December is approaching and with it comes the hustle and bustle of holiday shopping. It also means the end of the calendar year and the hustle and bustle of ensuring corporations, limited liability companies and other registered entities are properly formed, amended, dissolved or merged before the calendar turns over to the New Year. In many ways, the practices that serve you well as you buy presents for all the important folks in your life can also help ensure a more stress-free approach to the end-of-year filing deadlines. So what do these two tasks have in common?
- There is a firm deadline. Whether it is Christmas, Hanukah or Kwanzaa, holidays have a very specific deadline by which point the shopping needs to be done! So too, do end-of-the-year corporate filings. Keep in mind, however, that government offices are generally less accommodating than retail stores, and will not usually work late hours or weekends just to help you meet those end of the year deadlines. To avoid unpleasant surprises, go to the News and Events page of COGENCY GLOBAL INC.'s website to download our list of state and international holiday closings. Or better yet, subscribe to our e-mail updates to get this information delivered to your inbox every two months.
- Advanced planning means less stress. Even if you are not the person who has all presents purchased and wrapped by Halloween, you probably know that preparing a list before heading to the mall usually makes for a more enjoyable and productive trip. The same is true for corporate filings. The earlier you begin to prepare for the end-of-the-year crunch, especially when you need consent from another agency before you can file, the better off you will be. Let’s look at what might be required in a few key states:
- Delaware: Delaware has very few requirements for outside agency approval. A corporation or LLC filing a Certificate of Dissolution or a Certificate of Merger where it is the non-survivor should plan on making sure the current year’s taxes are paid to the state at least 48 hours in advance, but no formal clearance is required. When forming, only the use of the word “bank” requires outside agency approval. Banking approval usually takes two to three days in Delaware.
- Illinois: Like Delaware, Illinois does not require a clearance from the Department of Revenue when filing a dissolution or withdrawal. There are a number of words (“insurance,” “indemnity,” “bank,” among others) that require the approval of either the Insurance or Banking Department, which can take two to four weeks.
- California: California also does not require tax clearance in order to dissolve or withdraw, but the entity must ensure it is in good standing with both the Franchise Tax Board and the Secretary of State. It is best to verify this as soon as possible as restoring an entity to good standing with the Franchise Tax Board can often take several weeks. California will require approval for certain restricted words, such as “bank” or “trust.”
- New York: Here, tax clearance is required to file a dissolution or withdrawal. Depending on the situation, it can take anywhere from a few weeks to several months, so the best advice is to begin the process as soon as possible. Additionally, New York State requires outside agency approval for a great many words and purposes. (Download our memo about corporate/entity names in New York that require approval from various state departments from the General Corporate Information and Resources page of the COGENCY GLOBAL INC. website.) Since time frames for these approvals tend to slow down at the end of the year, it is best to allow two to five weeks, depending on the agency.
- Procrastination can be expensive. With holiday shopping, waiting until the last minute can often mean you’ll need to pay exorbitant shipping fees to make sure your gift arrives in time. In the corporate filing world, expedite fees play the same role. The longer you wait to file a document, the higher the fee you will pay. Make sure you are aware of the time frames and fees in advance so that you can ensure your important document is filed on time.
- Delaware: Options range from routine, which is currently taking a month or more, to 30-minute service, which costs an additional $1,500. When planning for your Delaware filings, bear in mind that the Secretary of State has implemented a new online system which may cause processing delays.
- Illinois: Illinois offers 24-hour expedited service for an additional fee, which can range from $10 to $200, depending on the type of entity and the type of request.
- California: California offers 24-hour ($350), same day ($750) and 4-hour ($500) expedited service. To be eligible for 4-hour service, the document must first be pre-cleared for an additional fee. California has recently indicated it is committed to a five day routine processing time, but this is a new policy so difficulties in adhering to this time frame could arise.
- New York: New York has three levels of expedited service: 24-hour ($25), same day ($75) and 2-hour ($150).
- Doing things at the last minute can cause rejection. One reason you might receive a gift that has you standing in the returns line, wondering what in the heck the giver was thinking is simply that the gift giver was rushing to get his/her shopping done. It is easy to make mistakes when rushing with corporate filings, too, and this can cause rejections! When documents are rejected, they can sometimes lose the initial submission date, causing you to miss your filing deadline, especially when they are not corrected and re-submitted in a timely way. If your filing is rejected in California or Delaware, you have 72 hours to resubmit the corrected filing and still maintain the initial submission date as the file date, in Illinois, you have only 24 hours. In New York, the file date is the date the document is approved by the state, rather than the date first submitted, so the file date cannot be guaranteed.
- Knowledge is power. It’s always a lot easier to shop for someone who has given you a list of what they want - knowledge is power! The same is true for corporate filings. By using the pre-clearance process, you can know in advance whether the state will accept your important filing, removing a lot of stress from the process. Planning ahead is required. While Delaware and Illinois will pre-clear on an expedited basis, New York will not (the process can take two to four weeks in December). Even with delays and the fees charged for this service, if there are doubts about the acceptability of the filing and a crucial need to get it filed on a certain date, pre-clearing a document can be worth it.
Working with a company that has a high level of experience in the jurisdiction is a great way to get “instant knowledge” and discover the best way to get a task accomplished. Take the case of a company that wishes to form as soon as possible after the New Year, so that it is not liable for taxes for the outgoing year. A service company with a knowledgeable California staff will be aware of the little known fact that California Franchise Tax for the current year does not apply to companies formed within 10 business days of January 1. It can also let you know the pitfalls of using future “file dates,” which are complicated by the fact that California often adopts new forms at the beginning of a calendar year. If a future filing date is used, the new form must be used. (This is different than a future effective date. In that case the old form must be used) It is often simpler just to wait and submit as early as possible on January 2nd.
The month of December can often be a crazy time with strict deadlines coinciding with government office holiday closings, a higher volume of documents that need to be filed and, of course, our own desire to both take care of holiday tasks like shopping and decorating and spend some time enjoying the season. Planning ahead for your corporate filings, and taking advantage of services offered, such as expedited processing and pre-clearance, can help you make the time for holiday cheer.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.