Corporate Transactions and Compliance Blog

Frequently Asked Questions about Delaware Alternative Business Entities Annual Tax Payments

Posted by Colleen DeVries on Thu, Apr 20, 2017

PiggyBankDelaware_Fotolia_85305928_XS.jpgBy Colleen DeVries, National Corporate Research, Ltd.

Delaware Limited Partnerships, Limited Liability Companies, and General Partnerships formed or registered in Delaware are required to pay an annual tax of $300.00 to the State of Delaware no later than June 1, 2017.This annual tax covers the prior calendar year of existence. There is no requirement for these entity types to file an Annual Report.

By now you should have received the paper notice from your Registered Agent reminding you of that due date and the amount due. Below are some answers to frequently asked questions to help guide you with making your franchise tax payments and ensure you maintain the good standing of your Delaware Limited Partnership, Limited Liability Company or General Partnership. 

How Do I Pay My Franchise Tax?

Payment must be made directly to the State of Delaware.

You may pay online by credit card (Visa, Master Card, American Express, Discover) at: http://corp.delaware.gov/paytaxes.shtml

Or you may send a check, made payable to “State of Delaware,” to the following address (you must include the detachable payment stub at the bottom of the Tax Notice you received):

        Regular Mail:  State of Delaware

                                  Division of Corporations

                                  P.O. Box 5509

                                  Binghamton, NY 13902-5509

 

           Overnight:      J.P. Morgan Chase

                                    33 Lewis Road

                                    Birmingham, NY 13905

                                    Attention: State of Delaware, Division of Corporations - 5509

 

 

Payments by wire are not permitted. In addition, if you are paying by check, the State of Delaware will only allow you to include payment for up to 25 entities on a single check.

How Do I Find My Entity’s Business File Number?

You will need your entity’s business file number to pay your taxes online. The entity file number may be found on the notice you received from your Registered Agent, or on the Delaware Secretary of State’s entity search portal. Simply type the name of your entity into the search screen and you will receive a summary of the information on record in Delaware, including the file number. The link for the search portal is: https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch.aspx.

What Happens if I Fail to Pay My Franchise Tax?

Delaware will assess a penalty of $200.00 for non-payment or late payment plus interest which will accrue on the tax and penalty at the rate of 1.5% per month.

If franchise tax payment is not made for 3 consecutive years, the Delaware entity will be deemed void on the Secretary of State’s records. However, the Delaware statutes include provisions to allow you to reinstate the entity by filing a Certificate of Reinstatement and paying all past due taxes, penalties and interest. Your Registered Agent can assist you with this filing if needed.

What if I Have Questions About My Franchise Tax?

You can contact your Registered Agent or the Delaware State Franchise Tax Unit

For information regarding the annual franchise at 302-739-3073 or visit http://corp.delaware.gov.

 

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

Tags: Corporate Compliance

You Make Me Feel Like a… Natural Person?

Posted by Krystal Beckner on Thu, Apr 13, 2017

Many States Require a “Natural Person” as the Communications Contact for Your Company

Registered Agent Name Natural Person for Company.jpgBy Krystal Beckner, National Corporate Research, Ltd.

You’ve formed your company! You’ve crossed your t’s and dotted your i’s. You’ve named a registered agent, and you have identified who should receive any legal documents. You’re confident that you’ve complied with all of the many statutory requirements for forming and maintaining your company. And now, you’re being told you need a “Communications Contact” and that it must be a “natural person”. What?

What is a “Natural Person”?

No, this is not a twist on the old Aretha Franklin song “You Make Me Feel Like a Natural Woman” (though you may be humming to yourself right now). Rather, a “natural person” is a living person with a name, address and phone number. Most often, this individual will be an officer, director, employee or designated agent (other than the registered agent) of the company who is authorized to receive communications from the registered agent. A natural person is required to ensure that there is a particular individual designated as the “responsible party” for the company in the event a jurisdiction needs to communicate with the entity directly.

Which States Require a “Natural Person” Communications Contact?

There are currently four states that statutorily require the designation of a “real” or “natural person” to receive communications from their agent. These include:

  • Delaware
  • Kentucky
  • Wyoming
  • And most recently, Indiana

For these states in particular, you will be required to provide your registered agent with the name of a person designated as the Communications Contact. If a name is not provided, the registered agent may be required to resign its appointment.

Staying in Compliance

These states reserve the right to inspect the records of the registered agent at any time to make sure this information has been provided and is maintained. If the registered agent is found not to be in compliance, there could be serious consequences including the revocation of the authority to serve as an agent. 

To make sure you are in compliance and don’t face an unintended resignation by your registered agent, it is recommended that you provide the name and contact information for Service of Process (SOP), Tax, Billing and Communications -- regardless of the jurisdiction. (It is perfectly acceptable to have the same individual serve in multiple capacities.) By providing the information for all of these contacts, you can ensure not only that you are in compliance, but that all legal documents, notices, communications from the state and invoices are properly directed.

Now that you know what a “natural person” is, the next time you are providing contact info to your registered agent, will you start humming an Aretha Franklin song? 

 

 

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

Tags: registered agent services

Florida Annual Reports Due May 1st: Avoid Substantial Late Fee by Filing on Time!

Posted by Terri Lennon on Thu, Apr 06, 2017

By Terri Lennon, National Corporate Research, Ltd.

Florida Annual Reports.jpg

All companies authorized to do business (formed or qualified) in Florida are required to file an annual report every year on or before May 1st. The state allows filing of an annual report between January 1 and May 1 of each year.  Unlike most states, the due date is the same for all companies (corporations, limited liability companies, limited partnerships and limited liability limited partnerships), regardless of the business entity type or domicile state. 

Submit Your Report on Time to Avoid a Hefty Late Fee!

The state of Florida will immediately apply a $400 non-negotiable late fee to all companies that fail to file the annual report by midnight Eastern Standard Time on May 1, 2017. In addition to the late fee, the state will automatically administratively dissolve or revoke all companies that have not filed the 2017 report by September 15, 2017.

Nonprofit corporations are not subject to the $400 late fee.

Will I Receive a Reminder That the Report is Due?

The Florida Division of Corporations sends out e-mail notification of the upcoming due date. The first notification was sent in early January to the e-mail address listed on last year’s annual report. The state continues to send an e-mail notification at the beginning of every month until the company has filed the report or May 1, 2017 has passed.

The e-mail address on file with the state may be updated by sending a request to the Corporations Division at corpaddresschange@dos.state.fl.us. The request must include the company’s Document ID Number, the exact business name and the new e-mail address.

What are the Filing Requirements?

While the requirements for the Florida annual report are essentially the same as the requirements of other states’ annual or periodic reports, those responsible for corporate compliance should note that, as indicated above, the penalty for missing the deadline for Florida is significantly higher than in most other states.

All reports need to be filed electronically at www.sunbiz.org. The state no longer accepts annual reports in paper form. 

General Information Required for Filing:

  • Document (ID) Number: This can be found on the report notice or by searching the Division of Corporations’ records.
  • Federal Employer Identification Number (FEIN)
  • Address for principal place of Business
  • Mailing address (if different than principal place of business address)
  • Registered agent name and address (a business cannot serve as its own registered agent)
  • If the CFO is listed as the registered agent, this cannot be changed since each “authorized insurer” in Florida is required by Florida Statute 48.151 to designate the Chief Financial Officer as its registered agent for Service of Process.
  • Principals’ names and addresses
  • E-mail address:  An acknowledgment confirming that the report has been accepted will be sent to the e-mail address listed on the report. This e-mail address will also receive future notification when the next annual report is due.

Cost and Payment Methods
Florida annual report fees vary based on entity type: 

  • For Profit Corporation: $150
  • Nonprofit Corporation: $61.25
  • Limited Liability Company: $138.75
  • Limited Partnership or Limited Liability Limited Partnership: $500

Payment may be made by credit card (Visa, Master Card, American Express or Discover), check or through a Sunbiz E-File Account (a pre-established Department of State payment account). Check and money order payments may only be submitted if they are accompanied by a Department of State check payment voucher.

How Long Does it Take for my Annual Report to Post on the State’s Website?

If filed online via credit card, the reports are processed and posted immediately. 

If paying by check or money order, allow 3-5 business days (longer during peak periods) for processing.

How Do I Make Changes if I Have Already Filed This Year’s Annual Report?

If the company is a corporation or LLC – you may file an amended annual report electronically.

  • Profit or Nonprofit Corporation: $61.25
  • Limited Liability Company: $50.00

If the company is a limited partnership or limited liability limited partnership, download and complete an amendment form. Mail the form and fee to the Division of Corporations.

Where Can I Find Additional Information?

If you have questions or need more information, here are some resources you can turn to:

 

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

Tags: Annual Reports

Which States Require Charitable Solicitation Registration for Nonprofits?

Posted by Ron Barrett on Mon, Apr 03, 2017

By Ron Barrett, National Corporate Research, Ltd.

charitable_solicitation-resized-600.jpgCharitable nonprofits frequently think they need to register to solicit donations in all 50 states.  Fortunately, not all states require this. The number of states that do require charitable solicitation registration varies in some circumstances (e.g., depending on the type of organization) and sometimes you’ll find conflicting information when searching for the exact states where this is required. In this post, we’ll clarify which states require charitable solicitation registration, along with a few notable exceptions, for most charities.  Keep in mind though, that registering to solicit is not the same as filing for a business license or qualifying to transact business in a state (i.e. qualify as a foreign nonprofit by filing an Application for Certificate of Authority to Transact Business).  With few exceptions, this is not required when a charity’s only nexus (or connection) with a state is fundraising via phone, email, direct mail or online (See our previous blog postWhat Types of Registrations are Needed When a Nonprofit is Fundraising in Multiple States?).

States That Require Charitable Solicitation Registration and Renewal
Currently, 37 states and D.C. broadly require charitable solicitation registration and renewal, unless a specific exemption applies. Exemptions vary greatly in each state, but most exempt religious organizations (e.g. churches and synagogue) and many exempt educational institutions (e.g. colleges and universities) and hospitals. However, there are frequently exceptions to the exemptions, and thus, a careful reading of each state’s requirements is needed.

States That Do NOT Require Charitable Solicitation Registration
There are 9 states that do not require charitable registration: Delaware, Iowa, Idaho, Indiana, Montana, Nebraska, South Dakota, Vermont & Wyoming. Texas has limited registration requirements that are only applicable to law enforcement, public safety and veterans organizations. Arizona requires charitable veterans organizations to register if they are solictiging money or other support in the state. Finally, Louisiana only requires registration if a charity engages paid, professional solicitors to fundraise in their state, while Missouri exempts 501c3, 501c7 and 501c8 organizations, upon application.

Summary
In summary, to comply with state charitable solicitation laws, a 501c3 charity that is not a law enforcement, public safety or veterans organization and that does not use the services of a professional solicitor and that is not otherwise in an exempt category, is required to register in 37 states and D.C., and to file a one-time exemption in Missouri. 

 

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

Tags: Compliance, Nonprofit, Nonprofit Compliance, Charitable solicitation registration, Due Diligence, Good Standing

The Ultimate Cheat Sheet for Registering a Company in Australia

Posted by Karen Redman on Thu, Mar 30, 2017

By Karen Redman and Tais Taber, National Corporate Research, Ltd.

Registering a Company in Australia.jpg

G’Day mate! When considering all there is to admire about Australia, from the Great Barrier Reef to the Sydney Opera House, from Aboriginal art to Hugh Jackman, people usually overlook all of the benefits of doing business there. From its excellent proximity to countries in the Asia Pacific to the ease of starting a business, it’s a great place expand your reach. In fact, out of 190 economies, the World Bank has, for 2017, ranked Australia as the 7th best jurisdiction for starting a business.[1]

Types of Businesses in Australia

There are various types of business structures in Australia -- namely, the sole trader, partnerships, trusts and companies. Each type of structure has different legal and tax consequences.

For the purpose of this article, we will focus on companies and, in particular, the most common type, which is the Proprietary Company (Pty Ltd). As in the U.S., a company is a separate legal entity, therefore having the same rights as a natural person and can incur debt, sue and be sued. It benefits from limited liability and corporate tax rates.[2] However, unlike in the U.S., when you register a company in Australia, the company may conduct business anywhere in Australia without the need to register in each state and territory.

What Is a Proprietary Company?

A proprietary company is a private company (as opposed to a public company which sells its shares to the general public). A proprietary company:

  • Must have no more than 50 non-employee shareholders.
  • Must be either limited by shares or be an unlimited company that has share capital.
  • Must not conduct any activity that requires disclosure to investors.
  • May only offer shares to members of the company or employees/subsidiaries of the company.[3]

Small Proprietary Companies vs. Large Proprietary Companies

The Corporation Act 2001, Section 45A, differentiates a small proprietary company, which has reduced financial reporting requirements, and a large proprietary company, which must prepare annual audited financial reports that are presented to its shareholders and filed with the Australian Securities and Investments Commission (ASIC).

 

A small proprietary company satisfies two of the following tests:

  • The consolidated gross operating revenue is less than $25 million

                                          and/or

  • The value of the consolidated gross assets is less than $12.5 million.

                                          and/or

  • The company has fewer than 50 employees.

 

A large proprietary company satisfies two of the following tests:

  • The consolidated gross operating revenue is $25 million or more

                                          and/or

  • The value of the consolidated gross assets is $12.5 million or more.

                                          and/or

  • The company has 50 employees or more.

 

Advantage of a Small Proprietary Company

A small proprietary company allows you to have the same person as a sole director and shareholder. In this instance there is no need for a formal set of rules governing the company’s internal relationships. Such companies do not have to adopt a constitution (although they may do so if they wish). If an additional director is appointed or an additional person becomes a member, the replaceable rules will automatically apply to the company, unless they are replaced by a constitution adopted by the company. Replaceable rules are in the Corporations Act and are a basic set of rules for managing your company. Using replaceable rules means your company does not need a written constitution. This means you don't have the expense of keeping it updated as the law changes.2

How to Register a Proprietary Company

In order to register a proprietary company, you must take the following steps1:

  1. Prior to submitting the application for registration, you should confirm the availability of the proposed company name. If no name is specified, the company will simply be referred to by its Australian Company Number (ACN).
  2. Complete and submit an ASIC Form 201 (Application for Registration as an Australian Company) and pay the prescribed fee.
  3. Ensure that any person to be appointed as a director or secretary of the company has consented in writing to that appointment. Similarly, each shareholder of the company must have consented to become a shareholder. At least 1 director (and, if the company has appointed secretaries, at least 1 secretary) must ordinarily reside in Australia. The registered office of the company must be an address in Australia.
  4. The company may adopt its own constitution or rely upon the Replaceable Rules in the Corporations Act 2001.
  5. Upon incorporation, ASIC will issue a Certificate of Incorporation, which evidences that the company has been incorporated on and from the date of issue.

How to Register a Foreign Company

Types of Businesses in Australia.jpg

If you wish to qualify your U.S. company to do business in Australia, you may apply as a foreign company. To do so[4]:

  1. Check that the name you want is available. You are responsible to be aware of any similar names or trademarks that may affect your name.
  2. To register, complete and submit ASIC Form 402 (Application for Registration as a Foreign Company). You need to provide general information about the company and how it will be run.
  3. Include all supporting documents with your application (Certificate of Incorporation and certified charter documents)
  4. State that the name and address of the local agent is resident in Australia (whether an individual or company) and is authorized to accept service of process on behalf of the company on ASIC Forms 418 and 403 and submit to ASIC.
  5. If the list of directors on the application form includes directors who are residents in Australia, you need to file a memorandum that outlines their powers.

As you can see, starting a business in Australia, especially a small proprietary company, is fairly easy and straightforward. After you’ve met all of the requirements and filed the paperwork, you can enjoy some shrimp on the “barbie” and congratulate yourself on your excellent choice of jurisdiction for international expansion!

 

[1] http://www.doingbusiness.org/data/exploreeconomies/australia#starting-a-business

[2] http://www.asic.gov.au/for-business/starting-a-company/how-to-start-a-company/

[3] CORPORATIONS ACT 2001 - SECT 45A(1)

[4] http://www.asic.gov.au/for-business/starting-a-company/how-to-start-a-company/foreign-companies/

 

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

Tags: International

Words Matter!

Posted by Colleen DeVries on Thu, Mar 23, 2017

Drafting Provisions for Independent Directors or Managers in Real Estate Finance Deals

Independent Director in Real Estate Deals.jpg

By Colleen A. De Vries, National Corporate Research, Ltd.

"Speak clearly, if you speak at all; carve every word before you let it fall." - Oliver Wendell Holmes

The quote above is powerful when considering the spoken word and, for attorneys who draft legal agreements, equally powerful when considering the written word.

When drafting legal agreements, there is a series of building blocks in each section with the necessary components to translate into legally effective provisions. If not done well, parties may lose the negotiated or intended advantage of an agreement term or provision by either failing to use the appropriate language or including language that is not necessary and imposes an unintended meaning. This is also true when it comes to defining the role of an independent director or manager.

In my experience working with attorneys over the years who work on large commercial financing transactions, there is great care taken when drafting agreements to reflect the negotiated terms of the deal and the remedies available if any party fails to perform. Remedial provisions typically include indemnification obligations, termination rights, limitations of liability and, depending on the nature of the financing transaction, other clauses that address possibility of future bankruptcy or litigation.

Forming a Bankruptcy Remote Entity

In my current role, I work with attorneys representing borrowers who are required to appoint an independent director or manager (both terms used interchangeably) on large commercial real estate financing transactions. Lenders in these types of transactions will require that a bankruptcy remote entity (“BRE”) be formed to limit certain risks associated with a borrower’s bankruptcy filings. “A BRE (also referred to as a single purpose entity “SPE”) is organized for the express purpose of holding a single real estate asset”. A properly structured BRE isolates a lender’s collateral from the insolvency and bankruptcy risks associated with other types of financing”[1].  

In addition to appointing an independent director or manager “who is not affiliated or associated with the borrower”1 above, lenders will also require that the Operating Agreement be drafted to include, among other things, provisions that limit the purpose of the BRE to owning a specific property, isolate assets and liabilities and limit debt/liens.

Delaware Limited Liabilities Companies Offer Flexibility

Typically, in addition to being appointed as the independent manager, we are asked to assist with the formation and be appointed as registered agent of a limited liability company (“LLC”) in Delaware. While there are other entity types and jurisdictions that are sometimes used in these types of deals, Delaware LLCs are favored for BREs because of the flexibility of the laws governing limited liability companies in Delaware.

Corporations are a less favorable entity type for these types of real estate financing deals. “Corporate laws generally require the officers and directors of a corporation to act as fiduciaries for the shareholders and to consider the best interests of the corporation above all else, particularly the corporations creditors.”[1] 

The lenders in these types of deals require that the independent manager appointed also consider the interests of the creditor. The legal premise known as freedom of contract gives the organizers of a Delaware LLC, who draft the Operating Agreement, flexibility in drafting its terms and, among other things expanding the responsibility of the independent manager to consider the interests of the creditor.

Defining Independent Manager’s Role

While the independent manager is one of many lender requirements as noted above, the drafting of the provisions in the Operating Agreement carving out and defining this role is extremely important so that the entity qualifies as a BRE and that no unintended responsibility is imposed on the independent manager. The provisions in the Operating Agreement will include language related to specific material actions, including actions related to bankruptcy, insolvency and dissolution that the independent manager will be required to vote on. This gives the lender comfort that their interests will be considered should a material action present itself. 

Independent Manager in Real Estate Transactions.jpgWhy Language in an Operating Agreement Matters

Prior to accepting independent manager appointments, we take great care to review these provisions in the draft Operating Agreement. We specifically look out for language that may impose an increased role or responsibility on the independent manager. One section of the Operating Agreement that we pay particular attention to are provisions that indicate that the independent manager should “[t]o the extent permitted by law. . .consider only the interests of the Company, including its respective creditors”.[1] 

In some cases, we see language that states that these determinations be made in accordance with the Delaware Corporation Law (DGCL). As noted above in the quote, words matter. In this scenario, the addition of the reference to the DGCL in a Delaware LLC Operating Agreement can have a significant effect on whether the LLC qualifies as a BRE.

This issue was highlighted in the In re General Growth Properties (GGP) case in which many BRE subsidiaries were included in Chapter 11 bankruptcy filings. While there were many points and arguments raised in this case, language in some of the Operative Agreements of the BREs included a reference to the DGCL.

In the GGP decision, the court stated that in instances in which the organizational documents of and SPE (also referred to as a BRE) provided that the fiduciary duties of the independent managers are analogous to the duties of directors under Delaware law, relevant case law requires those independent managers to act on behalf of the SPE’s shareholders at all points before actual insolvency, as opposed to acting in the interest of the creditors at the time the entity has reached the  ‘zone of insolvency’.[2] After this decision, among other things, many attorneys, both on the borrower and lender sides of real estate financing transactions, reviewed and revised the organization documents used by BREs to eliminate the reference to the DGCL.

Experience Matters!

The issues outlined above in the GGP case illustrate the importance of working with experienced individuals when engaging the services of independent managers or independent directors for large real estate financing transactions. Their knowledge can often help you avoid common pitfalls in these kinds of deals.

 

[1] Bankruptcy Remote Entities in Commercial Real Estate Transactions by Richard Facciolo and John H. Knight, Richards, Layton & Finger, PA, with Practical Law Real Estate

[2] In Re General Growth Properties, 409 B.R. 43 (Bankr. S.D.N.Y. 2009)

 

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

Tags: real estate finance, independent manager/director service

The Do’s and Don’ts of Working with a Professional Registered Agent

Posted by Krystal Beckner on Thu, Mar 16, 2017

By Krystal Beckner, National Corporate Research, Ltd.

Registered Agent Dos and Donts.jpgA registered agent is a business or individual designated to receive and forward legal documents such as Service of Process or notices from the state. The purpose of the registered agent is to provide a legal address where someone will be available during normal business hours to receive these notices and documents. Unlike some other responsibilities, in most jurisdictions in the United States, this is not a “nice to have”, but is a mandate by the state in which the entity is doing business. Failure to maintain a registered agent can have a negative impact on the business, including penalties or even revocation of the company’s authority to do business in the state in some cases.

While some businesses opt to have an officer or employee serve as the registered agent, many choose to designate a company that specializes in providing registered agent services. This choice may be especially beneficial when the company is doing business in several states and is not able to ensure that staff in a particular location will always be available during normal business hours to receive these documents.

But what are the responsibilities of a professional registered agent? What will they do for your business and, equally important, what should they not do?  Here are a few of the do’s and don’ts to keep in mind when working with a registered agent:

Registered Agent Services.jpgWhat You Should Do When Working With a Professional Registered Agent:

  • DO notify the registered agent if you are filing the formation or qualification documents yourself. In a number of states, a registered agent can be selected without any approval by or notification to the agent. Make sure you take the step to notify the agent so any legal documents received on your behalf are sent expeditiously to the correct contact for your business. Missing an important response date because you didn’t receive the service of process could subject your company to a default judgment.
  • DO provide current contact information so your registered agent can send legal documents in a timely manner. Most agents will email and/or send legal documents via an overnight service. Often, the registered agent is overlooked when there is a change of address or contact information. Make sure your registered agent receives any changes in contact name or physical and email addresses so costly delays are avoided.
  • DO provide jurisdiction-specific information (e.g., Delaware Communications Contact). Some states require the name of a “natural person” to be designated to receive notices. It is important that you provide your agent with the name of an individual rather than “accounting” or “legal department”. The registered agent has a responsibility to maintain this information, and in some situations may need to resign if it is not provided.
  • DO pay the invoice. It is not uncommon for an invoice to be overlooked or put aside if the individual receiving it is not certain of what it is for. This may result in the registered agent “resigning” with the state, which could result in penalties or legal documents not being forwarded.
  • DO reach out if you receive state filing solicitations that appear to be questionable. While some annual report notices are entirely legitimate, you should be on the lookout for misleading compliance solicitations. If you receive any notices that do not look to be from the state or request you send a fee much higher than you are accustomed to, do not hesitate to contact your registered agent who can investigate the legitimacy.

Registered Agent Donts.jpgWhat You Should NOT Do When Working With a Professional Registered Agent:

  • DON’T assume your registered agent will automatically file annual reports and other tax documents on your behalf. While the agent will forward any notices received from the state, it is your responsibility to file the report. Some states do not forward reminder notices and others may forward notices only very shortly before the due date. If you need help managing the due dates, consider asking your agent if they have a tool for tracking report due dates. If you prefer to outsource the responsibility for annual report filings, many agents will be able to automatically file reports on your behalf for an additional fee.
  • DON’T use your registered agent’s address as a business or personal address without consent. Some entities do not realize that a registered agent’s address is only for legal documents and notices. Are you expecting license tags or having a package sent to the business address? Make sure the agency or vendor has your physical address for shipping purposes.
  • DON’T forget that your registered agent may be able to provide more than just an address for service of process (e.g., assist in managing your entities’ registrations, annual reports, charitable registrations, business licenses, etc.). If you have any questions about what your agent can or cannot do for you, just ask.

Following these simple tips will help ensure you receive timely notification of any legal documents or notices that need to be addressed allowing you to focus on the important job of managing your business!

 

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

Tags: registered agent services

5 Quick Tips about Annual Reports in Puerto Rico

Posted by Teri Mayor on Mon, Mar 13, 2017

By Teri Mayor, National Corporate Research, Ltd.

  1. FILE ON TIME!annual report filing
    Annual Reports in Puerto Rico are due on April 17th this year. Corporations that were formed the previous year must file an annual report or an extension by that date, or face sizeable penalties. Even if the entity was formed as late as December 31st, 2016 it will owe an annual report for 2016 on April 17th of 2017. LLCs are required to submit minimal information and the annual fee by this date.

    The fee for filing an annual report is $150.  A corporation that misses the April 17th deadline has to pay a $750 penalty. An LLC that misses the deadline must pay a $500 penalty, plus an additional 1.5% for each month that has passed since the filing deadline.

    If needed, a corporation can file an extension, rather than an annual report, by paying the annual report fee in full, but not submitting the completed report.  This will extend the filing deadline till June 16th (July 16th if an additional extension is filed). 

    If your corporation has been delinquent in past years, please note that this is the year to submit those past due filings!  Corporations that have not filed annual reports for two subsequent years are receiving letters from the Puerto Rico Department of State that their entities will be revoked if they do not become compliant within 60 days of the letter. These letters are also posted on the entity’s record on the Puerto Rico website.  The Department of State has also posted another Spanish only letter to their webpage that indicates that late fees for these past due annual reports will be waived if the corporation becomes compliant by April 17, 2017.

  2. DON’T WAIT FOR A REMINDER NOTIFICATION
    Puerto Rico does not send out any notification that the annual report is coming due. Corporations and limited liability companies need to track this requirement and ensure they file on time.

  3. AVOID DELAYS BY FILING ONLINE
    In the last year, Puerto Rico has greatly expanded the ability to file a number of documents electronically and has an easy to use online system for filing annual reports. The system will reflect the filing immediately and using it will help you to avoid delays often experienced when submitting paper filings. Do not be disconcerted by the Spanish only home page! The pages for filing the annual reports can be viewed in English by clicking the American flag in the upper right-hand corner, giving you access to instructions and information in English. To file an annual report online, you must be authorized as either an employee/owner of the corporation or as a certified public accountant, attorney or paralegal.

  4. GATHER THE INFORMATION YOU NEED
    LLCs merely have to pay the $150 fee and present basic information about the company (name, register number and whether the LLC is foreign or domestic).  The annual reporting requirements for corporations are a bit more involved.  Corporations must provide the following information on an annual report:
    a. Name, register number and whether the corporation is foreign or domestic
    b. Whether the volume of business exceeds three million dollars
    c. Name, address, telephone number and e-mail address of the corporation’s designated office in Puerto Rico and its registered agent (These should be the same.)
    d. Name, mailing address and date of the expiration of the term of at least two officers of the corporation
    e. Financial Statement:  Every corporation must present a financial statement for the corporation. If the volume of business is under three million dollars, the statement must be prepared in accordance with GAAP. If the corporation’s volume of business is over three million dollars, then the statement must be audited by a certified public accountant licensed to practice in Puerto Rico.

  5. REVIEW YOUR ONLINE STATUS TO ENSURE RECORDS ARE CORRECT
    Puerto Rico will accept the current year’s annual report, even if previous annual reports are past due. To ensure that you are in compliance and that Puerto Rico’s online system reflects that all annual reports or annual fees due have been filed for your entity, run a search on the company name. The tab “annual filings” will display the annual reports filed or fees paid for the company. (Note that for LLCs, the phrase “annual due” appears. This does not mean that the annual fee is due, but that the annual dues have been paid.) If there are past due annual reports from previous years, these will need to be submitted using a paper filing.

Puerto Rico’s online system has greatly expanded and improved over the past year and, if you follow the tips above, it is likely you will have no difficulties filing your annual report in a timely way and avoiding a sizeable monetary penalty.

 

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

Tags: Corporate Compliance, International, Compliance, International Transactions, Entity Formation and Filing Considerations, LLC Compliance, Annual Reports, Good Standing, Compliance due dates

FOIA at 50: Fifty Fun Facts about the Freedom of Information Act (PART 2)

Posted by Joanna McCall on Thu, Mar 09, 2017

By Joanna McCall and Courtney McRae, National Corporate Research, Ltd.

Freedom of Information Act seal.jpg

In Part I of our series commemorating the 50th anniversary of the Freedom of Information Act (FOIA), we covered the origins of the Act and its major amendments, processes, procedures, exemptions and exclusions. In Part II, we take a look at the various types of FOIA requesters, turnaround times, and more.

Who Receives the Most FOIA Requests?

  1. The number of FOIA requests submitted to federal agencies has steadily increased over the years. In March 2016, the Department of Justice’s Office of Information Policy announced that government agencies processed nearly 770,000 FOIA requests in 2015.
  2. The top agencies to receive FOIA requests in 2015 were the Departments of Homeland Security, Justice, Defense, Health and Human Services and Veterans Affairs.[1]

Three General Categories of FOIA Requesters       

  1. Commercial-use requesters: individuals or companies requesting records in order to further their own, or another party’s commercial, trade or profit interests.
  2. Noncommercial requesters: including educational institutions, noncommercial scientific institutions and members of the news media.
  3. All others: a catchall category for individuals and companies who don’t fit into the first two categories.
  4. Agencies vary their fees depending on the category of requester. Noncommercial requesters may even request a fee waiver. [2]

Turnaround Times for FOIA Requests

  1. Federal agencies have 20 working days to respond to the request. However, this usually means they acknowledge the request within 20 working days. It almost always takes them longer to actually issue a final response.
  2. An agency may cite “exceptional circumstances”, such as the scope of the request or the agency’s FOIA backlog, in communicating an extension to their response time.
  3. Per the government’s 2015 analysis of FOIA response times, it takes from one to two-and-a-half years to answer requests.
  4. If an agency feels a request is overly broad or cumbersome, they may ask the requester to narrow the request. [3]
  5. Agencies frequently cite FOIA exemptions and withhold information in their final responses and information may be deleted or blacked out.
  6. The most frequently cited FOIA exemptions are Exemption 6 and Exemption 7(c), which protect personal privacy.

FOIA Information: Public vs. Private

  1. Information issued in response to a FOIA request is usually, but not always, considered public information. An agency may release records that contain sensitive information only to the requester.
  2. The FOIA requester’s name and the nature of their request are considered to be public information and will be listed in the agency’s FOIA log.

The Appeal Process

  1. If a requester is unhappy with the agency’s final response or with the amount of time the request is taking, they may appeal to the “FOIA Ombudsman”, the Office of Government Information Services (OGIS). The OGIS assists in resolving disputes between requesters and agencies.
  2. If a requester is unhappy with the agency’s final response, they also have the option of appealing. The appeal must be filed within 90 days of receiving the final response.
  3. An appeal can be mailed or, in most cases, emailed. There is no fee to submit an appeal.
  4. FOIA requesters have the option of suing the agency should both their request and their appeal fail. The U.S. Supreme Court has decided several notable cases regarding FOIA requests.
  5. The number of FOIA lawsuits has steadily risen over the years, from 299 suits filed in fiscal year 2001 to 498 suits filed in fiscal year 2015. [4]

You Can FOIA Yourself!

  1. Under the Privacy Act of 1974, 5 U.S.C. § 552a, individuals can request access to their own records as maintained by the Federal government.
  2. The Privacy Act also requires that the government obtain the written consent of an individual before disclosing records about the individual. However, there are exceptions to this requirement.

Famous FOIA Requests

  1. Agencies have responded to some unusual FOIA requests over the years, including a request for complaints at the CIA’s cafeteria and the FBI’s dictionary of Twitter slang.

FOIA Laws in U.S. States and Around the World

  1. All fifty U.S. states have versions of the Freedom of Information Act which allow citizens to request state government records.
  2. Some states, such as Arkansas and Virginia, only respond to requests from state residents. Arkansas agencies even take the step of requesting identification from would-be records requesters.
  3. At least 95 countries worldwide have some variation of a ‘right to information’ law.  Sweden is said to have enacted the first such law in 1766, followed by Finland in 1951 and then the United States.[5]

As you can see, a FOIA request can quickly become complicated. Diligent and time-consuming follow-up is often required to ensure you get results quickly. Before you file, you may want to consider using an experienced service company to file on your behalf to ensure you receive the documents you need.

 

[1] https://www.justice.gov/oip/blog/summary-fiscal-year-2015-annual-foia-reports-published

[2] https://foia.state.gov/Request/Fees.aspx#Requester-Categories

[3] http://nsarchive.gwu.edu/nsa/foia/foia_flowchart.pdf

[4] http://foiaproject.org/2016/01/06/foia-lawsuits-reach-record-high/

[5] http://www.right2info.org/archived-content/access-to-information-laws/access-to-information-laws

 

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

Tags: Freedom of Information Act

Annual Reports in Puerto Rico are Due April 17th

Posted by Melissa Tomelden on Tue, Mar 07, 2017

By Melissa Tomelden, National Corporate Research, Ltd.

Annual_reports_in_Puerto_Rico

Corporations (profit and nonprofit) and limited liability companies (LLCs) organized or registered as a foreign entities with the Department of State in Puerto Rico are obligated to file an annual report on or before April 17th. This applies to all corporations and LLCs formed or qualified on or before December 31st of the previous year --- even if the entity was only in existence for one day. All filings are done electronically. The filing fee for corporations and LLCs is $150 and the fee for nonprofit corporations is $5.

General information required when filing your annual report in Puerto Rico includes:

  • The corporation's name and the name of the resident agent as registered with the Department of State;

  • A list containing the names and addresses of all directors and officers of the corporation at the date the report is filed, the expiration dates of their respective terms and their email addresses;

  • For entities whose volume of business does NOT exceed $3 million, the report must include a balance sheet reflecting the assets and liabilities of the company. Entities whose business volume exceeds $3 million must include a balance sheet audited and certified by an independent certified public accountant licensed in Puerto Rico. The auditor's opinion must include the stamp from the Puerto Rico Certified Public Accountants' Association and the accountant’s seal;

  • LLCs are only required to file an Annual Fee Statement with basic information; no balance sheet is required.

  • The Economic Data Survey is required for all filings. This is a two-part questionnaire which includes general information such as current sales amount generated in Puerto Rico, the company’s EIN number and whether the company has any contract with a governmental entity.

Late Filing Fees:

The Puerto Rico Department of State assesses a hefty penalty fee if the deadline is missed. The late penalty fees imposed are as follows:

  • $750 for corporations

  • $500 plus 1.5% interest per month for LLCs

  • $75 for nonprofits

To avoid these expensive penalty fees imposed by the Puerto Rico Department of State, file on time. Corporations have the option to file an extension with the Department of State. However, they must pay the $150 annual filing fee to obtain the extension. The extension is only available for corporations --- NOT LLCs. It grants a corporation 60 days to file its annual report, which extends the filing deadline to June 14, 2017. This extension must be filed on or before April 15th. If a corporation requires an additional extension, until July 15, 2017, a filing fee of $30 must be paid between April 16 and June 14, 2017. No additional extensions are available and the annual report must be filed on or before July 15th to avoid the penalty fee.

Cancellations and Reinstatements

As a precaution, the Puerto Rico Department of State has initiated cancellations of entities for failing to file two consecutive annual reports. Should an entity be administratively cancelled, it can file a reinstatement. The entity will need to submit a Certificate of Renewal and pay a filing fee, plus the penalty fees associated with the missing years. Entities that were cancelled five more years must pay twice the annual report filing fee for each missing year, but no penalty fee will be imposed. For domestic entities, an additional fee to restore will be imposed. The additional fees are $20 for profit corporations, $4 for nonprofits and $80 for LLCs, plus the fees associated with the missing years.

Keep Track of Due Date: No Reminders Sent

When filing your annual report in Puerto Rico, it is important to remember to calendar the due date, as no notice is sent. You will also need to gather the necessary information, including financial statements, in advance, and to make sure the extension requests and annual reports are submitted in a timely way to avoid the large penalties. A knowledgeable service company that offers compliance services can assist with the process and help ensure the entity meets the deadline. 

 

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

Tags: Annual Reports