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

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

Harvard Business Services Joins Hall of Shame

Logo of Harvard Business Services, which joined this blog's Hall of ShameHarvard Business Services, Inc. has joined this blog’s Hall of Shame.

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.

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IncNow Joins Hall of Shame

Logo for IncNow, the subject of this blog post

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].

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In Delaware, No Par Value Can Cost a Bundle

Delaware Division of Corporations logo for post about shares without par value

In “How Many Shares Should My Corporation Authorize and Issue?“, I warned that “If you are forming a Delaware corporation with a large number of shares, be sure to specify a low par value, such as $0.0001 per share, to avoid having to pay excessive annual fees to the state.” This post gives more details about this issue.

There are two methods for calculating Delaware’s annual franchise tax. (more…)

How Many Shares Should My Corporation Authorize and Issue?

Sample certificate showing number of shares owned by a corporation's shareholderThis post discusses the number of shares that a corporation should authorize, and the number of authorized shares that a corporation should issue.

On a couple of occasions, I have worked with founders whose corporations (prior to retaining me) issued a small number of their authorized shares.

In one instance, four founders formed a corporation that was authorized to issue 50,000 shares, but had issued (to themselves) fewer than 400. They asked me to help reallocate shares among them because, as time had passed, they saw that their respective contributions to the business differed from what they initially had expected.

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