What this is – So you started your own company? You got the money lined up, your product plan in place, and interest from private equity investors and other lenders to support the growth of your business. So now what?
What this means – When forming your company, you should know about the importance of legal and tax advice, understand the role of your registered agent, determine what qualifying as a “foreign corporation” means, and the importance of annual compliance. Read more to find out about these critical points in your company’s formation.
Congratulations! After all your hard work and belief in your products or services, you’re finally getting your big break. Private equity investors or other lenders are interested in your new business idea and have committed to financing the launch of your product or services throughout the United States, and potentially globally.
Perhaps your goal is to take your company public within 5 years. You will want to work closely with tax and legal advisors to determine what state in the US you should be formed (domiciled) and what other states you should qualify or registered to do business in based on the business that will be conducted in each state. Determining the appropriate type of company (i.e., Corporation vs. Limited Liability Company) and the state(s) that you choose to form and register in may have an impact on future business decisions. All legal and tax advice as to what state to form and register your company in will be customized to your specific business goals.
The Role of a Registered Agent
Typically, your law firm will work with a registered agent to coordinate the filings in all jurisdictions and provide your investor group with evidence of the formation and registrations for doing business in all states. The registered agent will be named in each of your filings as required by statute.
Generally, the role of the registered agent is to receive any legal process (i.e., summons and complaints, legal notices) and official correspondence from Secretaries of States where your company is registered (i.e., annual report tax notices) and forward these time sensitive documents to the designated contacts at your company. But the registered agent is also another partner on your team and can assist your lawyers and in-house legal and accounting teams with ongoing services even after your company is formed.
Tips for Forming Your Company
While there will be many tasks that you need to take care of as you prepare to launch your business and complete the first-round financing, below are a few tips for working with your lawyers and registered agent:
- Choosing the Name of the Company:
- Before you fall in love with a name for your new company, make sure it’s available in all 51 jurisdictions and doesn’t have any words that may require additional consents that could take a longer time for approval (i.e., insurance, bank or any other word in the name that may require regulatory approval).
- If you’re not filing right away, reserve the name to ensure no one else can take it. (The law firm you’re working will typically coordinate with your registered agent to file the name reservations and renew them, if necessary, depending on the timing of when you will form your new company or companies based on the type and size of the transaction you are working on)
- Prepare the Certificate of Incorporation and Applications for Authority for All Jurisdictions:
- Do this well in advance of your filings so you can ensure that you include all required information (amount of information varies from state to state), and arrange to proofread to minimize the risk of rejection when submitted.
- Know which filings require original signatures! Many allow for a PDF copy to be submitted to the Secretary of State’s filing office, however, some jurisdictions, such as Washington, D.C., require that an original be submitted.
- Have your law firm coordinate with the registered agent to ensure that all filings get submitted on the same date.
- Make sure the person signing the Certificates of Incorporation/Formation and Application for Authority is the proper authorized signer per each state’s statutes. (One of the most common causes of rejection of a filing is the incorrect signer’s title. The contact you or your law firm is working with at your registered agent can review the documents and bring errors like this to your attention so that they can be corrected before the filings are submitted.)
- Post-Formation and Qualification: Obtain a Certified Charter and a Good Standing Certificate from the State of Delaware:
- Again, your law firm will likely request the above from your registered agent to provide evidence of the formation of your new company and its registration in all required states to your investor or lender. (This is just one of the many items on the law firm’s closing checklist that will be required before you complete your first round of funding for your business that will serve as evidence that your company has been formed and registered where required.)
- Know What the Annual Compliance Obligations Are for Your Company:
- In order to maintain the good standing of your company in all 51 jurisdictions, you’ll be responsible for payment and filing of income and franchise tax reports and returns. Note that your accounting firm may not handle the filing of the annual and franchise tax reports due to the Secretaries of States where you are registered. Your designated registered agent partner is likely to be able to assist with these annual reports and franchise tax payments.
- As with all other filings, the fees and required disclosure will vary from state to state.
- Your trusted group of legal, tax and registered agent partners, can help ensure that you maintain good standing in order to conduct your business and meet all of the obligations you agree to under the terms of your financing agreements with your investors or lenders.
In addition to the above, depending on the nature of your business and what states you will have employees in, there are likely to be other filings or registrations required. Again, your legal counsel, tax advisor, registered agent and other partners can assist with providing guidance and forms and can also coordinate these filings for your new and expanding company along with advising on what annual requirements are.
Introducing your legal and tax advisor to your registered agent partner early on in your business development and as your business grows is valuable. Each of these partners will support you on legal, tax and state administrative matters in order to allow you to focus on successfully executing your business plan and growing your business!
I want to register my business in another state. What do I do if the name is taken?
The common course of action is for the corporation to use a different name when conducting business in that state. The formal expression for this name varies but will almost always be one of the following: “alternate name,” “assumed name,” “fictitious name,” “modified name” or “trade name.” Most states require that the forced fictitious name (a term that helps distinguish this type of name from an elective assumed name) be available for use and contain a corporate indicator or abbreviation (for instance, Inc., LTD or LLC) Some states make the corporate indicator optional and New Hampshire, New York and Vermont do not allow it. You can read more about it in our article “Help! My Corporation’s New Name is Not Available in A Foreign Jurisdiction!”
What should I look for in a good, registered agent?
A reliable registered agent should provide you a level of personalized service that ensures you are not left with more questions than answers. But at its root, a good registered agent should at least provide:
- a registered agent address to fulfill state requirements.
- experienced handling of service of process, as well as legal and state tax notifications in every state and many countries around the world.
- immediate notification of new documents.
- secure notification options for service of process (email, via a secure link and password-protected access and express courier delivery).
- Some type of online entity management system, like the free Entity Central®, for access to your entity information, customized reports, and real-time status updates.
Do US companies need a registered agent for international transactions?
In most countries, companies are required to seek out international registered agent services to appoint a registered agent and registered office to receive and respond to local legal documents (service of process, writs, summonses), tax information and compliance communications.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.