Online Incorporation: It’s Time to Call Out Inadequate Providers

I have not been a big fan of online incorporation and LLC formation services. (See, e.g., Forming an LLC Online: You Get What You Pay For.) However, the way a client recently was treated by one of these services – The Company Corporation – convinces me that it is time to expose their shortcomings and add them to the Hall of Shame page.

The client used The Company Corporation to incorporate in September 2006. Two months later, the client retained me to provide a variety of services.

In the course of reviewing the client’s corporate records, I saw that the standard-form bylaws provided by The Company Corporation were more than five years old. This meant, most notably, that the bylaws did not include provisions for conducting shareholder and board meetings by electronic transmission – something that had been permitted in California for more than two years (see Corporations Code Section 307).

Under the Corporations Code, my client had the right to conduct meetings electronically. However, with this information omitted from the bylaws, there is no way that the client would know this on its own.

Given that the client has personnel in both the U.S. and Europe, electronic transmission could make it significantly easier to hold meetings. In my opinion, The Company Corporation’s failure to update its standard-form bylaws on a timely basis constitutes lax, slipshod, inadequate performance. (I provided up-to-date replacement bylaws for the client.)

This post is the direct result, however, of my client’s more recent interaction with this vendor. Even though the client stopped using the The Company Corporation’s services long ago, it could not stop The Company Corporation from sending invoices for services. The client asked me to intervene.

I called the sales rep, who explained that while she could see that I, rather than The Company Corporation, am listed as the agent for service of process, she needed proof that my status as such predated October 1 – otherwise, she would invoice my client a prorated fee of $20 for the month of October.

A dispute over twenty dollars? The need to bring in a lawyer to provide some sort of official record because the client’s word is not good enough? I was in disbelief! In my opinion, this shows that The Company Corporation lacks good business judgment and a dedication to client service.

On Friday, I e-mailed a scan of a printout showing that I was appointed agent for service of process more than two years ago. Not have received a reply to that e-mail, today (Monday) I called the sales rep. She said that she had forwarded my e-mail to have the client’s account closed and that no more need be done. While the problem was resolved, in my opinion, the rep’s failure to reply to my e-mail – to acknowledge it, let alone report that the matter was considered closed – suggests that The Company Corporation lacks courtesy if there is not a dollar to be made.

In summary, if you must use an online incorporation service, do not use The Company Corporation.

Related posts:

• When Is It OK to Incorporate Online?
• Can I Form an LLC without a Lawyer?

Dana H. Shultz, Attorney at Law  +1 510-547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.