The High-touch Legal Services® Blog…for Startups!

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

How to Redomesticate when Your State Won’t Permit It

Great Seal of the State of California for post about how to redomesticate an entity

In How Can I Move My Corporation to Another State?, I discussed redomestication, i.e., how to move a legal entity from one state to another. In this post, I explain how to redomesticate an entity when the existing state’s law prohibits redomestication.

California Corporation Cannot Redomesticate

About a year ago, the CEO of a California corporation contacted me. He was relocating to Pennsylvania, so it made sense to move his corporation there, too. Unfortunately, California does not permit its corporations, in contrast to limited liability companies (LLCs), to redomesticate. (Please see the CA Secretary of State’s Conversion Information page.)

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Should We Authorize Preferred Shares when We Incorporate?

Certificate for preferred shares

This post discusses whether founders should authorize preferred shares, in addition to common shares, when they incorporate.

As I discussed in What is Preferred Stock?, corporations typically issue preferred shares to institutional investors, such as venture capitalists (VCs). The term “preferred” refers to preferences that those shares have relative to common shares.

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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?

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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 is a Corporation’s Incorporation Date?

Logo for Quora, where Dana Shultz answered a question about a corporation's incorporation dateThis post explains how a state assigns a corporation’s incorporation date and how you can find the incorporation date for a given corporation. I first wrote about this in my answer to a Quora question. Please see What is the date of incorporation? Is it the date the articles of incorporation are adopted and signed, or when the state agency accepts them (USA)? (more…)

Can We Have a Corporate Incorporator?

Sample Articles of Corporation for blog post about the corporate incorporatorMost of us think about an individual being the party that forms a corporation. As an alternative, this post discusses the corporate incorporator, i.e., a corporation that forms another corporation. (For information about incorporators generally, please see What Does an Incorporator Do? )

To start, I wondered whether various states’ statutes permit a corporate incorporator. (more…)

What Are My Entity’s Compliance Obligations?

Frequently, the first service I provide to a client is to form a new legal entity (corporation or limited liability company). And frequently, once that entity is formed, the client’s first question is “What are my entity’s compliance obligations?”

This post provides a high-level answer to that question.

(If you form a corporation in California, you can find additional information in the Postincorporation Matters document on the Downloads page – image above.) (more…)