Prior to retaining me, one of my international clients used Harvard Business Services to form a Delaware corporation. During that process, HBS made two significant mistakes that I had to fix.
A couple of weeks ago a client emailed me with great concern. He received a letter that looked like a government demand for $225, lest a penalty of $250 be imposed by the state. It turns out that the letter was not from the state, but from Corporate Business Filings, the latest addition to my Hall of Shame.
Most of the way down the second page, the letter does have an oddly-worded disclaimer that there is no obligation to pay the amount requested. However, even though the disclaimer is upper-case, it is not nearly so prominent as the fear-inducing language in the rest of the letter – and it does not comply with a disclaimer that has been required by law since January 1, 2012.
Almost two years ago, I wrote about how Delaware corporations with no-par-value stock can find themselves obligated to pay extraordinarily high franchise taxes (In Delaware, No-Par-Value Can Cost a Bundle). Yesterday, a reader of this blog pointed out that IncNow, an online incorporation service, virtually lures naive customers into this tax trap.
Here is what the reader reported to me:
- IncNow’s default assumption is that no-par stock will be issued.
- IncNow does not invite the user to specify a par value (in contrast to LegalZoom, for example, which does).
- IncNow’s representative said that the reader “could assign a par value to shares, under special requests at the bottom of the checkout form” [emphasis added].