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There is no minimum capital
requirement � Because no minimum capital is required, a Delaware corporation
can be organized very inexpensively. Many states require a corporation to have
at least $1,000 in capital.
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Delaware has no sales tax, no
personal property tax, and no intangible property tax. Additionally, Delaware
state income tax is not levied on corporations not doing business in
Delaware.
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One person can be the only Officer,
Director, and Shareholder. There is no need to bring additional people into a
Delaware corporation to fill offices or director positions. Note that many
other states require at least three people to fill the officer and director
positions. These officers and directors may be indemnified to that their
liability is limited.
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Delaware has a separate Court of
Chancery, a business court system specializing in corporate law. What this
means for Delaware corporations is a well-developed body of state corporation
law, which helps deliver predictable and consistent legal decisions.
Additionally, Delaware has corporation friendly anti-takeover statutes which
limit the ability of other corporations to institute hostile takeovers.
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Shares of stock in a Delaware
corporation owned by non-residents are not subject to any Delaware taxes.
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Low incorporation costs. A Delaware
corporation can be organized without ever even visiting the state.
Furthermore, corporate meetings such as shareholder and director meetings can
be held anywhere with no need for contact with the state.
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Voting provisions for company
decisions can be tailored to require greater-than-majority approval.
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Delaware is a very "corporation
friendly" state. One of the greatest sources of state income for Delaware is
incorporation fees. As a result of the large number of businesses which choose
to incorporate in its territory, Delaware has developed an excellent filing
system and a very "customer friendly" Corporation Department. Corporations
can pay dividends out of both profits and surplus. Directors may be given the
authority to make and alter bylaws.
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The annual Franchise Tax on
corporations in Delaware is among the lowest of all the states.
Acquisition: Obtaining control of another
corporation by purchasing all or a majority of its outstanding shares in
open market or through its existing shareholders.
Administrative dissolution: An involuntary
dissolution of a corporation by an act of the Secretary of State or
similar state authority, caused by the corporation's failure to comply
with certain statutory requirements; especially the failure to file an
annual report, to pay franchise taxes, file corporate tax returns or
maintain a valid Registered Agent.
Advisory
board of directors: An advisory board of
directors are individuals appointed to advise an elected board of
directors. This board is not bound by the duties imposed upon elected
board members, and the corporation is not required to follow their
recommendations.
Agent:
Anyone who is authorized to act on the behalf of another. A corporation
acts only through its agents; therefore, it is important to define what
actions an agent is authorized to perform.
Agent
for service of process: An agent, required
to be appointed by a corporation, whose authority is limited to receiving
process issued against the corporation. Also known as a Registered Agent
or a Resident Agent.
Amendment: An addition to, deletion from, or
a change of existing provisions of the articles of incorporation of a
domestic corporation.
Annual
meeting: A annually meeting of shareholders
at which directors are elected and other general business of the
corporation is conducted.
Annual
report: A required annual filing in a state,
usually listing directors, officers and financial information. Also, an
annual statement of business and affairs furnished by a corporation to its
shareholders and pay the required filing fees.
Apostille: Is a method of certifying a
document for use in another country pursuant to the 1961 Hague Convention.
With this certification by apostille, a document is entitled to
recognition in the country of intended use, and no certification or
legalization by the embassy or consulate of the foreign country where the
document is to be used is required.
Articles
of incorporation: A document use to file in
many states to create a corporation. Also known as the certificate of
incorporation or corporate charter.
Articles
of organization: A document use to file in
many states to register a limited liability company (LLC) with the state.
Also known as articles of formation.
Assumed
name: A name other than the true name, under
which a corporation or other business organization conducts business. Also
referred to as a fictitious name, a trade name or "doing business as"
(d/b/a).
Authorized shares: The maximum number of
shares that a corporation may issue pursuant to its articles of
incorporation.
Board
of directors: A group of people use to
govern a corporation who is elected by shareholders. The directors are
responsible for selecting the officers and the supervision and general
control of the corporation.
Business corporation act: A business
corporation act is the collection of laws in each state that governs
corporations.
Bylaws: The regulations of a corporation
that, subject to statutory law and the articles of incorporation, provide
the basic rules for the conduct of the corporation's business and affairs.
Certificate of good standing: A certificate
issued by a state official as conclusive evidence that a corporation is in
existence or authorized to transact business in the state. The certificate
generally sets forth the corporation's name; that it is duly incorporated
or authorized to transact business; that all fees, taxes and penalties
owed the state have been paid; that its most recent annual report has been
filed; and, that articles of dissolution have not been filed. Also known
as a certificate of existence or certificate of authorization.
Certificate of incorporation: The title of
the document filed in many states to create a corporation. Also known as
the articles of incorporation or corporate charter.
Close
corporation: A corporation that elects in
its articles of incorporation to be registered under the close corporation
statutes of their state of incorporation. Some state close corporation
statutes provide for a maximum number of shareholders. In addition, close
corporation statutes may eliminate or limit the powers of the board of
directors, prescribe preemptive rights to the shareholders or relax the
corporate formalities. Exact specifications vary by jurisdiction. Not all
state statutes provide for a close corporation provision.
Common shares: A class of shares that has no
special features and possesses no greater rights than any other shares.
Consolidation: The statutory combination of
two or more corporations to create a new corporation.
Constituent: A party to a transaction; a
corporation involved in a merger, consolidation or share exchange.
Corporate indicator: A word or an
abbreviation of a word that must be included in a corporation's name to
indicate that the named entity is a corporation. Valid corporate
indicators include: incorporated, corporation, limited, company, inc.,
corp., ltd. and co. The list of acceptable corporate indicators will vary
depending upon the jurisdiction in which the corporation is registered.
Corporate kit: A binder usually containing
essential items for the routine maintenance and administration of a
corporation or limited liability company. Corporate kits provided by
Active Filings, LLC. include, for instance, stock certificates, a
corporate seal and stock ledger.
Corporate seal: A corporate seal is a device
made to either emboss or imprint certain company information onto
documents. This information usually includes the company's name and date
and state of formation. Corporate seals are often required when opening
corporate or LLC bank accounts, distributing stock or membership
certificates or conducting other corporate business. Active Filings, LLC
includes custom-made corporate seals as part of its corporate Kit.
Corporation An artificial entity created
under and governed by the laws of the state of incorporation.
Corporation law: The statutory provisions of
a state relating to domestic and foreign corporations.
Debenture: A long-term debt issued mainly to
evidence an unsecured corporate debt.
Derivative suit: A lawsuit brought by a
shareholder on behalf of a corporation to protect the corporation from
wrongs committed against it.
Directors: The individuals who, acting as a
group known as the board of directors, manage the business and affairs of
a corporation.
Dissenters right: A right granted to
shareholders that entitles them to have their shares appraised and
purchased by the corporation if the corporation enters into certain
transactions that the shareholders do not approve of.
Dissolution: The statutory procedure that
terminates the existence of a domestic corporation.
Distribution: A transfer of money or other
property made by a corporation to a shareholder in respect of the
corporation's shares.
Dividend: A distribution of a corporation's
earnings to its shareholders.
Equity financing: A method of raising
capital in which a corporation sells shares of stock.
Equity interest:An ownership interest; the
interest of a shareholder as distinguished from that of a creditor.
Federal Employer Identification Number: The
Federal Tax Identification Number (also known as a "95 Number" or "EIN
Number") is a number assigned to a corporation or L.L.C. by the Federal
Government for purposes of taxation. The Federal Tax ID Number is to a
corporation or L.L.C. as a Social Security Number is to an individual.
Most banks require that a corporation or L.L.C. obtain a Federal Tax
Identification Number as a prerequisite to opening a bank account
regardless of whether the company will have employees.
Fictitious name: A name other than the true
name, under which a corporation or other business organization conducts
business. Also referred to as an assumed name, a trade name or "doing
business as" (d/b/a).
Fractional share: Ownership in a corporation
in an amount less than a full share.
Franchise tax: A tax or fee usually levied
annually upon a corporation, limited liability company or similar business
entity for the right to exist or do business in a particular state.
Failure to pay the franchise tax or similar fees may result in the
administration dissolution of the company and forfeiture of the charter.
Going
public: The process by which a corporation
first sells its shares to the public.
Hostile takeover: A takeover that occurs
without the approval of the target corporation's board of directors.
Incorporation: The act of creating or
organizing a corporation under the laws of a specific jurisdiction.
Incorporator: The person(s) who perform the
act of incorporation and who sign the articles of incorporation and
deliver them for filing.
Indemnification: Financial protection
provided by a corporation to its directors, officers, and employees
against expenses and liabilities incurred by them in lawsuits alleging
that they breached some duty in their service to or on behalf of the
corporation.
Involuntary dissolution: The termination of
a corporation's legal existence pursuant to an administrative or judicial
proceeding; dissolution forced upon a corporation rather than decided upon
by the corporation.
Judicial dissolution: Involuntary
dissolution of a corporation by a court at the request of the state
attorney general, a shareholder or a creditor.
Limited Liability Company (LLC): An
artificial entity created under and governed by the laws of the
jurisdiction in which it was formed. Limited liability companies are
generally able to provide the limited personal liability of corporations
and the pass-through taxation of partnerships or S corporations.
Limited partnership: A statutory form of
partnership consisting of one or more general partners who manage the
business and are liable for its debts, and one or more limited partners
who invest in the business and have limited personal liability.
Limited personal liability: The protection
generally afforded a corporate shareholder, limited partner or a member of
a limited liability company from the debts of and claims against the
company.
Majority: More than 50 percent; commonly
used as the percentage of votes required to approve certain corporate
actions.
Managers: The individuals who are
responsible for the maintenance, administration and management of the
affairs of a limited liability company (LLC). In most states, the managers
serve a particular term and report to and serve at the discretion of the
members. Specific duties of the managers may be detailed in the articles
of organization or the operating agreement of the LLC. In some states, the
members of an LLC may also serve as the managers.
Members: The owner(s) of a limited liability
company (LLC). Unless the articles of organization or operating agreement
provide otherwise, management of an LLC is vested in the members in
proportion to their ownership interest in the company.
Membership certificates: Evidence of
ownership of and membership in a limited liability company.
Merger: The statutory combination of two or
more corporations in which one of the corporations survives and the other
corporations cease to exist.
Minutes: The corporate minutes are the
written record of transactions taken or authorized by the board of
directors or shareholders. These are usually kept in the corporate minute
book in diary fashion.
Name
registration: The filing of a document in a
foreign state to protect the corporate name, often in anticipation of
qualification in the state.
Name
reservation: A procedure that allows a
corporation to obtain exclusive use of a corporate name for a specified
period of time
No
par value shares: Shares for which the
articles of incorporation do not fix a par value and that may be issued
for any consideration determined by the board of directors.
Not-for-profit corporation: A not-for-profit
corporation is generally organized for some socially beneficial purpose,
rather than for the direct monetary benefit of the directors or members.
Not all not-for-profit corporations are tax exempt and some make a profit.
However, the profit is not distributed to the members or directors. Also
known as a non-profit corporation.
Officers: Individuals appointed by the board
of directors who are responsible for carrying out the board's policies and
for making day-to-day decisions.
Organizational meetings: Meetings of
incorporators or initial directors that are held after the filing of the
articles of incorporation to complete the organization of the corporation.
Organizer: The person(s) who perform the act
of forming a limited liability company.
Parent corporation: A corporation that owns
a controlling interest in another corporation.
Partnership: A business organization in
which two or more persons agree to do business together.
Par
value: A minimum price of a share below
which the share cannot be issued, as designated in the articles of
incorporation.
Perpetual existence: Unlimited term of
existence; characteristics of most business corporations.
Preferred shares: A class of shares that
entitles the holders to preferences over the holders of common shares,
usually with regard to dividends and distributions of assets upon
dissolution or liquidation.
Professional corporation: A corporation
whose purposes are limited to professional services, such as those
performed by doctors, dentists and attorneys. A professional corporation
is formed under special state laws that stipulate exactly which
professionals are required to incorporate under this status.
Qualification: The filing of required
documents by a foreign corporation to secure a certificate of authority to
conduct its business in a state other than the one in which it was
incorporated. Limited liability companies or similar business entities may
also conduct this process.
Quorum: The percentage or proportion of
voting shares required to be represented in person or by proxy to
constitute a valid shareholders meeting, or the number of directors
required to be present for a valid meeting of the board.
Record date: The date for determining the
shareholders entitled to vote at a meeting, receive dividends, or
participate in any corporate action.
Redeemable shares: Shares subject to
purchase by the corporation on terms set forth in the articles of
incorporation.
Registered Agent: A person or entity
designated to receive important tax and legal documents on behalf of the
corporation. The Registered Agent must be located and available at a legal
address within the specified jurisdiction at all times. Failure to
maintain a Registered Agent in the jurisdiction in which the corporation
is registered, may result in the forfeiture of the corporate status. Also
known as a Resident Agent.
Registered Office: The statutory address of
a corporation. In states requiring the appointment of a Registered Agent,
it is usually the address of the Registered Agent.
Reinstatement: Returning a corporation that
has been administratively dissolved or had its certificate of authority
revoked, to good standing on a state's records.
Resolution: A formal statement of any item
of business that has been voted upon.
Restated articles of incorporation: A
document that combines all currently operative provisions of a
corporation's articles of incorporation and amendments thereto.
S
Corporation: A corporation granted a special
tax status as specified under the Internal Revenue Code. The code is very
explicit on how and when this election is made and the number of
shareholders this type of corporation can have. Since this type of
corporation pays no income tax, all gains and losses of the corporation
pass through to the individual shareholders in proportion to their
holdings.
Share: The unit into which the ownership
interest in a corporation is divided.
Share
exchange: A statutory form of business
combination in which some or all of the shares of one corporation are
exchanged for some or all of the shares of another corporation and neither
corporation ceases to exist.
Shareholders: Shareholders are the owners of
a corporation based on their holdings. They own an interest in the
corporation rather than specific corporate property. Also known as
stockholders.
Sole
proprietorship: An unincorporated business
with a sole owner in which the owner may be personally liable for business
debts and claims against the business.
Special meeting: A shareholder meeting
called so that the shareholders may act on the specific matters stated in
the notice of the meeting.
Stock: Stock represents ownership in a
corporation. It may be represented by a certificate and can be common or
preferred, voting or non-voting, redeemable, convertible, etc.. The
classifications and special designations, if any, of the stock are set
forth in the articles of incorporation.
Stock
certificate: Evidence of ownership of shares
in a corporation. May also be referred to as a share certificate.
Stockholders: Stockholders are the owners of
a corporation based on their holdings. They own an interest in the
corporation rather than specific corporate property. Also known as
shareholders.
Subsidiary: A corporation that is either
wholly owned or controlled through ownership of a majority of its voting
shares, by another corporation or business entity.
Takeover: A merger, acquisition or other
change in the controlling interest of a corporation.
Target: A corporation that is the focus of a
takeover attempt.
Tax-exempt organization: Any organization
that is determined by the Internal Revenue Service to be exempt from
federal taxation of income. A tax-exempt may be required to operate
exclusively for charitable, religious, literary, educational or similar
types of purposes.
Trademark: A word or mark that distinctly
indicates the ownership of a product or service, and that is legally
reserved for the exclusive use of that owner.
Underwriter: A company that purchases shares
of a corporation and arranges for their sale to the general public.
Voluntary dissolution: Action by
shareholders, incorporators or initial directors to dissolve a corporation
