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© 2009-2018 Dana H. Shultz, Attorney at Law

How Most States Chose “Shareholder” as Delaware Kept “Stockholder”

Cover page from Delaware Laws 1875 for post about terms shareholder and stockholder“Shareholder” and “stockholder” are synonyms. This post explains how most states came to use the former term in their laws, while Delaware consistently has used the latter.

Before Delaware had a general corporation law, Delaware’s legislature created each corporation. The Constitution of Delaware – 1831 so provided in Article II, Section 17, but made no mention of stockholders (or shareholders).

Following a constitutional amendment, Delaware adopted its first general corporation law in 1875. (See Laws of the State of Delaware, Vol. 15 – Part 1, beginning at page 181.) That law includes a few references to “stockholder”, none to “shareholder”. (more…)

Board Members Aren’t Necessarily Equal in Delaware

Logo of the State of Delaware bor post about board members having unequal voting rightsPeople typically think about corporate board members having equal voting rights: One director, one vote. However, for Delaware corporations, that is not always the case.

Delaware Statute – Board Members

This unusual situation is the result of a Delaware statute. (more…)

Delaware Corporation Stockholders Can Waive Inspection Rights

Seal of the Delaware Division of Corporations, symbolizing this post by Dana Shultz about how stockholders can waive inspection rightsSeveral years ago, I wrote about stockholder inspection rights. (See Which Financial Information Must a Corporation Provide to its Shareholders? ) This post explains how stockholders of a Delaware corporation can waive inspection rights.

Delaware General Corporation Law Section 220 gives stockholders a right to “inspect for any proper purpose, and to make copies and extracts from…[t]he corporation’s stock ledger, a list of its stockholders, and its other books and records”. Furthermore, “proper purpose” means “a purpose reasonably related to such person’s interest as a stockholder.” (more…)

How Does a Corporation Declare a Dividend?

Photo of cash symbolizing post about how to declare a dividendThis post discusses the process by which a corporation may declare a dividend. This is part of Dana Shultz’s Canonical Questions on the Law™ series of questions and answers about legal issues, concepts and terminology.

Please note that this post assumes that the corporation will pay a cash dividend to its shareholders. If, instead, the corporation wishes to pay a stock dividend (issue more shares to existing shareholders), then somewhat different rules will apply. (more…)

Delaware’s Franchise Tax – A Tale of Two Methods

Seal of the Delaware Division of Corporations, symbolizing this post about two methods for calculating Delaware's franchise taxIn an earlier post, In Delaware, No Par Value Can Cost a Bundle, I discussed the two methods by which Delaware’s franchise tax for a corporation may be calculated. This post discusses the history of those two methods.

To some extent, this post is educated guesswork. It is based on a Quora question that I answered. Please see What is the rationale/reason (not math) behind the two methods of calculation for Delaware’s domestic franchise tax fee?

(more…)

May an LLC Manager Be a Minor?

Hand drawn workflow diagram representing an LLC manager whi is a minor

This post discusses whether an LLC manager (the person who manages a limited liability company) may be a minor.

In May a Minor Form an LLC?, I discussed whether the organizer of an LLC may be a minor. In that post, I noted that only five states – Colorado, Illinois, Minnesota, Oregon and Texas – prohibit a minor from organizing an LLC. So, those are the states to which I paid the closest attention in writing this post. (more…)

What is a Managing Member?

Logo for Quora, where Dana Shultz wrote about the meaning of the term " managing member "The post is about the definition of the term ” managing member “. I am writing this because of a Quora question that I answered a short while ago. Please see What is the difference between a managing member and a member in an LLC?

I have not confirmed whether all of the following background information applies equally to all states. However, I know that it applies to enough states that I will present the following as applying throughout the U.S., generally. (more…)

If You Incorporate in the U.S., You Can’t Remain Anonymous

Graphic: no anonymous usersRecently, two different individuals emailed me about their desire to form and run a legal entity while remaining anonymous.

I had to tell them that they could not achieve their objective. This post explains why that is the case.

Initial Formation is Easy

It is easy for a founder to be anonymous when taking the first step to form a corporation or a limited liability company (LLC). (more…)

What Are the Types of Partnerships?

Logo for Quora, where Dana Shultz wrote about the types of partnerships in the U.S.I am writing this post about types of partnerships because of a question that I answered on Quora. Please see Why would a group of people organize their business as a partnership?

in the U.S.,  there are different types of partnerships. (more…)

How to Form an LLC

Logo for Quora, where Dana Shultz answered a question about how to form an LLCI am writing this post about how to form an LLC (limited liability company) because of a question that I answered on Quora. Please see What are the basic requirements for forming of a LLC in US?

The following is an overview of the steps required to form an LLC properly in the U.S.: (more…)