CORPORATE TRANSACTIONS & COMPLIANCE BLOG

Under the Gun to Prepare for a Closing? Don’t Panic!

By: Krystal Beckner, COGENCY GLOBAL INC. on Thu, Jul 21, 2016

FormAndQualifyYourLLCInNoTime.jpgIt’s Friday afternoon, and you just found out that there is a financing transaction closing on Monday afternoon for a limited liability company (LLC) that needs to be qualified in several states, and it hasn’t even been formed in the domestic state yet!  You start to panic and silently ask yourself two very important questions:     

  • Can I meet this deadline?  
  • How am I going to get this done?

To make this happen, you have a LOT to do and time is not on your side.

After your heart stops racing – you’ve gone down this road a time or two – take a deep breath and assess what you need to do and in what order. Remind yourself that you’re lucky that Delaware is the domestic state where the LLC is to be formed. When it comes to turnaround time for corporate filings, Delaware is one of the quickest states where you can make a filing and receive the evidence.

 

Here are some tips that will help you form and qualify the LLCs in time for your closing:

  • Form the entity in Delaware: The entity has to be formed before it can be qualified in the other states. Your first step is to check the name availability before submitting your corporate filings to ensure the name on the document is available. If there is a conflict, name consent may be needed (on company letterhead) from the entity with the similar name. As with checking name availability, checking any name reservations on file BEFORE submitting your corporate filings will ensure that there will be no delays due to the entity’s name. Time-saving Tip: Request the Good Standing Certificate in connection with the formation of the entity. This will save you a step and valuable time.
  • Take advantage of your options for expedited service: You’re under the gun. If you’re working with a service company, make sure you explain the situation and urgency to get the entity formed and the qualifications completed ASAP. Ask about the available options and cost for expediting the filing in the formation state as well as the other states where the entity needs to be qualified. You’re fortunate that the entity’s home state will be Delaware since the available expedite options can ensure it will be formed more quickly than preparing tonight’s dinner….if you’re willing to pay for it.  Here are your options for expediting in Delaware. (Note that these fees are in addition to the normal statutory fees):
  • 30-Minute Service - Evidence will  be returned to the submitter within 30 minutes if the document has been pre-cleared with “clear comments” (an indication that the filing will be acceptable as is, with no modifications).  Important Note: If the document does not have these “clear comments”, the  30-minute service may not be possible, however, the 30-minute filing fee will still be charged; State Cost -$1,500
  • One-Hour Service - Evidence returned to the submitter within 1 hour of submission to Delaware; State Cost - $1,000
  • Two-Hour Service - Evidence returned to the submitter within 2 hours of submission to Delaware; State Cost - $500
  • Same-Day Service - Evidence will be returned by 5 PM EST if submitted to Delaware by 2 PM EST. For new entity filing;  State Cost - $100
  • 24-Hour Service - Evidence returned within 24 hours of submission to Delaware if submitted by 7 PM EST. For new entity filing; State Cost - $50

 

Many other states also offer expedite options, but a handful do not.  Know what your options are.

  • Make sure all required documents are completed and provided with the filing: Most states require a Good Standing Certificate from the domestic state and some may also require certified copies of the formation documents. If you work with a professional service company, they should be able to tell you what the requirements are for each state.
  • Ensure signatures are correct: Review the filing instructions to make sure the correct person with the correct title is signing the form. Many service companies have filing guidelines by state for the most common entity types. It may save you time to review these requirements to make sure you have the right name on the dotted lines. Also, ensure that the correct execution date is listed in the document.  Be aware that in Delaware, no future dated documents are allowed. The date should be the date of submission or a prior date.
  • Know where originals are needed and when your registered agent needs to sign: This is where the knowledge and expertise of your service partner will be very beneficial. For example, South Carolina and New Mexico require originals AND they both require the agent to sign. Unfortunately, in this day of online immediacy, some things still need to be done manually and when this occurs, time will need to be built in for overnight delivery. The following are states that require originals: Arkansas, Maine, New Hampshire, New Mexico, South Carolina, South Dakota, Vermont and Wyoming.
  • The devil is in the details! More times than not, it’s the little things that get you.  Here are a few things that we see frequently that can cost valuable time:
  • Make sure the Good Standing Certificate is from the correct state: The most common error we see is that incorrect supporting documents are provided or they are not from the correct state.
  • Double-check spelling and punctuation: Make sure you’ve reviewed the document for spelling, punctuation and compliance with state requirements. For example, for an LP filing in Connecticut, the words Limited Partnership must be spelled out. For LLC filings, most states require either the words “Limited Liability Company” or the “LLC” abbreviation to be part of the name.
  • Make sure the stock amount on the home state document matches what is indicated on the qualification document: Your qualification may be rejected if the stock that’s indicated on a qualification filing does not match what’s on the formation document.
  • Make sure your filings are legible: This may seem obvious, but what a crushing disappointment it would be to have submitted everything properly only to have your filing rejected (and the closing delayed) because your filing was not legible. If you have any doubts, consider scanning to yourself so you will see what the filing officer will see.

 

Following the above steps may not necessarily guarantee that you’ll be able to get everything completed by your closing
on Monday.  However, if you work with a knowledgeable service company, provide all necessary supporting documents and triple-check the details, you’ll still be able to have some quality relaxation time with Jimmy Buffet by the end of the day on Friday. After all, it’s 5:00 somewhere!

LLC_CLosing.jpg

 

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Company Formation and Filing Considerations