatedorLLCwasformed.Followingouraboveexample,thiswouldmean
that,whilenoothercompanycoulddobusinessinDelawarewiththename
DelawareBusinessIncorporators,Inc.anothercompanycoulddobusinessinNew
CastleCountyDelawareunderthenameDelBusIncGlobal.Ifwewantedtoprotect
thatnamefromuse,ouroptionswouldincluderegisteringDelBusIncGlobalasa
newDelawareCorporation,orpossibleapplyingforTrademarkrights.
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Registered Agent
AkaResidentAgent
DelawarelawrequiresthatyourcompanymaintaininthisstateaRegisteredAgentandRegisteredOffice.
Mostotherstateshavesimilarlaws.DBIisoneofDelawaresleadingCorporationservicecompanies,withadirect
computerlinktotheDelawareDivisionofCorporations.TwelveMonthsoffreeDelawareRegisteredAgentservice
comeswithanypurchaseofaNewCompanyRegistrationPackage.
ARegisteredAgentisapersonorcompanywhoactsasyouragenttoreceiveanylegaldocumentsthatmaybe
deliveredonyourcompanybyServiceofProcess.TheRegisteredOfficeistheaddresswheretheRegistered
Agentislocated.TheRegisteredOfficemustbeopenduringnormalbusinesshourstoreceiveServiceofProcess
andmustbelocatedwithinthestateofDelaware.
ServiceofProcessmeansthedeliveryoflegalnoticeofanactionofthecourt.Forexample,ifyourcompanyis
beingsued,aProcessServerwillcometoourofficeanddeliveraSummons.Thisdocumentisissuedbythe
courtandcontainsthecasenumber,thenamesoftheDefendant(s)andPlaintiff(s)andthedateandlocationat
whichyouaresummonedtoappearbeforethecourt.Itwouldthenbeourresponsibilitytoacceptthedocumenton
yourbehalfandthenforwardthisdocumenttoyou.IfwereceiveadocumentbyServiceofProcessonyourbehalf,
andyourRegisteredAgentServiceiscurrent,wewilltrytocontactyouimmediatelybyphone,emailorfaxbefore
weforwardthedocumenttoyou.
ItisalsotheRegisteredAgentsdutytoforwardstatetaxnotices,buttheSecretaryofStatewillnotwaivethe
penaltyifyournoticewaslostinthemail;sowesuggestthatyoumarkyourcalendaraccordingly.
BecauseyourRegisteredAgenthassuchcrucialresponsibilities,youdontwantaflybynightRegistered
Agent.Youneedanagentyoucancountontobeavailableaslongasyourcompanyremainsinbusiness,whichwill
hopefullybemanyyearstocome!DBIhasservedasRegisteredAgentforthousandsofDelawareLLCsand
Corporationssince1986.WeowntheCapitolOfficeCenterinWilmingtonDelawareandbusinesshasneverbeen
better!Youcancountonustohandleyourcompanysneedsreliably,confidentially,efficientlyandwithgenuine
enthusiasm.Wereconstantlylookingfornewwaystoofferinnovativeservicesourclientswant,liketheGood
StandingProtectionServiceprogramthatwedevelopedin2009inresponsetocustomerfeedbackandthe
CustomerAlert!programtonotifyyouimmediatelyifalegalnoticeisservedonyourcompany.
DBIoffersRegisteredAgentserviceinall50UnitedStates.
Q: HowdoIchangemycurrentRegisteredAgenttoDelaware
BusinessIncorporators?
A: Orderonlineatwww.dbiglobal.comorcontactanIncorporation
Specialist.WellcollectyourcontactinformationandpaymentandsendyouaChangeof
Agentformtosign.Justreturnthesignedformbymail,faxoremailandwelltakecareof
therest.
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Q: DoestheaddressofDELAWAREBUSINESSINCORPORATORS,
INC.(3422OldCapitolTrail,Suite700)becomethelegaladdressorheadquartersofmy
newDelawarecompany?
A: No;withoutaMailForwardingAgentappointmentformfromthe
UnitedStatesPostalService,theonlydocumentswecanlegallyreceiveonyourbehalfat
ouraddressarelegalnoticesfromthecourtdeliveredbyServiceofProcessandtax
noticesfromtheSecretaryofStateofDelaware.Ifyouwantabusinessaddressin
Delawarewhichyoucanputonyourwebsiteandbusinesscardsasyourcompanys
mailingaddressandtowhichyoucanreceivesalesordersandroutinebusiness
correspondenceweofferVirtualOfficepackageswhichincludeaDelawareMailing
AddresswithMailForwarding.IfyoupurchaseoneofourVirtualOfficepackagesitwill
notbelegalforustoforwardyourmailuntilyoureturntheMailForwardingAgent
appointmentform,whichwewillprovidetoyouatthetimeyoupurchasetheservice.
Failingtorespondtoanoticefromthecourtwithintherequiredamountoftimecouldhave
disastrouslegalconsequences.Itisextremelyimportantthatyoucontactusimmediatelyif
youraddress,phonenumber,faxnumberoremailaddresschangessothatwecangetany
legalnoticestoyouassoonaspossible.
IfyoufailtopayyourRegisteredAgentRenewalFeeyourcompanyCharterwillbedeclared
FORFEITbytheDelawareSecretaryofState.Yourcompanywouldbecomeinvalidandyou
wouldlosetherighttodobusinessasanLLCorCorporation.Dontletthishappentoyou!
Markyourcalendar:YourRegisteredAgentRenewalfeeisduethefirstdayofthemonth
yourcompanywasformedin.
Manyofourclientseveryyearcallustosaythattheirtaxislatebecausetheymisplacedtheir
taxnotice,ormistookitforaRegisteredAgentRenewalFeethattheyalreadypaid.Dontlet
thishappentoyou!Ifyouneedtopayyourtax,youcancallustorequestareplacement
notice,orwecangiveyoutheinstructionsonhowtopayonlinewithoutyournotice,oryou
canorderourTaxPreparationandPaymentservicebyphone,internet,fax,mailoremail.
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Qualification
Qualificationistheprocessofapplyingforpermissiontodobusinessinastatethatisnotthehomeofyour
companyCharter.ADelawareCorporationorLLCisconsideredaforeigncompanyinotherUSstatesandis
consideredadomesticcompanyinsideDelaware.
How do I know if I need to Qualify in a state I do business in?

Theanswerisnotcutanddry,butasageneralrule,ifyouemployW2wageearningemployeeswithinastate,
orifyouhaveanoffice,homeoffice,storeorotherphysicallocationwithinastate,itismostlikelythatyouwillbe
requiredtoQualifyyourcompanytotransactbusinesswithinthatstate.Thereareexceptions:ifyousellthrough
independentdistributors,manufacturersrepresentatives,wholesalers,orretailers;orifyouractivityinastateis
conductedthroughindependentcontractorsormailorder;orifyouractivitywithinastateisonlyoccasional,and
incidentaltoyourinterstateorinternationalbusiness,youmaynotberequiredtoQualifyinthatstate.
TheCommerceClauseoftheU.S.ConstitutionprohibitsUSStatesfromregulatingCorporationsinvolvedin
interstatecommerce.Interstatemeansbetweenpartieslocatedintwoormorestates.Intrastatemeanswithin
onestate.Muchoftodaysinternetdrivenbusinessactivityisinterstateorinternationalcommerce.Inthecaseofa
multiplestepbusinessprocessinwhichonestageintheprocessconsistentlyoccurswithinaparticularstate,a
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companymustdetermineifitneedstoregisterinthatstate.Indeterminingifthebusinessbeingtransactedis
interstateorintrastate,thecourtwouldtypicallyconsiderthefrequencyofthebusinessbeingtransacted,andthe
levelofinvolvement.
Thelawsvarybystate,butmoststatesprovidealistofactivitieswhichdonotrequireQualification.The
followinglistisnotintendedtobecompleteorcomprehensive,andisnotintendedtoreplacetheadviceofan
attorney,butforyourgeneralinformation,moststateswouldnotrequireQualificationforthefollowingactivities:
EngaginginLitigation,HoldingBoardMeetingsandotherInternalCorporateActivities,MaintainingBankAccounts,
MaintainingOfficesfortheTransferofSecurities,SellingthroughIndependentContractors,SolicitingOrdersby
MailorotherChannels,CreatingorAcquiringIndebtednessandSecuringorCollectingDebts,OwningRealor
PersonalProperty,andIsolatedTransactions.SomestatesdorequireQualificationforsomeoftheseactivities,soit
isnecessarytoreviewonacasebycasebasis.
Inmostcases,acompanywouldnotberequiredtoregisterasaforeignentityinastatesolelybecauseanowner
orinvestorliveswithinthatstate,ifthatownerorinvestorisnottransactingbusinesswithpartieswithinthatstate.
ABC Cotton, LLC has two Members (owners). Bob owns a 60% membership
interest in the company. Bob lives in Mississippi and directs the operation of the
company within Mississippi and nationwide. Jane owns a 40% share and is a silent
partner living in Florida. Jane contributed start-up capital to the LLC but is not
involved in directing the operation of the company and she does not transact any
business of the company. ABC Cotton, LLC does not have any employees or offices
in Florida. Any sales to customers in Florida are handled by Bob from Mississippi.
In this scenario, the business transactions described are INTER-STATE commerce,
and as such, would not require ABC Cotton, LLC to register in Florida.
What is the procedure to Qualify in an additional state?

IfyouneedtoqualifyyourDelawarecompanyinanadditionalstate,DBIcanhelpyouwiththeprocessatthe
sametimethenewDelawarecompanyisformed,orlaterastheneedarises.Theprocedureusuallyconsistsof
completinganapplicationformandfilingproofofexistenceinthehomestate,bysubmittingeitheraCertifiedCopy
oraCertificateofGoodStanding.DBIwillobtainthesedocumentsforyouandcompletethemaspartofthe
process.
ForExample:IfaDelawareLLCwantedpermissiontotransactbusinessasaforeignLLCinNewYorkStateit
wouldsubmitanApplicationforaCertificateofAuthoritytoTransactBusinessintheStateofNewYorkfromthe
DivisionofCorporationsoftheNewYorkDepartmentofStatetogetherwithaCertificateofGoodStandingfromthe
DelawareSecretaryofState.
Theauthoritywhograntspermissionforforeigncompaniestodobusinesswithinthatstatevariesbystate;
typicallyitistheSecretaryofStatesofficebutotherpossibleauthoritiesinclude:CommissionerofCommerce,
CorporateCommission,SuperintendentofCorporations,StateDepartmentofAssessmentsandTaxation,Secretary
ofTheCommonwealth,DepartmentofTheTreasury,DepartmentofRevenue,StateCorporationCommissionor
CorporationCommissioner.
ForsomestatestheprocesswillrequireDBItocollectadditionalinformationregardingyourcompanyandwill
requirethesignatureofanofficerontheapplicationform;forotherstatesDBIisabletocompletetheentire
processwithoutanythingadditionalfromyou.Thecostofqualificationvariesbystate.ContactanIncorporation
Specialistforaquote.
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What happens after my company is Qualified in an additional state?

MoststateswillrequireyoutomaintainaRegisteredAgentinthestateandmostwillrequireyoutopayan
annualtaxand/orfileanAnnualReport.Somestateswillalsorequirethepublicationofanoticeregardingyour
companysnewauthoritytotransactbusinessinthestate.DBIwillinformyouwhatisrequiredforthestateyouare
applyingin.Ifyoufailtomeettheannualrequirementsyoucanloseyourpermissiontodobusinessinthestateand
mayalsobefined;ifthisoccursitmaybenecessarytofileforreinstatement,whichDBIcanassistwith.
Q: Isellmyproductsorservicesovertheinternetanddontreally
haveaphysicallocation.DoIhavetoqualifymycompanyineverystate?DoIhaveto
qualifymycompanyinanystate?
A: No;itisunlikelythatyourcompanywouldneedtoqualifyineverystate
becausemostofyourinternetbusinessactivitywillconsistoftransactionsbetween
partiesintwodifferentstatesandwillthereforebeexemptundertheInterstate
CommerceprotectionsoftheUSConstitution.Astoqualifyinginanystate:Ifyoupay
wagestoanemployeeyouwillmostlikelyneedtoqualifyyourbusinessinthestate
wheretheemployeeworks.Ifyouregularlytransactbusinesswithcustomerslocatedin
thesamestatewhereyourbusinessislocated,youwillmostlikelyberequiredtoregister
inthatstatebecausethesetransactionsarenotprotectedbytheInterstateCommerce
clause.Ifyourunaninternetbusinessandyoudonothaveanoffice,yourhomeisusually
consideredyourbusinesslocation.Ifyourbusinessislocatedandoperatedentirely
outsidetheUS,itisunlikelythatyouwouldneedtoQualifyyourDelawarecompanyin
anyotherUSStates.
Q: MybanksaystheycantopenanaccountformycompanyuntilI
provideaCertificateofAuthority.Canyouprovidethisdocumenttome?
A: Thetruthis,moststatelawsdonotrequireacompanytoQualifyfora
CertificateofAuthoritytojusttoopenabankaccount;butmanybanksrequestone
anyway.Banksmaketheirownpoliciesregardingwhatdocumentationisrequiredto
openacompanyaccount.Ifyouarelivinginthesamestateyouarebankingin,youmay
needtoQualifyyourbusinessinthatstatebecauseyouwillbecompletingfrequent
businesstransactionsthereinadditiontobanking.Ifyouwillnothaveroutinebusiness
transactionsotherthanbankinginthatstate,youmayinquirewithanotherbanktoseeif
theywillallowyoutoopenabankaccountwithoutprovidingaCertificateofAuthority.If
youdoneedtosatisfythisrequirementforyourbank,DBIcanprovideyouaquoteonthe
costofapplyingforaCertificateofAuthority(akaQualifying)andanestimateofthetime
requiredtocompletetheprocess.
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Opening a Bank Account

Manyofourcustomerswanttoknowwhatstepsareinvolvedinobtainingabankaccountinthenameoftheir
company.Procedurevaries,butthefollowinginformationcanfamiliarizeyouwiththeprocess.Pleasedonot
hesitatetocontactanIncorporationSpecialistifyouhavequestionsabouthowtoopenabankaccountforyour
DelawareLLCorDelawareCorporation.
Summary of Requirements to Open a Bank Account in the US

YoumaybesurprisedtolearnUSbanksdonotallhavethesamepoliciestoopenabusinessbankaccount(aka
corporatebankaccountorcommercialbankaccount)!Despitethesedifferences,thereareafewthingsyoucanbe
surethebankwillrequest:CertificateofIncorporation(akaArticlesofIncorporation,CertificateofFormation,
ArticlesofOrganization),photoidentificationofthepersonauthorizedtoopentheaccount,andanEIN.Other
documentsthebankislikelytorequestincludeaCertificateofGoodStanding,andaBankingResolution.SomeUS
bankswillalsorequestproofofaddress.SomeUSbanksmayrequesttheByLawsorOperatingAgreement.Unless
youhaveanexistingaccountwiththebank,USbanksmayrequiretheaccountholdertocomeinpersontoopenthe
account.Itisalwaysagoodideatocontactthebankbranchinadvanceofyourvisittofindoutwhatdocuments
theywillrequire,asrequirementsvaryfrombranchtobranch.
Summary of Requirements to Open a Bank Account Outside the US

DidyouknowyourDelawareCorporationorDelawareLLCcanbankanywhereintheworld?Ifyouarenot
interestedinbankingintheUS,wesuggestyoucontactareputableinternationalbankwithabranchconveniently
locatednearyoutolearnwhattheirrequirementswillbetoopenabusinessbankaccount(alsoknownasCorporate
accountorCommercialaccount).Typically,abanklocatedoutsidetheUSwillrequireArticlesofIncorporation,By
lawsorOperatingAgreementandCertificateofIncumbencyorPowerofAttorney.Youcanalsoexpectthebankto
requireatleastoneofthedocumentstobearanApostilleortobelegalizedbytheconsularofficeinWashington,
DC.AllofourInternationalIncorporationandLLCFormationservicepackagesincludeanApostilleorGoldSeal
AuthenticationontheCertificateofIncorporation.IfyouwillnothaveaUSSourceofIncome,willnotbebankingin
theUSandwillnothaveemployeesintheUS,youarenotlikelytoneedanEIN.
Contacting Your Bank

Whenyoucontactabankaboutopeninganaccountwesuggesttakingalistofquestionssoyoudontforget
anything.WehaveincludedabankinterviewquestionnaireasareproducibleworksheetintheAppendixwhichwill
helpyoudeterminewhichquestionstoasktofindoutaboutdocumentationrequirements.DBIwillhelpyouobtain
thedocumentsandcertificationsrequiredbyyourbank.ContactanIncorporationSpecialisttofindoutifthe
documentsyourbankrequiresareincludedinyourNewCompanyRegistrationPackageorifyouwillneedtoorder
themseparately.
FormoreinformationabouttheEINrequiredtoopenabankaccountintheUSseethe
EmployerIdentificationNumber(EIN)section.
Formoreinformationaboutthedocumentsmentionedinthissection,includingtheApostille
andlegalizationofdocumentsbyforeignembassies,seetheCertificates,Apostilles,
LegalizationandAuthenticationofDocumentssection.
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Employer Identification Number (EIN)

AkaFederalTaxIDNumber
AnEmployerIdentificationNumber(EIN)isaninedigitnumber[similartotheSocialSecurityNumber(SSN)]
thattheIRSassignstobusinessentities,nonprofitorganizationsandsomeotherassociations.Itisalsoknownasa
CorporateTaxpayerIdNumber.Theformatis#########;butnotallEINsstartwiththesametwonumbers.AnEIN
isnotanauthorizationtoliveorworkintheUnitedStatesandisnotpresentableasaformofpersonal
identification.
AllbankswillrequireyourcompanytoprovideanEmployerIdentificationNumber(EIN)toopenabankaccount
intheUS.YourcompanywouldalsoberequiredtoobtainanEINifyouwillhavewageearningemployeesworking
intheUS.SomeorganizationssuchasAmazonorPayPalmayrequestacompanysEINaspartofanapproved
venderapplicationprocessorotherbusinessrelationship.
IfyouwillbeopeningyourbankaccountoutsidetheUS,andwillnothaveemployeesintheUnitedStates,it
maynotbenecessaryforyourcompanytoobtainanEIN.
USCitizensandResidentAliens
ForcompaniesphysicallylocatedinsidetheUSheadedbyaUSCitizenorResidentAlien,DBIcanelectronically
fileanapplicationforanEINwiththeIRSandobtaintheEINforyournewDelawareCorporationorDelawareLLC.
ThisprocesswouldbeinitiatedafterthenewcompanyisregisteredwiththeDelawareDivisionofCorporationsand
beforethebankaccountisopened.Youwillreceiveyourconfirmationletterbyemail;theprocesscanusuallybe
completedinlessthan24hours,oftenasquicklyas12hours!
OneMemberorPrincipalShareholderwillberequiredtogivehisorhersocialsecuritynumberaspartofthe
applicationprocess.Ifthecompanyisasubsidiary,itmayprovidetheEINofitsparentcompanyforapplication
purposesinsteadofthesocialsecuritynumberofanowner.Youmustalsoprovidethephysicaladdresswherethe
businessisactuallylocated,butyoumayhaveyourtaxrelatedcorrespondencemailedtoadifferentmailing
address.Onlythemailingaddresswillappearontheconfirmationletter.Wewillalsoneedtoknowifyouexpectto
haveanyW2wageearningemployeeswithinthenext12months,howmanymemberswillbeinyourLLC,andthe
natureofyourbusinessactivity.AdditionalinformationmayberequestedbyanIncorporationSpecialistafteryour
orderisreviewed,ifneededtocompleteyourapplication.
NonResidentNonCitizens
ForcompaniesphysicallylocatedoutsidetheUSownedbynoncitizens,DBIcannotusetheelectronicfiling
method,butcanobtainanEINbyadifferentmethod.AVirtualOfficeisnotconsideredaphysicallocationwithin
theUSA.DBIwillpreparetheapplicationformwiththeinformationyouprovideandwillsendittoyoubyemailor
faxforthesignatureofanowner.Whenthesignedapplicationformisreceived,DBIwillfiletheapplicationform
withtheIRSonyourbehalf.
YouwillnotberequiredtoprovideasocialsecuritynumberorITINiftheownerdoesnothaveone.Youmust
providethephysicaladdressoutsidetheUSwherethebusinessisactuallylocated,butyoumayhaveyourtax
relatedcorrespondencemailedtoadifferentmailingaddress.Onlythemailingaddresswillappearonthe
confirmationletter.WewillalsoneedtoknowifyouexpecttohaveanyW2wageearningemployeeswithinthe
next12months,howmanymemberswillbeinyourLLC,andthenatureofyourbusinessactivity.Additional
64
informationmayberequestedbyanIncorporationSpecialistafteryourorderisreviewed,ifneededtocomplete
yourapplication.YourEINwillbeassignedwithin15businessdays.TheEINconfirmationletterwillbemailedto
yourmailforwardingaddresswithin23weeks.
Q: Mycompanywonthaveanyemployees;canIstillgetanEIN?
A: Althoughthenamemayseemmisleading,youarenotrequiredtohaveemployeesto
applyforanEIN.IfyouneedanEINforbankingpurposesyouwillbeassignedanEINeven
ifyouhavenoemployees.
Q: IfIapplyforanEIN,doesthatmeanIhavetostartpayingUSFederalIncomeTaxes?
A: ObtaininganEINisnotafactortakenintoconsiderationwhendeterminingifyouwillowe
USFederalIncomeTaxes.UScitizenswhohaveaOneMemberLLCoranSCorporation
willusuallyfileanyprofitsorlossesontheirpersonalincometaxreturn.Ingeneral,Non
ResidentNoncitizenswhohavenoUSSourceIncomewillnotowepersonalUSFederal
IncomeTax.IfyouarenotsureifyouwilloweCorporateorPersonalIncomeTaxwe
recommendthatyouconsultataxadvisor;pleasecontactanIncorporationSpecialistif
youwouldlikeareferral.
Q: WhatisthedeadlinetoapplyforanEIN?
A: IfyouwillhavewageearningemployeesintheUSitisbesttoobtainyourEINbeforethe
firstpayrollruns.Ifyouwillnothaveemployeesordonothaveanyyet,andhaveno
immediateplanstoopenabankaccount,youmaywaituntiltheneedarises.Beaware
thattheremaybeothertaxregistrationdeadlineswhichapplytoyourbusinessother
thantheEINapplication.AnEINapplicationdoesnotaffordSCorporation,CCorporation
orTaxExemptstatus;itonlyassignsataxpayeridentificationnumber.
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ITIN Individual Tax Identification Number

ThefollowinginformationisprovidedbytheIRSontheirwebsiteat
http://www.irs.gov/individuals/article/0,,id=96287,00.html
WhatisanITIN?
AnIndividualTaxpayerIdentificationNumber(ITIN)isataxprocessingnumberissuedbytheInternalRevenue
Service.TheIRSissuesITINstoindividualswhoarerequiredtohaveaU.S.taxpayeridentificationnumberbutwho
donothave,andarenoteligibletoobtainaSocialSecurityNumber(SSN)fromtheSocialSecurityAdministration
(SSA).ITINsareissuedregardlessofimmigrationstatusbecausebothresidentandnonresidentaliensmayhaveU.S.
taxreturnandpaymentresponsibilitiesundertheInternalRevenueCode.Individualsmusthaveafilingrequirement
andfileavalidfederalincometaxreturntoreceiveanITIN,unlesstheymeetanexception.
HowdoIapplyforanITIN?
UsethelatestrevisionofFormW7.SendFormW7andproofofidentitydocumentsto:
InternalRevenueService
AustinServiceCenter
ITINOperation
P.O.Box149342
Austin,TX787149342
Whatdocumentsareacceptableasproofofidentityandforeignstatus?
Thereare13acceptabledocuments.
Anoriginal,oracertifiedornotarizedcopy,ofanUNEXPIREDpassportisacceptedforbothidentityandforeign
status.
Ifyoudonothaveapassport
Ifyoudonothaveapassport,youmustprovideacombinationofcurrentdocumentsthatcontainexpiration
dateswe[theIRS]acceptdocumentsissuedwithin12monthsoftheapplicationifnoexpirationdateisnormally
available.Thedocumentsmustalsoshowyournameandphotograph,andsupportyourclaimofforeignstatus.
IRSwillacceptcertifiedornotarizedcopiesofacombination(twoormore)ofthefollowingdocuments,inlieu
ofapassport:
- Nationalidentificationcard(mustshowphoto,name,currentaddress,dateofbirth,andexpirationdate)
- U.S.driver'slicense
- Civilbirthcertificate
- Foreigndriver'slicense
- U.S.stateidentificationcard
- Foreignvoter'sregistrationcard
- U.S.militaryidentificationcard
- Foreignmilitaryidentificationcard
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Visa
U.S.CitizenshipandImmigrationServices(USCIS)photoidentification
Medicalrecords(dependentsunder14yearsoldonly)
Schoolrecords(dependentsand/orstudentsunder18yearsoldonly)
HowandwhencanIexpecttoreceivemyITIN?
IfyouqualifyforanITINandyourapplicationiscomplete,youwillreceivealetterfromtheIRSassigningyourtax
identificationnumber,usuallywithinfourtosixweeks.IfyouhavenotreceivedyourITINorothercorrespondence
sixweeksafterapplying,youmaycalltheIRStofindoutthestatusofyourapplication.
WhatisanAcceptanceAgent?
AnAcceptanceAgentisanindividual,businessororganization(college,financialinstitution,accountingfirm,
etc.)authorizedbyIRStoassistindividualsinobtainingITINs.CertifyingAcceptanceAgentsreviewapplicants'
documentation,completeacertificateofaccuracy,andforwardthecertificateandapplicationtotheIRSfor
processing.SomeAcceptanceAgentsmaychargeafee.
LocateAcceptanceAgentsbyCountry:http://www.irs.gov/individuals/article/0,,id=96304,00.html
Belgium
Brazil
Canada
DominicanRepublic
Guam
HongKong
Israel
Italy
Mexico
Philippines
Portugal
Singapore
Venezuela
Germany
Japan
UnitedKingdom
ThefollowingfirmsalsoofferassistanceasAcceptanceAgents:
DeloitteandTouche,LLP
Ernst&YoungLLP
KPMGLLP
PricewaterhouseCoopersLLP
Checklocaltelephonedirectoryfornearestlocation.
AnITINisfortaxreportingonly;itisnotaformofidentificationandisnotanauthorizationto
liveorworkintheUnitedStates.
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Certificates, Apostilles, Legalization and

Authentication of Documents
Atvarioustimesyourcompanymaybeaskedtoprovidespecialdocumentationrespectingtheorganizationand
registrationofyourcompany,suchaswhenyouopenabankaccount,orsubmitabidforagovernmentcontract.
MostofthesedocumentscanbeobtainedbyDBIfromtheSecretaryofStateofDelaware.DBIcanalsohelpyou
obtainmanyformsofofficialdocumentationorcertificationwhicharenotprovidedbytheDelawareSecretaryof
State.Ifanorganizationoragencyyouaredealingwithrequestsofficialdocumentationofyourcompany,contact
anIncorporationSpecialistforhelp;manytimeswecancommunicatedirectlywiththepersonwhoisrequestingthe
documentsfromyoutoensurethatwedeliverexactlywhatisneeded.
Certificate of Good Standing

akaCertificateofExistence
ACertificateofGoodStandingisanofficialstatementbytheSecretaryofStateofDelawarethatyourDelaware
LLCorCorporationhasbeenlegallyregisteredinDelawareandhaspaiditstaxes.Thisdocumentisoftenrequested
bybanksandagenciessolicitingbidsforcontracts.ThroughourdirectconnectionwiththeStatecomputersystem
wecanusuallygenerateaCertificateofGoodStandingwithinoneortwohoursofreceivingpayment.Wewillemail
orfaxtheCertificatetoyoubeforemailingittoyou.AllDelawareCertificatesofGoodStandingbearan
authenticationcodethatcanbeusedbytherequestortoauthenticateanemailorfaxcopy.
Certified Copy
ACertifiedCopyisareproductionofanydocumentfiledwiththeCorporationsDivisionattachedtoastatement
bytheSecretaryofStatethatthedocumentisatrueandcorrectcopy.MostoftenaCertifiedCopyofthe
CertificateofFormationorCertificateofIncorporationisrequestedbyabank,foreignstateorotheragencytoverify
thecredentialsofyourcompany.WeareusuallyabletoobtainaCertifiedCopywithinanhourortwoofyour
payment,howeversomedocumentsarenotavailablefor12hourservice.YourIncorporationSpecialistwillletyou
knowtheexpectedprocessingtimeandwilldiscussanyexpeditedserviceoptionsavailable.
ItisnotpossibletoobtainaCertifiedCopyofanOperatingAgreement,BylawsorTransferLedger,because
thesedocumentsarenotfiledwiththeSecretaryofStatesoffice.SeeNotarizedTrueCopyforinformationabout
certifyingdocumentswhichwerenotfiled.
Notarized True Copy

IfyouneedacertifiedcopyofadocumentthatwasnotfiledwiththeSecretaryofState,suchasanOperating
Agreement,ByLaws,ShareTransferLedgerorPowerofAttorney,DBIcanprovideyouwithaNotarizedTrueCopy
ifyousendustheoriginaldocument.ANotarizedTrueCopyisareproductionofadocumentattachedtoa
certificatefromaNotaryPublicoftheStateofDelawarestatingthatthedocumentisatruereproductionandisnot
availableinpublicrecord.Wecannotnotarizeanemail,faxorphotocopyofadocument,itmustbetheoriginal
document.Youroriginaldocumentwillbereturned.Wecannotnotarizesignaturesondocumentsunlesswe
witnessthesigningofthedocumentinperson,butwecannotarizeaTrueCopyofadocumentbearingoriginal
signatures.
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Certificate of Incumbency
ACertificateofIncumbencyisanofficialdocumentwhichcertifiesthenamesandofficerstitlesofthe
individualsassociatedwithagivenorganizationsuchasMembers,Managers,Officers,Directorsandsometimes
majorshareholders.Thisdocumentisoftenrequestedwhenabankorotheragencywishestoconfirmwhohasthe
authorityofthecompanytoendorsedocumentswiththeirsignature.Itmayormaynotincludetheincumbents
identifyinginformationsuchasdateorbirthorpassportnumber.
Apostilles
ApostilleisaFrenchwordwhichmeansacertification.ItiscommonlyusedinEnglishtorefertothelegalization
ofadocumentforinternationaluseunderthetermsofthe1961HagueConventionAbolishingtheRequirementof
LegalizationforForeignPublicDocuments.DocumentswhichhavebeencertifiedwithaconformantApostilleare
acceptedforlegaluseinallnationsthathavesignedtheHagueConvention.
AnApostillecanbeobtainedforanydocumentfiledwiththeDelawareSecretaryofState.IfanApostilleisneeded
foranonpublicdocument,suchasanOperatingAgreement,thedocumentmustfirstbenotarizedbyaDelaware
NotaryPublic.DBIhasDelawareNotaryPublicsonstaff.
Legalization of Documents by Foreign Consulates

TheLegalizationofDocumentsofaDelawarecompanyinaforeigncountrythatdoesnotparticipateinthe
HagueConventionisusuallya4stepprocess.DBIwillperformeachstepoftheprocessforyou:
1. WewillorderthedocumentfromtheDelawareSecretaryofStateifithasbeenfiledwiththeDivisionof
Corporations,otherwise,wewillproduceaNotarizedTrueCopyoftheoriginaldocument.
2. WewillsendthedocumenttotheDelawareSecretaryofState,whowillthenattachaGoldSealCertified
CopybytheSecretaryofStateoranAuthenticationstatementbytheSecretaryofStateontheNotarys
seal.
3. DBIwillcontacttheforeignconsulatetolearniftheywillrequirethepriorLegalizationbytheUS
DepartmentofStateSecretaryHillaryClinton.IfthisisrequiredDBIwillarrangeit.
4. Finally,DBIwillforwardthedocumentstotheforeignconsulateofthedesiredcountryinWashingtonDCor
NewYorkforlegalization.
WhentheAuthenticationSealsoftheforeignconsulatehavebeenobtainedDBIwillforwardthesedocuments
toyouandwillalsoreturnanyoriginaldocumentsyousubmittedforLegalization.
Conversions
Conversionistheprocessofchangingacompanyfromonetypetoanotherbyfilingtheappropriate
documentationwiththeissuingauthoritysothatthechangewillbeofficiallyrecognized.Therearethreevarietiesof
Conversion:EntityType,DomesticationandTaxStatus.
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Entity Type Conversion

InDelawareitispossibletoconvertanexistingCorporationintoanLLC,oranexistingLLCintoaCorporation.
ThisisaccomplishedbyfillingaCertificateofConversiontogetherwithaCertificateofFormationifchangingintoan
LLC,orwithaCertificateofIncorporationifconvertingintoaCorporation.Notallstatesoffertheoptiontoconvert
entitytypes;insomeotherstatesitcanonlybeaccomplishedthroughMergerratherthanConversion.Ifyou
choosetoconvertyourcompany,itwillalsobenecessarytoreplacetheStockorInterestcertificates;theByLawsor
OperatingAgreement;andifyouuseone,thecompanyseal.Ifyourcompanyisregisteredinadditionalstates,it
willalsobenecessarytofilethenecessarydocumentationintheadditionalstate(s)fortheConversiontobe
recognized.BeforedecidingtoorderEntityTypeConversionservice,youshouldconsultyourtaxadvisoraboutthe
possibletaxconsequencesoftheconversion.
Domestication
InDelaware,andinmoststates,itispossibletoconvertaForeignEntityintoaDomesticEntity.Thismeans
thatacompanyinitiallyregisteredinonejurisdictioncanhaveitsChartertransferredtoanotherjurisdiction.So,for
example,ifDBIGlobal,Inc.wascreatedbyregisteringaCertificateofIncorporationinDelaware,theDelaware
CorporationcanbetransformedintoaCaliforniaCorporation.ThehomeofthecompanyCharterwouldthenbe
California.Aftertheconversion,DBIGlobalwouldbeaForeignCorporationinDelawareandaDomestic
CorporationinCalifornia.Infact,afterconvertingintoaCaliforniaCorporation,ifDBIGlobalwantedtocontinue
doingbusinessinDelaware,itwouldhavetoQualifyasaForeignCorporation.ThecostofDomesticationvaries
widelybystate;pleasecontactanIncorporationSpecialistformoreinformationandapricequote.Itisalsopossible
toconvertanentityfromanotherstateorcountryintoaDelawareentitybythesameprocess.
Tax Status Conversion

Insomecasesitmaybepossibletoconvertanentity(company)fromonetaxstatustoanother.Themost
popularConversionisaCCorporationtoanSCorporation.Somethingsyoushouldbearinmindwhenconsidering
Conversion:
IfyouareconvertinganexistingCCorporationtoSCorporationstatus,tocompletelyavoidCCorporation
incometaxes,nomorethan25percentofitsgrossincomemaybederivedfrompassivesourcessuchasrent,
dividends,interest,annuities,royalties,salesorexchangeofsecurities.However,ifyouareincorporatingyour
enterprisefromthebeginningasanSCorporation,itmayearnasmuchpassiveincomeasyouwishwithno
limitations.
WhenaCCorporationswitchestoSstatusandlaterdisposesofanassetoftheCCorporationthatbecamean
assetofthenewSCorporation,itmustpaytaxesonthebuiltingainitbenefitedbyatthetimeoftheSelection.If
youhaveaCCorporationthathasappreciableassetsandplantoelectSCorporationstatus,youshouldobtainan
independentprofessionalappraisalofboththebulksale(wholesale)valueandretailvalueofsuchassetsatthetime
ofSelection.
Ifyouareconsideringconvertingyourentitystaxstatus,pleaseconsultaTaxAdvisortofind
outifyouareeligibleandtodiscusstheimpactthiswouldhaveonyourpersonaland
corporatetaxes.Ifyouneedareferral,pleasecontactanIncorporationSpecialist.
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The United States Patriot Act

TheUnitedStatesPatriotActbecamelawinlate2001.ThepurposeoftheActistopreventterrorism.To
achievethatgoaltheActimposesfinancialreporting,complianceandduediligenceobligationsonabroadrangeof
financialinstitutions,businessentitiesandtransactions.TheActappliestofinancialinstitutions;however,theActs
definitionofafinancialinstitutionisverybroad.Whilebanksandfinancialinstitutionsareclearlysubjecttothe
PatriotActothersbusinessesdealingincreditandcreditcards,mutualfunds,securities,currency,commodities,
insurance,realestatesales,gamingestablishmentsandcar,boatandaircraftsalesorganizationsaresubjecttothe
Act.
TheActrequiresfinancialinstitutionstoestablishantimoneylaunderingprogramstodetectandpreventmoney
launderingschemes,todetermineaclientssourceofassets,methodstoverifycustomeridentities,maintain
detailedcustomerrecordsandtodeveloprecordkeepingmeasurestoidentifysuspicioustransactionsormoney
launderingactivities.Oneimmediateconsequenceoftheseregulationsisthatanyentityorpersonopeningabank
accountwithaUSbankmusthaveeitherasocialsecuritynumber,ifeligible,anIndividualTaxpayerIdentification
Numberand/oraFederalEmployerIdentificationNumber.
Undercertaincircumstances,theUSgovernmentmaywithholdregulatoryapprovalofamergeroracquisition
involvingabankholdingcompanyifeitherthebankoracquirersantimoneylaunderingprogramsorrecordsare
deficient.
TheActnowrequiresthatanytransactionofmorethan$10,000.00madetoanypersonengagedintradeor
business,evenifmadebyanonfinancialinstitution,issubjecttoreporting.
UndertheAct,banksandsecuritiesbrokersmaynotmaintaincorrespondentaccountswithshellbanksthat
lackaphysicalpresenceinanycountry.Financialinstitutionsmayexchangeinformationwithotherinstitutionsand
lawenforcement,withoutcivilliability,ifdoneforthepurposeofinvestigatingsuspectedterroristormoney
launderingactivities.Also,theActprovidesasafeharborforthosethatreportsuspectedmoneylaundering.
Financialinstitutionsmayexchangeinformationwithotherinstitutionsandlawenforcement,withoutcivil
liability,ifthatinformationisexchangedforthepurposeofinvestigatingsuspectedterroristormoneylaundering
activities.Tothisendthefinancialinstitutionsmustproducefinancialinformationtothegovernmentwithin120
hoursofarequest.
Finally,theActcarriesstiffcivilandcriminalpenaltiesforviolations.Financialfinesfornoncompliancecanbeas
highas$1,000,000.00.
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Good Standing Protection Service

TheGoodStandingProtectionServiceProgramwasdevelopedattherequestofourclientstomakemaintaining
yourcompanysDelawareCharterinGoodStandingaseasyaspossible.
Corporations
TomaintainyourDelawareCorporateCharteryoumustdothreethingseveryyear:
1. FileanAnnualReporteveryyearbeforeMarch1st.
2. PayFranchiseTaxeveryyearbeforeMarch1st.
3. PayRegisteredAgentServiceRenewalfeeeveryyearontheanniversaryofyourcompanysformation
(IncorporationDate).
LLCs
TomaintainyourDelawareLLCCharteryoumustdotwothingseveryyear:
1. PayLLCTaxeveryyearbeforeJune1st.
2. PayRegisteredAgentServiceRenewalfeeeveryyearontheanniversaryofyourcompanysformation.
IfyouenrollintheGoodStandingProtectionServiceProgramwewillchargeyourannualtaxandRegistered
AgentRenewalfeetoyourcreditcardautomatically.IfyourcompanyisaCorporationwewillalsofileyourAnnual
Reportforyoueveryyearreferencingthecorporatedatawestoreonfileforyou.
Ifyouareinterestedinenrolling,pleasecontactusat3029965819.
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Glossary
AdministrativeDissolution:
SeeVOIDSTATUS
Alien:
Aforeignnational,apersonwhoisnotacitizenoftheUnitedStates.Aliensmay
beResidentorNonResident(intheUS.).
Amendment:
AchangemadetoapreviouslyadopteddocumentsuchasaCertificateof
IncorporationorBYLAWS.SomeAMENDMENTSarerequiredtoberegistered
withtheSecretaryofStatewhileotherscanbeaccomplishedprivatelybythe
CORPORATIONorLLCwithoutregistrationorfilingwiththeSecretarysOffice.
Apostille:
TheLEGALIZATIONofadocumentforuseina foreignjurisdictionwhichisaparty
totheHagueConventionAbolishingtheRequirementofLegalizationofForeign
PublicDocuments.
ArticlesofIncorporation:
SeeCERTIFICATEOFINCORPORATION
ArticlesofOrganization:
SeeCERTIFICATEOFFORMATION
ArtificialPerson:
AlegalENTITYthroughwhichthelawallowsagroupofhumanpersonstoactasif
theywereasinglecompositeindividualforcertainpurposes,forexample,agroup
ofinvestorswhoownstockinaCORPORATION.ThisdoesnotmeantheArtificial
Personisahumanbeing,butrathermeansthatthelawallowstheArtificialPerson
toenjoytheprivilegesahumanpersonwouldenjoyincertaincases,forexample:
therighttobringordefendlawsuits,toownproperty,andtomakecontracts.
Authentication:
Theverificationofthelegitimacyofadocumentandtheauthorityoftheissuer.
AuthorizedShares:
Thenumberofstock sharesauthorizedatthetimetheCHARTERwasregisteredto
potentiallybeissuedbythecompany.
BusinessStatement:
SeeSTATEMENTBYINCORPORATOR
ByLaws
Adocumentspecifyingtherulesadoptedbythefoundersand/ordirectorsofa
corporation,
andoutliningtherightsandresponsibilitiesofSHAREHOLDERS,DIRECTORSand
OFFICERS.
Cancellation:
ThelegalprocessofendingtheexistenceofanLLCaftercloseofbusiness.
Capital:
Themoneyorotherassetsofvalue(usuallySTOCKS,bondsorotherSECURITIES
thatcanbereadilyconvertedtocashataneasilyestablishedmarketvalue)which
SHAREHOLDERSinvestinabusinesstoenableittooperate.Thecapitalofan
establishedcorporationisnormallydefinedasthecontributionsofthe
shareholdersplusaccumulatedprofits.Itisthetotalbookworthoftheenterprise
afterallliabilitiesarededucted.
Capitalization:
Thetotalvalueofallsecuritiesofanenterprise.Capitalizationsometimesincludes
longtermdebt,ifany.Itrepresentswhatwouldhavetobepaidtoinvestorsand
longtermcreditorsifthebusinessanditsassetsweretobeliquidated.
CapitalStock:
Thetotalamountofstock aCORPORATIONisauthorizedtoissuebyitsCertificate
ofIncorporation
73
CapitalSurplus:
Thesumofthepaidinsurplus(ifany),profits(ifany)retainedasearnedsurplus
andthesurplus(ifany)createdbyarevaluationofassets,includinggoodwill
(uponwhichavaluemaybeset).
CCorporation:
ACORPORATIONwiththedefaultTAXSTATUSwhichpaysFederalCorporate
IncomeTaxattheCorporatetaxrates.
CertificateofIncorporation:
AdocumentfiledwiththeauthoritywhichissuesCorporateCHARTERSinagiven
jurisdiction(suchastheSecretaryofStateinDelaware)andwhichoutlinescertain
definingqualitiesoftheCORPORATION,suchasitsname,thenumberofsharesof
StockauthorizedandtheaddressofitsREGISTEREDAGENT.
CertificateofIncumbency:
SeeSTATEMENTBYINCORPORATOR
Charter:
ACharteristhegrantofauthorityorrights,statingthatthegranterformally
recognizestheprerogativeoftherecipienttoexercisetherightsspecified.A
CORPORATIONissuedaCharterbytheSecretaryofStateofDelawarehasbeen
grantedtherighttoexistasanARTIFICIALPERSONandtooperateasabusiness.
CloseCorporation:
ACORPORATIONwhichsetscertainlimitationonthesale,holdingandtransferof
itssharesofStock,whichisheldbeasmallnumberofShareholdersandwhichis
exemptfromcertainadministrativeresponsibilitieswhichotherCorporations
mustobserve.
CMRA
CommonStock:
ACMRA(CommercialMailReceivingAgency)isaprivatebusinessthataccepts
mailfromthePostalServiceforothers(recipients),retainsitforcollection(in
mostcasesaprivatemailbox"PMB")orremailsittoanotherlocationwith
paymentofnewpostage.MailservicesofferedbyCMRAsareexternaltoservices
offeredbythePostalServicethereforeCMRAcustomersbeartheexpenses
associatedwiththeservicesprovided.DBIisaregisteredCMRA.
CorporatestockwhichnormallyentitlestheshareholdertoDividendsifthe
CORPORATIONisprofitableanddoesnotneedtoretainallofitsearningsforits
ownpurposes.Commonstockmaybeassumedtocarryvotingrightsunlessitis
classedasNonvotingCommonStock
ConvertiblePreferredStock:
CarriestheprivilegesandentitlementsofPreferredStockandgivestheholders
theright,attheiroption,toconvertthesesharesintoCommonStock,accordingto
aspecifiedformula.
CorporateSeal:
TheCorporateSealisanimageapprovedbytheDirectorsorMembersofa
companytorepresenttheauthorityofasignatoryasacompanyrepresentative,
orthecompanysendorsementofadevicesuchasacontract.TheSealmaybein
theformaninkstamporembossingstamporasagoldmedallionaffixedby
adhesive.TheSealisfrequentlyaffixedtoaSTOCKCERTIFICATEatthetimeof
issuancetoaSHAREHOLDER,differentiatinganIssuedStockCertificatefroman
unissuedCertificate.
CorporateSecurity:
Ashareofstock,bond,note,debenture,orotherfinancialinstrument,issuedbya
CORPORATIONandregisteredastoitsownershiponthebooksofaCorporation.
Corporation:
AnEntityregisteredwithastateauthorityandissuedaCharterbywhichitobtains
therightsandprivilegesofanArtificialPerson,withLimitedLiabilityforthe
owners,whoareknownasShareholders.
Director:
ApersonelectedbyorappointedbyabodyofSHAREHOLDERStooverseethe
activitiesoftheCORPORATION,toactonbehalfofthefullassemblyofvoting
shareholders.TheDirectorusuallysitsonaBoardofDirectorswhose
responsibilitiesareoutlinedintheByLawsoftheCorporation.
74
Dissolution:
TheprocessoflegallyendingtheexistenceofaCorporation afterthecloseof
business.Itisnotlegalforshareholderstotakethefinaldistributionaftercloseof
businessuntiltheCertificateofDissolutionisfiled.
DisregardedEntity:
AnEntitywhichhastherighttoberegardedasanArtificialPersonforlegal
purposesbutwhoistreatedasaNaturalPersonorPartnershipofNaturalPersons
fortaxpurposes.AnLLCisaDisregardedEntitybydefaultandwillbetaxedonan
ownerspersonalincometaxreturnifthereisoneMemberortaxedasa
partnershipiftherearemultipleMembers.ThetaxesofaDisregardedEntityare
saidtoPassThroughtotheownerspersonalincome.
Domestic:
AcompanyisconsidereddomesticinthestateinwhichitisDOMICILED,which
istosay,thestateinwhichitwasCHARTERED(Incorporated,Organized),
regardlessofwherethecompanyisphysicallylocatedorheadquartered.
Domicile:
ThestateorJurisdictioninwhichacompanyreceiveditscompanyCHARTER,the
stateinwhichitwasINCORPORATEDorORGANIZED.TheDomicileisthelegal
homeofyourcompanyregardlessofwhereyourbusinessisphysicallylocatedor
headquartered.
Dividend:
AdistributionofprofitsmadetoaSTOCKSHAREHOLDERorMEMBER.
DoubleTaxation:
WhenincomeissubjectedfirsttoCORPORATIONIncomeTaxandthentaxeda
secondtimewhenpaidtotheSHAREHOLDERSasDIVIDENDSandtaxedas
PersonalIncome.
EarnedSurplus:
Theprofitsacorporationhasretainedsinceitsincorporation.Itissynonymous
withretainedearnings,retainedincomeandaccumulatedsurplus.Earned
surplusmayalsoincludeportionsofthesurplus(es)ofothercorporationsthat
mayhavebeenacquiredbyormergedorconsolidatedintothecorporation.
EIN:
EmployerIdentificationNumber.AnumberissuedtoCORPORATIONSandLLCs
fortaxreportingpurposes;aprerequisiteforopeningabankaccountintheUSin
thenameofanLLCorCORPORATION.
Entity:
Somethingwhichhasadistinguishableexistence.
EntityType:
Theclassofcompanyasofficiallyregisteredwithastateauthority.
CORPORATIONSandLLCsareexamplesofEntityTypes,asareLimited
PartnershipsandTrusts.
Equity:
Thenetinvestmentwhichshareholdershaveintheircorporation.Itisanother
termforNetWorthwhichiswhatremainsfortheownersafterallliabilitiesare
deductedfromassets.
ExclusiveUse:
OnlyoneENTITYhastherighttousethenameregistered.
ExpeditedService:
Fasterthanregularprocessing,usuallywithinaguaranteedtimeframe.
FiscalYear:
Aperiodusedforcalculatingannualfinancialstatements.AFiscalYearisoften,
butnotalways,thesameasacalendaryear.
Foreign:
AcompanyCHARTERED(Incorporated/Organized)inDelawareisaForeign
CorporationorForeignLLCinanystateorJURISDICTIONotherthanDelaware,
regardlessofwherethebusinessorheadquartersarephysicallylocated.
ForfeitStatus:
InDelaware,therevocationofacompanyCHARTERduetofailuretomaintaina
DelawareREGISTEREDAGENT.
Formation:
Usually,thecreationofanLLCbyREGISTRATIONintheDOMICILEstateandthe
filingoftheCERTIFICATEOFFORMATION.Sometimesalsousedtomean
INCORPORATION.
75
GeneralCorporation:
SeeCORPORATION
GoodStanding:
AstatusinDelawareandmanyotherstatesinwhichtheCORPORATIONorLLChas
avalidCHARTERbyvirtueofmeetingallofthestaterequirementssuchas
REGISTRATION,payingannualtaxesandfilinganAnnualReport,andmaintaininga
REGISTEREDAGENTandREGISTEREDOFFICEinthestate.ACertificateofGood
StandingisastatementbytheSecretaryofStatethattheEntityisinGood
Standing.
Incorporation:
TheprocessofcreatingaCORPORATIONbyREGISTRATIONintheDOMICILEstate
andfilingtheCERTIFICATEOFINCORPORATION.
Incorporator:
ApersonorcompanyappointedbythefounderofanewCORPORATIONasan
agentforthepurposeofregisteringthenewcompanywiththeSecretaryofState
andfilingtheCERTIFICATEOFINCORPORATIONorCERTIFICATEOFFORMATION.
DBIisanINCORPORATOR;ourdutiesendwhenthenewCORPORATIONis
registeredandtheINITIALDIRECTORisappointedasoursuccessor.
InitialDirector:
ThepersonappointedbytheINCORPORATORofaCORPORATIONtoholdthe
responsibilityoforganizingthecompanyafterishasbeenregistered.Such
responsibilitiesmayincludeissuingSTOCKSHARECERTIFICATES,holdingtheInitial
MeetingtoelectorappointtheBOARDOFDIRECTORSorOFFICERS,and
assemblingtheBYLAWSforratificationbytheBoard.
InitialMember:
ThepersonappointedbytheORGANIZER ofanLLCtoholdtheresponsibilityof
organizingthecompanyafterithasbeenregistered.Suchresponsibilitiesmay
includeissuingMEMBERSHIPINTERESTCERTIFICATES,draftingorretaininga
professionaltodraftanOPERATINGAGREEMENT,openingbankaccountsorother
responsibilities.
Interstate:
Involvingpartiesintwoormorestates.
Intrastate:
Involvingpartieswithinthesamestate.
InvoluntaryWithdrawal:
IRS:
SeeFORFEITSTATUS
The IRS is theinternal revenue service of the UnitedStates federal government.

The agency is a bureau of the Department of the Treasury, and is under the
immediate direction of the Commissioner of Internal Revenue. The IRS is
responsible for collecting taxes and the interpretation and enforcement of the
InternalRevenueCode.
IssuedShares:
ITIN:
Thestockshareswhichhaveactuallybeensold,transferredorassignedtoa
SHAREHOLDER(owner).
IndividualTaxpayerIdentificationNumber.Anumberissuedtononcitizennon
residentsfortaxreportingpurposes;aprerequisiteforobtaininganEINfor
companiesownedbynonresidentALIENS.
Jurisdiction:
Thegeographicalareatowhichanauthorityapplies.Exampleswouldinclude
Cities,CountiesandStates.
LLC:
LimitedLiabilityCompany.AnENTITYTYPE whichfeaturesLIMITEDLIABILITY
similartoaCORPORATIONbutwhichisgenerallyregardedashavinggreater
flexibilityandeaseofadministration.
Legalization:
Theprocessofhavingadocumentinspectedandcertifiedaslegitimateforuseina
foreignJURISDICTIONbyarepresentativeofthatjurisdiction,suchasaForeign
Consulate.
LimitedLiability:
AfeaturesharedbyLIMITEDLIABILITYCOMPANIESandCORPORATIONSbywhich
apersonsaccountabilityforlossduetothedebts,obligationsorliabilitiesofa
76
companyislimitedtotheamountthepersonpaidfortheStockSharesor
MembershipInterest(orotherwiseinvestedinthecompany);providedthatthe
persondidnotpersonallyguaranteethedebtsoftheEntityorcommitfraudor
otherillegaldealings.
Manager:
Specifically,whenusedinthediscussionofanLLC,aManager isanemployeeor
agent,appointedbytheMEMBERSoftheLLC,toruntheoperationsofthe
companyontheirbehalf.ThepositionissimilartothatoftheDIRECTORofa
CORPORATIONortheGeneralPartnerofaPartnership.Unlessthetitleisgivenas
ManagingMember,aManagercanbeassumedtohavenoownershipstakein
theLLC.WhenanLLCdistinguishesbetweenMEMBERSandMANAGING
MEMBERS,theMembersrolemaybecomparedtothatofaSilentPartner
whiletheManagingMembersmaybecomparedtothatoftheGeneralPartner;
suchadistinctionisatthediscretionoftheLLCandisnotrequiredtobemadein
Delaware.
Member:
ApersonwhoownsallorpartofanLLC.TheMember issimilartothe
SHAREHOLDERofaCORPORATIONorthePartnerinaPartnership.
MembershipInterest:
AMEMBERSpercentofownershipofanLLC.AMembershipInterestCertificateis
similartoaStockCertificateinthatitrecordstheinvestorsshareofownership.
Minutes:
ArecordoftheproceedingsofaMeetingoftheDIRECTORS,OFFICERS,
SHAREHOLDERS,MEMBERSorMANAGERSofacompany.CORPORATIONSshould
maintainMINUTESoftheirmeetings;LLCsarenotrequiredtodoso;butmayif
theysochoose.
NamingConventions:
Therulesorstandardswhichmustbefollowedinselectingacompanynametobe
REGISTEREDwiththeSecretaryofStateorotherauthority.
NetAssets:
Theamountbywhichthetotalassetsofacorporation,includingmoney,
securities,property,equipment,etc.,exceeditstotaldebts.
NGO:
SeeNOTFORPROFIT
NonProfit:
SeeNOTFORPROFIT
NonStock:
SeeNOTFORPROFIT
NoParValue:
STOCKwithnomoneyvaluestatedinthecompany CHARTER.NOPARVALUE
stockmaybesoldforwhatevertheinvestoriswillingtopay.
NotforProfitCorporation:
ACORPORATIONorganizedsolelyforCharitable,EducationalorReligiousreasons.
Officer:
PersonselectedbytheSHAREHOLDERSorDIRECTORSofaCORPORATIONtodirect
dailyoperationsandorbusinessplanning.Examplesinclude:CEO,President,
Secretary,andTreasurer.
OperatingAgreement:
Thedocumentoutliningthebusinessstructure, mannerofoperationsand
distributionrightsofanLLC.TheOperatingAgreementissimilartotheBYLAWS
ofaCORPORATIONorthePartnershipAgreementofaPartnership.
OperatingSurplus:
Theamountremainingattheendofa corporationsreportingperiod(fiscalyear),
followingthedeductionofexpenses,taxesanddividends.Attheendofthefiscal
year,operatingsurplusisaddedtoearnedsurplusonthecorporationsbooks.
Organizer:
ApersonorcompanyappointedbythefounderofanewLLCasanagentforthe
purposeofRegisteringthenewcompanywiththeSecretaryofStateandfilingthe
CERTIFICATEOFFORMATION.DBIisanOrganizerandourdutieswillendwhen
theINITIALMEMBERisappointedasoursuccessor.
77
ParValue:
ThestatedmoneyvalueonthefaceofaSTOCKshare.IfaParValueisstatedwhen
theCHARTERisregistered,thecompanymustreceiveCONSIDERATIONworthat
leastParValueforeachsharesold.
PassThrough:
AqualityofcertainTaxStatuseswherebytheprofitsandlossofthecompanywill
passthroughtotheownerofthecompany(SHAREHOLDERorMEMBER)andbe
claimedontheownerspersonalincometaxreturn.
PaidinSurplus:
Thedifferencebetweenpaidupcapitalandthestatedvalueofthecorporate
stock.Itisthesurplusthatiscreatedwhenshareholdershavepaidmorefortheir
stockthanthestatedvalue(parvalueornoparvalue)pershare.
PaidupCapital:
ThetotalamountpaidbySHAREHOLDERSfortheirsharesofCAPITALSTOCK.On
thebalancesheetoftheCORPORATION,PaidUpCapitalisequaltothestated
value(PARVALUEorNOPARVALUE)ofitsCOMMONSTOCKpluswhat
Shareholdersmayhavepaid,orcontributedinvalue,inexcessofstatedvalue.
PerpetualDuration:
AnLLCorCorporation whichwillcontinuetoexistasalegalEntityindefinitelyor
untilaCertificateofCANCELLATIONorDISSOLUTIONisfiled.Theoppositewould
beacompanywithafiniteduration,whichwouldautomaticallybelegally
dissolvedonanstatedexpirationdate.
PreferredStock:
EntitlesitsSHAREHOLDERStopriorityoverothertheshareholdersofotherclasses
ofSTOCKintheDISTRIBUTIONofprofits.Frequently,preferredstockentitlesits
holderstoDIVIDENDSofaspecifiedamounteachyearwhichmustbepaidbefore
COMMONSTOCKdividends,ifany,arepaid.Preferredstockholderstypically
surrendervotingrightsinreturnforpriorityindividendpayout.However,they
mayobtainvotingrightsbydeferringtheirdividends.Thesedividends,inturn,will
accrue,addingtotheoveralloutstandingdebtofthecompany.
Qualification:
Theprocessofapplyingforpermissiontodobusinessinastatethatisnotthe
homeofyourcompanyCHARTER.WhenacompanysuccessfullyQualifiesin
anotherstatetheyaretypicallyissuedaCertificateofAuthoritytoTransact
Businessinthatadditionalstate.
RegisteredAgent:
TheagentappointedtoreceiveSERVICEOFPROCESSandtaxnoticesonbehalfof
aregisteredENTITY.Requiredbylawinmoststates.
RegisteredOffice:
TheaddressoftheREGISTEREDAGENT.TheRegisteredOfficeisnottheaddressof
thecompany.
Registration:
TheprocessofenteringacompanyintotherecordinaspecificJURISDICTIONand
filinganydocumentationnecessarytosatisfytherequirementsofthatjurisdiction.
SeealsoINCORPORATION,FORMATION,ORGANIZATION.
SCorporation:
AnEntity(STOCKCORPORATIONorLLC)whichhassuccessfullyelectedtobetaxed
underSubChapterSoftheIRScode.
ServiceofProcess:
Thedeliveryoflegalnoticeofanactionofthecourt.ServiceofProcesscanbe
deliveredbyregisteredmailorhanddeliveredbyaProcessServer.
Shareholder:
TheownerofaportionofaSTOCKCORPORATIONiscalledaSHAREHOLDER
becausetheyhavebeenissuedStockSharesinevidenceoftheirownershipstake.
InthecaseofaCORPORATIONownedbyoneperson,thatownermightbeknown
asaSoleShareholder.
StatedCapital:
ThesumoftheparvalueofallissuedsharesoftheCORPORATIONassignedPAR
VALUEplusotheramountsthathavebeenpaidintothestatedcapitalofthe
corporation.
78
StatementbyIncorporator:
AnotarizedstatementbytheINCORPORATORattestingto theorganizationofa
company,includingthenamesofOFFICERS,MEMBERS,MANAGERS,and
sometimesSHAREHOLDERS.
Stock:
StockCertificate:
ASECURITYwhichrepresentstheCAPITALinvestedintoaCORPORATIONbythe
founders/owners/investors.AStockShareisaunitofStockissuedtoaninvestor
usuallyexpressedbyaSTOCKCERTIFICATE.
AcertificaterecordingashareofownershipinaCORPORATIONbyspecifyingthe
nameoftheowner,thenameoftheCorporation,thenumberofSHARES
AUTHORIZEDandthenumberofSHARESISSUED.
Suffix:
ThepartofacompanyslegallyregisterednamewhichidentifieswhichENTITY
TYPEitis.ForexampleInc.isaSuffixwhichidentifiestheEntityTypeasa
CORPORATION.
Surplus:
TheamountbywhichthenetassetsofaCORPORATIONexceeditsstatedcapital.
TaxStatus:
TaxStatusdefineswhatFederalTaxreturnapersonorEntitywillfile.Examplesof
TaxStatusincludeDisregardedEntity,CCORPORATIONorSCORPORATION.
Title:
SynonymouswithName
TotalSurplus:
Thesumofallsurpluses,includingearnedandcapitalsurplusandanyadditionsto
surplusfromrevaluationsofassetswhichmayhaveappreciatedordepreciatedin
valueduringthefiscalyear.
TreasuryShares:
Anysharesofstock whichwerepreviouslyissuedtoaSHAREHOLDERand
subsequentlyboughtbackfromtheshareholderbytheCORPORATIONitself,and
whichwerenotcancellednorretiredfollowingreacquisition.TreasurySharesare
includedwhencountingthetotalnumberofsharesissuedbutarenotconsidered
outstanding.
USPS:
VirtualOffice:
USPS(UnitedStatesPostalService)isanindependentfederalagencythatprovides
mailprocessinganddeliveryserviceforindividualsandbusinessesintheUnited
States.
Asuiteofserviceswhichprovideremoteaccesstotheamenitiesofaprofessional
office,includinganofficeaddressatwhichareceptionistormailroompersoncan
receiveandsignforregularandcertifiedmail,courierdeliveryandsmallparcels,
withmailforwarding,atelephonenumber,phoneforwarding,faxnumberandfax
forwarding.
VOIDStatus:
InDelaware,therevocationofacompanyCHARTERduetofailuretopaytaxesor
fileandAnnualReport.
WithoutParValue:
SeeNOPARVALUE
ZeroPar:
SeeNOPARVALUE
79
80
Index
Amendment....................................................................................................................................................................19,33,43,72
Anonymity.....................................................................................................................................................................................6,11
Anonymous...................................................................................................................................................................................6,33
Apostilles.....................................................................................................................................................................................14,67
Authentication......................................................................................................................................................................67,68,72
BankAccount..............................................................................................................................................................................10,62
ByLaws..........................................................................................................11,19,27,33,37,43,44,45,46,51,53,67,69,72,73
Cancellation................................................................................................................................................................................21,72
CCorporation...........................................................................................................................................8,30,37,38,47,48,49,69
CertificateofFormation...................................................................................................................6,7,10,16,17,19,23,33,67,69
CertificateofGoodStanding.....................................................................................................................................10,14,60,67,75
CertifiedCopy...........................................................................................................................................................13,16,60,67,68
Charter.........................................................................................................6,7,11,12,20,27,30,31,39,40,47,51,59,69,71,73
CloseCorporation.......................................................................................................................................................................37,45
Conversion............................................................................................................................................................................34,68,69
CorporateKit.........................................................................................................................................................................13,17,44
Corporation...5,6,7,8,9,10,11,12,13,14,15,16,18,19,20,21,23,26,27,28,30,32,33,37,39,40,41,42,43,44,45,46,47,
48,49,50,51,52,53,54,56,57,59,60,67,69,71,73,74,75,76,77,78
DBA...................................................................................................................................................................................................56
Director..........................................................................................................................6,7,14,17,18,28,37,39,43,45,46,73,75
DisregardedEntity..........................................................................................................................................................30,32,74,78
Doubletaxation....................................................................................................................................................................30,32,49
EIN.......................................................................................................................................................................10,13,14,63,74,75
EmployerIdentificationNumber....................................................................................................................................10,63,70,74
EntityType......................................................................................................................................................8,14,32,68,69,74,78
Expedited....................................................................................................................................................................................16,67
Foreign................................................................................................................................................7,40,56,65,68,69,72,74,75
FORFEIT.......................................................................................................................................................................................20,75
GoodStanding..........................................................................................................................................7,16,20,39,57,67,71,75
InitialDirector...................................................................................................................................................................................37
InitialMember........................................................................................................................................................6,7,14,17,33,75
International....................................................................................................5,6,8,9,10,11,12,13,15,16,17,18,22,23,45,48
Interstate................................................................................................................................................................................7,59,75
Intrastate....................................................................................................................................................................................59,75
ITIN..............................................................................................................................................................................................65,66
Jurisdiction..............................................................................................................................................26,49,56,69,72,73,75,77
LegalizationofDocuments................................................................................................................................................................68
Manager................................................................................................................................................................................30,33,76
Member..................................................................................................................................................14,30,32,33,34,51,74,76
Minutes.......................................................................................................................................................................................18,76
Name...............................................................................................................................................................................10,19,55,78
NotforProfitCorporations............................................................................................................................................37,43,45,46
Officer.............................................................................................................................................................................33,37,43,60
Offshore...........................................................................................................................6,8,9,10,11,12,13,15,16,17,18,22,23
OperatingAgreement..............................................................................11,13,16,17,19,27,30,31,33,45,51,53,67,68,69,76
OperatingAgreementKit......................................................................................................................................................13,17,33
ParValue...................................................................................................................................................................20,21,40,76,78
PatriotAct.........................................................................................................................................................................................70
Qualification................................................................................................................................................................7,13,59,60,77
RegisteredAgent........................................................................................6,11,12,14,18,19,20,28,33,43,45,46,57,61,71,77
81
Registering................................................................................................................................................................15,51,52,53,76
SCorporation................................................................................................................................................32,37,45,47,48,49,69
Serviceofprocess.............................................................................................................................................................................28
Shareholder.................................................................................................................................27,37,40,44,47,48,49,50,73,78
Stock.............................................................................9,14,19,27,28,37,39,40,43,45,46,48,49,51,53,72,73,75,76,77,78
Taxstatus...................................................................................................................................................9,11,32,44,45,47,49,69
USPS...78
VirtualOffice...................................................................................................................................................................11,14,28,78
VOID................................................................................................................................................................................20,30,72,78
82
APPENDIX
83
Corporate Kits & Operating Agreement Kits

Important information about proper documentation:
TheByLawsorOperatingAgreementarethedocumentswhichdefinetherulesforprofitdistributions,
resignationofmembersordirectors,shareholderrightsandotherimportantmatterswhichcouldbeessentialin
resolvingdisputesbetweenprincipalsordefendingtaxstatusinanIRSinquiry.AllkitsincludemodelByLawsor
OperatingAgreement.
The State of Delaware never registers the names of the owners of a corporation or LLC! This allows for
unparalleledprivacybutitdoesmeanthatthebusinessownersmustkeepproperrecordsofstockormembership
shareassignmentandtransfer. Our CorporatekitsandOperatingAgreementkitsincludesharecertificatesand
transferledgerstoensurethatyourownershipofthecompanyisproperlydocumented.
Records Binder -A high quality binder customized with the name of your
company in gold lettering with matching slipcase, locking D rings and
pockets. The records binder provides ample room for your company records.
Company Seal Metal Embossing Stamp -This stamp will create a
raised seal in the medallion section of your Stock Certificates or Membership
Interest Certificates and can be used on any corporate document as evidence
of authority.
20 Stock Certificates or Member Interest Certificates Customized with the name of your company, plus an easy template for
printing the name of the shareholder and the number of shares on the face
of the certificate using any computer with any printer.
Model Operating Agreement or By-Laws - Your choice of an MS
Word .doc or WordPerfect template or a fill-in-the-blanks document. This is
one of the most important documents in your kit!
The kit also includes Section Divider Tabs, Model Minutes forms, Register
of Shares Transferred, and List of Officers & Directors or Members List.
To see other kits offered by DBI visit the Corporate Kits section of our website.
84

Delaware Incorporation Handbook (14th Edition, 2013)

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Table of Contents

Understanding New Company Formation, Made

Basic Mail Forwarding

Basic Package Forwarding

Delaware Office Space (Time-Shared) with Signed Lease Agreement

Information for International and

How to determine if you have US Source Income

Limited Liability Companies (LLCs)

How are LLCs Managed?

How are LLCs Taxed by the IRS?

How are LLCs Taxed by the Secretary of State of Delaware?

Advantages of Delaware LLCs

What are the advantages of operating as an LLC for non-resident noncitizens?

The LLC as an alternative to a Partnership

The LLC as an alternative to an S-Corporation

The following information will be included on the Certificate of Formation:

What is the Operating Agreement?

How are Series LLCs Managed?

The following information will be included on the Certificate of Formation

How is a Corporation Taxed?

What is the benefit of forming a Delaware Corporation for non-resident

How is a Corporation Taxed by the Secretary of State of Delaware?

Assumed Par Value Capital Method

Regulated Investment Companies Franchise Tax

Estimated Franchise Tax

Foreign Corporations Franchise Tax

Other Delaware State Taxes

The following information will be included on the Certificate of Incorporation of a

What are the By-Laws?

How are Close Corporations Managed?

How are Not-for-Profit Corporations Managed?

How are Not-for-Profit Corporations Taxed in Delaware?

How is an S-Corporation taxed by the IRS?

How is an S-Corporation taxed by the Secretary of State of Delaware?

Who may elect S Status?

The S-Corporation as an alternative to the C-Corporation

What are the limitations of S-Corporation status?

How are holding companies taxed in Delaware?

Marine Holding Companies

Where the vessel should be registered?

Aircraft Holding Companies

Naming Your Company

John Smith owns a street sweeper manufacturing plant in Florida. He is interested

DBAs Doing Business As Names

If Delaware Business Incorporators, Inc. wanted to do business in Wilmington

How do I know if I need to Qualify in a state I do business in?

What is the procedure to Qualify in an additional state?

What happens after my company is Qualified in an additional state?

Opening a Bank Account

Summary of Requirements to Open a Bank Account in the US

Summary of Requirements to Open a Bank Account Outside the US

Contacting Your Bank

Employer Identification Number (EIN)

ITIN Individual Tax Identification Number

Certificates, Apostilles, Legalization and

Certificate of Good Standing

Notarized True Copy

Legalization of Documents by Foreign Consulates

Entity Type Conversion

Tax Status Conversion

The United States Patriot Act

Good Standing Protection Service

The IRS is theinternal revenue service of the UnitedStates federal government.

Corporate Kits & Operating Agreement Kits