Are you the proprietor of a company desiring to be a Delaware corporation? If that’s the case, make sure you don’t commit any of the standard errors listed in this article. By ensuring that you do not save these errors, you will be able to guarantee that the registration of your corporation is done correctly and that you are taking the appropriate measures to safeguard your company. A significant number of individuals who decide to form a Delaware C-Corporation have no previous expertise with any facet of company law.
When completing the paperwork, it is not unusual for them to commit severe work errors. Taking advantage of the limited liability protection offered by C-Corporation status might lead to complications for the company owner after the corporation has already been constituted and the entity has been established. The following is a list of the six most frequent errors that individuals make while creating a Delaware Corporation:
Failing to Choose either “C” Corp or “S” Corp Status
To begin forming a company in Delaware, you must first choose whether you want it to be a C-Corp or an S-Corp. An organization’s shareholders and owners should not be confused with the company, a distinct legal entity. There are various reasons to incorporate your firm, but for our purposes, the primary distinction between C-Corp and S-Corp taxation is essential. S-Corps pay fewer taxes than C-Corps because they are not subject to “double taxation.”
When a company pays taxes on its profits at both the corporate and shareholder levels, it is known as “double taxation.” On the other hand, S-Corps do not have to pay corporate taxes; instead, they distribute their profits to their shareholders, who then pay tax on that income at their own personal rates. Depending on your preferences, a C-Company may be handled as either a conventional corporation or a Subchapter “S” corporation.
Failing to Include an EIN in the Entity Name for Your Delaware Corporation
If you want your company’s name to last for decades, it has to be something you’re proud of and something that won’t be mistaken for another business. If you’re worried about a name clash in Delaware, you may use this resource to find out whether there are any. When setting up a business, many individuals fail to realize the significance of the EIN (Employer Identification Number). The IRS assigns each company with workers a unique number known as an Employer Identification Number (EIN).
If you have workers, even if it’s just you, you still need an EIN so that you can issue them W-2s at the end of the year. If your organization’s name doesn’t already contain an EIN, you’ll need to get in touch with the IRS to have one issued before you can go forward with tax and other legal filings.
Failing to file an Appointment of Registered Agent with the Delaware Division of Corporations
This is the most frequent error committed when creating a Delaware Corporation. Remember that only a Registered Agent you choose may receive legal papers on your behalf. Examples of such documents include legal notifications and summonses. You must have at least one Registered Agent who resides in Delaware; nevertheless, it is essential to remember that the appointment will only be in force until you decide to cancel it.
After your contract with the state has been canceled, you must hire a new agent before proceeding with any additional business with the state. Contact an attorney if you are unclear on how to file this form or appoint a new agent. An attorney can assist you through the processes and verify that everything is done thoroughly and properly. If you are confused about how to file this document or appoint a new agent, consult an attorney.
Failing to Declare That This Entity is a Corporation in its Certificate of Incorporation
You omitted from your certificate of incorporation the required phrase stating that your business is a corporation. Be it known that the undersigned incorporators are incorporated under and according to the requirements of chapter X of Title Y,” or similar should be included in the certificate of incorporation if a company is being formed. Avoiding a legal examination of company documents before submitting them to the Division of Corporations.
If the Division sees that an attorney has not examined your documents, they will likely return them unprocessed. Submitting late or nonexistent charge payments. The Division has the right to refuse to accept or process your record and dissolve your company if fees are not paid on time. In addition, you may be liable for late fees and penalties if you submit your fee payments late or don’t pay them. Submitting papers of incorporation without first obtaining a registered agent address from the Secretary of State.
Failing To Consider Whether This Entity Will Be Subject To Other State’s Jurisdiction
In the initial stage of establishing a Delaware company, you are likely to feel overwhelmed by the quantity of paperwork you are required to fill out and the number of questions asked. If this is the case, you should prepare yourself for this feeling. You may feel the want to go through it on autopilot, checking every box with a “Yes” response and saving the blanks for later consideration. The disadvantage of using this technique is that the Secretary of State of Delaware can tell you later on that you made an error in judgment and need to start again.
Remember to call the Delaware Corporation Center at 800-580-4870 before you do anything else. They’ll talk you through the process, and with the help of their team of experts, you’ll be on your way to protecting your business with a legal corporation in no time! Ask about their current costs and special offers for new corporations.
