Delaware Incorporation Handbook (14th Edition, 2013)

Table of Contents UNDERSTANDINGNEWCOMPANYFORMATION,MADEEASY..........................................................................................5

INTRODUCTION:...........................................................................................................................................................................5HOWTOSELECTTHEBESTSTATETOBEYOURCOMPANYSLEGALHOME................................................................................................6

Privacy.................................................................................................................................................................................6MultipleStateRegistration.................................................................................................................................................7

SELECTINGENTITYTYPE.................................................................................................................................................................8LLCs(Briefly).......................................................................................................................................................................8StockCorporations(Briefly)................................................................................................................................................9

BEFOREYOUORDER...................................................................................................................................................................10SelectingaName..............................................................................................................................................................10OpeningaBankAccountandtheFederalEmployerIdentificationNumber(EIN)............................................................10

NEWCOMPANYREGISTRATION.....................................................................................................................................................11RegisteredAgentServices.................................................................................................................................................11CorporateKitsandOperatingAgreementKits..................................................................................................................11DelawareVirtualOffice.....................................................................................................................................................11SelectingaPackage..........................................................................................................................................................12PlacingYourOrder............................................................................................................................................................13PaymentOptions...............................................................................................................................................................15

REGISTERINGYOURNEWCOMPANY..............................................................................................................................................15ProcessingTime................................................................................................................................................................16Whattodowiththedocumentsyoureceive....................................................................................................................17

ADMINISTRATIONOFYOURNEWCOMPANY.....................................................................................................................................18AnnualResponsibilities.....................................................................................................................................................18AmendmentsandOtherChanges.....................................................................................................................................19FORFEIT&VOIDStatusandRenewal&Revival................................................................................................................20

INFORMATIONFORINTERNATIONALANDOFFSHORECOMPANIES.................................................................................23WHYISDELAWARESOPOPULARWITHOFFSHOREENTREPRENEURSANDINVESTORS?...............................................................................23HOWTODETERMINEIFYOUHAVEUSSOURCEINCOME.....................................................................................................................2425REASONSTOFORMADELAWARECOMPANY...................................................................................................................26

LIMITEDLIABILITYCOMPANIES(LLCS)...........................................................................................................................30HowareLLCsManaged?..................................................................................................................................................30HowareLLCsTaxedbytheIRS?.......................................................................................................................................30HowareLLCsTaxedbytheSecretaryofStateofDelaware?...........................................................................................30AdvantagesofDelawareLLCs..........................................................................................................................................31WhataretheadvantagesofoperatingasanLLCfornonresidentnoncitizens?............................................................31TheLLCasanalternativetoaPartnership.......................................................................................................................31TheLLCasanalternativetoanSCorporation..............................................................................................................32Isthereadownside?.........................................................................................................................................................32

CERTIFICATEOFFORMATION........................................................................................................................................................33ThefollowinginformationwillbeincludedontheCertificateofFormation:...................................................................33WhatistheOperatingAgreement?..................................................................................................................................33

SERIESLLC................................................................................................................................................................................34HowareSeriesLLCsManaged?.......................................................................................................................................35ThefollowinginformationwillbeincludedontheCertificateofFormationofaSeriesLLC.............................................35SeriesAgreement..............................................................................................................................................................36

CORPORATIONS.............................................................................................................................................................37HowareCorporationsmanaged?.....................................................................................................................................37HowisaCorporationTaxed?............................................................................................................................................37WhatisthebenefitofformingaDelawareCorporationfornonresidentnoncitizens?..................................................39HowisaCorporationTaxedbytheSecretaryofStateofDelaware?...............................................................................39

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DelawareBusinessIncorporators,Inc.|www.dbiglobal.com|[email protected],Suite700,Wilmington,Delaware19808,USA|Telephone:3029965819or18004232993|Fax:3029965818

CertificateofIncorporation...............................................................................................................................................43WhataretheByLaws?.....................................................................................................................................................44

CLOSECORPORATIONS................................................................................................................................................................45HowareCloseCorporationsManaged?............................................................................................................................45

NOTFORPROFITCORPORATIONS.................................................................................................................................................45HowareNotforProfitCorporationsManaged?..............................................................................................................46HowareNotforProfitCorporationsTaxedinDelaware?................................................................................................46CertificateofIncorporation...............................................................................................................................................46

SCORPORATIONS......................................................................................................................................................................47HowisanSCorporationtaxedbytheIRS?.......................................................................................................................47HowisanSCorporationtaxedbytheSecretaryofStateofDelaware?...........................................................................47WhomayelectSStatus?...............................................................................................................................................47TheSCorporationasanalternativetotheCCorporation................................................................................................48

HOLDINGCOMPANIES...................................................................................................................................................51HowareholdingcompaniestaxedinDelaware?..............................................................................................................51

MARINEHOLDINGCOMPANIES.....................................................................................................................................................51Wherethevesselshouldberegistered?............................................................................................................................52

AIRCRAFTHOLDINGCOMPANIES...................................................................................................................................................52PERSONALHOLDINGCOMPANY....................................................................................................................................................53

NAMINGYOURCOMPANY.............................................................................................................................................54NAMINGCONVENTIONS..............................................................................................................................................................54RESERVINGANAME....................................................................................................................................................................55DBASDOINGBUSINESSASNAMES.........................................................................................................................................55

REGISTEREDAGENT.......................................................................................................................................................57QUALIFICATION.............................................................................................................................................................59

HowdoIknowifIneedtoQualifyinastateIdobusinessin?.........................................................................................59WhatistheproceduretoQualifyinanadditionalstate?.................................................................................................60WhathappensaftermycompanyisQualifiedinanadditionalstate?.............................................................................61

OPENINGABANKACCOUNT..........................................................................................................................................62SummaryofRequirementstoOpenaBankAccountintheUS.........................................................................................62SummaryofRequirementstoOpenaBankAccountOutsidetheUS................................................................................62ContactingYourBank........................................................................................................................................................62

EMPLOYERIDENTIFICATIONNUMBER(EIN)...................................................................................................................63USCitizensandResidentAliens.........................................................................................................................................63NonResidentNonCitizens................................................................................................................................................63

ITININDIVIDUALTAXIDENTIFICATIONNUMBER..........................................................................................................65WhatisanITIN?................................................................................................................................................................65HowdoIapplyforanITIN?...............................................................................................................................................65WhatisanAcceptanceAgent?.........................................................................................................................................66

CERTIFICATES,APOSTILLES,LEGALIZATIONANDAUTHENTICATIONOFDOCUMENTS......................................................67CertificateofGoodStanding.............................................................................................................................................67CertifiedCopy....................................................................................................................................................................67NotarizedTrueCopy..........................................................................................................................................................67CertificateofIncumbency.................................................................................................................................................68Apostilles...........................................................................................................................................................................68LegalizationofDocumentsbyForeignConsulates............................................................................................................68

CONVERSIONS...............................................................................................................................................................68

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ENTITYTYPECONVERSION.............................................................................................................................................69Domestication...................................................................................................................................................................69TaxStatusConversion.......................................................................................................................................................69

THEUNITEDSTATESPATRIOTACT..................................................................................................................................70GOODSTANDINGPROTECTIONSERVICE.........................................................................................................................71

Corporations.....................................................................................................................................................................71LLCs...................................................................................................................................................................................71

GLOSSARY......................................................................................................................................................................72INDEX............................................................................................................................................................................80

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SECTIONONE:UNDERSTANDINGNEWCOMPANY

FORMATION,MADEEASY

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Understanding New Company Formation, Made Easy

Disclaimer:Thefollowingarticleisintendedtoprovidegeneralinformationabouthowtoincorporatein

DelawareorformanewDelawareLLCandisintendedforinformationalpurposesonly.Itisnotintendedtoreplacetheadviceofanattorneyortaxaccountantanddoesnotconstituteindividualizedlegaladvice,legalservice,ortaxadvice.Introduction:

Forminganewcompanyrequiressomeadvancedpreparation,butthatdoesn'tmeanithastobedifficult!Thisinformationisintendedtofamiliarizeyouwiththeprocessofcharteringanewcompany,inotherwords,howtoincorporateabusinessorhowtoformanLLC.Whenwesay"charteringanewcompany""incorporatingabusiness"or"forminganewcompany"wearereferringtotheprocessoffilingtherequireddocumentsandregisteringthenameofthecompanywiththestateauthoritywhichcontrolsandoverseescorporations.Whenthisprocessiscomplete,thenewcompanyisgrantedanofficialcharterauthorizingittooperateasabusinessinthestatewhereitisregistered,enablingittotransactinterstatebusinessintheUS,andtoberecognizedasabusinessentityinforeigncountries.Youcouldthinkofthe"charter"asbeingsimilartoalicense.DBIcanhelpwitheverystepofthisprocess;infact,we'lldomostofitforyou!

InthissectionoftheDelawareIncorporationHandbookwewilldiscusshowtocreateandregisteranew

DelawareLLCorDelawareCorporationingeneralterms.ThisinformationwillbedividedintoTopicalSections.Eachsectionwillbeginwithanintroductionofthebasicsineasytounderstandlanguage.FrequentlyAskedQuestions(FAQs)alsoappearattheendofeachsection.MostofthisinformationappliestobothUSbasedclientsandclientslocatedoutsidetheUS;wehavemadeanefforttoidentifyinformationwhichmaybeofparticularinteresttoInternationalclientsandinformationwhichmaybeprimarilyofinteresttoUSbasedclients.

Ifyouareinterestedinreadingfurther,youwillfindthepagenumbersofarticleswithmoreindepthinformationlistedattheendofeachsection.

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Q: IsitnecessarytohireanattorneytoIncorporateintheStateofDelaware?

A: TheservicesofanattorneyarenotrequiredtoIncorporateinDelawareorformanLLCinDelaware.DBIwillcompleteandfilethedocumentsnecessarytoregisterthenewcompanyintheStateofDelaware(and/orotherdesiredstates)andofferskitsforByLawsandOperatingAgreements.PleasefamiliarizeyourselfwiththeprocessbyreadingthishandbookandaskingourIncorporationSpecialistsanyquestionsyoumayhave.Ifyoufeelyouneedlegaladvicewesuggestyoucontactanattorney;pleasecontactanIncorporationSpecialistifyouwouldlikeareferral.

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HowtoSelecttheBestStatetobeYourCompanysLegalHomeWhenyoudecidetoformanewcompanyyouhavealotofoptionstochoosefrom.Oneofthefirstdecisions

youwillmakeiswhatstateyouwanttobethe"legalhome"ofyourcompanycharter.Youcouldform(charter)yourcompanyinthestatewhereyourheadquartersorhomeofficewillbelocated,oryoucouldformyourcompanyinastatewithareputationforbeingmoreadvantageous.Thedecidingfactorsareusuallywhatcorporatelawsandtaxesapplyforagivenstate.

Youhavemostlikelyalreadyheardabouttheadvantagesofformingyourbusinessorholdingcompanyin

Delaware.AsofJanuary14,2013,morethan900,000USbasedandoffshorecompanieshadchosenDelawareastheircorporatehome.Over60%oftheFortune500firmsandmorethan50%ofthecompaniestradedontheNewYorkStockExchangeandNASDAQareCharteredasDelawareCorporations.

IfyouwouldliketolearnmoreabouttheadvantagesofforminginDelaware,pleaseseethe25ReasonstoFormaDelawareCompanysectiononandthepublicationWhyCorporationsChooseDelaware.PrivacyThissectionappliestobothUSbasedbusinessesandInternational/OffshoreCompanies,butmaybeofparticularinteresttoInternational/OffshoreCompanies.

OnefactorwhichisstronglyinfluentialinselectingthestateinwhichtobaseyourcompanysCharterisprivacy.

Manyofourclientsareveryconcernedabouttheprotectionoftheirsensitiveinformationandwishtokeepinformationsuchasownershipdetailsandhomeaddressesoutofthepublicrecord.WhetheryouareaclientofDBIoraprospectiveclientdiscussingyourplansfortheorganizationofanewcompany,allofyourinformationiscompletelyconfidential.ThepossibilityoftotalprivacyisapowerfulmotivatorandmovesmanyofourclientstoselectDelawareasthelegalhomeoftheircompany.ADelawareLLCorDelawareCorporationisnotrequiredtonametheDirectors,Officers,Owners,Shareholders,Members,orManagerswhenitisIncorporatedorOrganized.

PrivacyinDelawarestartswithdraftingtheCertificateofFormation(orCertificateofIncorporation).AllDBI

NewCompanyRegistrationpackagesincludethedraftingoftheCertificateofIncorporationorCertificateofFormation.Next,theCertificateisfiledwiththeDelawareSecretaryofStateandthenewLLCorCorporationisregisteredintheDivisionofCorporationsInformationSystem.Thenamesoftheshareholders,Directors,MembersandManagersarenotrequiredtoappearontheCertificateofFormationofanLLCorCertificateofIncorporationofaforprofitCorporationandthereforedonotenterthepublicrecordatincorporation.DBIhasadirectcomputerconnectiontotheregistrationsystem;whenweenterthenewLLCorCorporationintotheregistrationsystemtheonlyinformationwegivewillbeourown,asRegisteredAgentandIncorporator(Organizer).

Ifyouelectnottohavethenamesoftheprincipalsappearinthepublicrecordwewillfurnishyouwithaprivate

documentwhichnamestheInitialDirectorsorInitialMembers,andwhichcanbeusedforpurposessuchasopeningbankaccountsandenteringcontracts.Thisdocumentwillbegiventoyoudirectlyandwillonlybeseenbythoseyoupersonallyshowthedocumentto.OtherdetailsregardingOwners,Shareholders,Members,andManagerswillberecordedbyyouinyourownprivatecompanyrecordsandwillnotbefiledwithanyDelawareagencyormadepublicinanyway.

IfyouformaDelawareStockCorporationorNotforProfit,youwillberequiredtonametheDirectorsandone

OfficeroftheCorporationwhentheAnnualReportisdue.YouwillnotberequiredtonametheShareholders(owners)oftheCorporation.Bearinmind,aDirectorisnotrequiredtobeanowneroremployeeoftheCorporation.

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IfyouformaDelawareLLC,youwillnotberequiredtofileanAnnualReportinDelawareandthenamesofthe

Members(owners)andManagersofthecompanywillnotenterthepublicrecord.IfyouattempttoQualifyyourDelawareLLCorDelawareCorporationtotransactbusinessinanadditionalstate,

theForeignstatemayrequireyourecordownershipormanagementdetailsinthepublicrecordsofthatstate.SomestateswhichrequiredisclosurebyDomestic(local)companiesdonotrequiredisclosureiftheapplicantisaDelawareLLCorCorporation.

IfyouwouldprefertohavethenameandaddressoftheInitialMemberorInitialDirectorprintedonthe

CertificateofIncorporationorCertificateofFormation,youmayselectthisoptionwhenyouplaceyourorder.

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Q: DoesDBIofferNomineeDirectors?A: No,DBInolongeroffersthisservice.YoumaycontactanIncorporationSpecialistfora

referral.Q: IfmynameisntprintedontheCertificateofIncorporation,howdoIprovethatIown

thecompany?A: DBIwillprovideaResolutionbyIncorporatornamingtheperson(s)authorizedtoopen

bankaccountsandenterintocontractsastheInitialDirectororInitialMember,butthisdocumentshouldbesupplementedbyproperlymaintainedcompanyrecords.ProofofownershipisrecordedintheprivateCorporaterecordsmaintainedbythecompanyintheformofStockCertificatesorMembershipInterestCertificatesplustheShareTransferLedgerorRegisterofMembers.

MultipleStateRegistrationThissectionappliestoclientswhowillhavebusinessactivitieswithintheUnitedStates

WhenyoudecidetoIncorporateorformanewLLCyouhavealotofoptionstochoosefrom;thestateyou

selectasthehomeofyourCharterwillcontrolwhichoptionsyouhave.IfyouarelocatedintheUS,oneofthefirstdecisionsyouwillmakeiswhatstateyouwanttobethelegalhomeofyourCorporateCharterorLLCCharter.YoucouldIncorporateinthestateyourbusinessislocatedin,oryoucouldformyournewLLCorCorporationinastatewithareputationforbeingmoreadvantageous,suchasDelaware.

ADelawareLLCorCorporationinGoodStandingwiththeSecretaryofStateofDelawarehastheConstitutional

righttotransactInterstateCommerce;meaningcommercethatoccursbetweenpartiesintwoormorestates.AKentuckyresidentwithaDelawareLLCsellinghisproducttoacustomerinNewYorkisanexampleofInterstateCommerce.Ifyouareregularlyconductingbusinesstransactionsbetweenyourselfandanotherpartywithinthebordersofthesamestate,youmayberequiredtoobtainthepermissionofthatstatetodobusinessthere.Thisdoesnotmeanyouhavetocreateanewcompanyineverystateyoudobusinessin.YoucanchooseDelawaretobethelegalhomeofyourcompanyCharter,andcanthenapplyforpermissionforyourDelawareLLCorDelawareCorporationtodobusinessinadditionalstates.

TheprocessofapplyingforpermissiontodobusinessinanadditionalstateiscalledQualification.Qualification

inanadditionalstatemaynotberequiredineverycase;inadditiontotheexemptionforInterstatecommerce,thereareotheractivitieswhichareoftenexemptfromrequiringQualificationinaparticularstate.

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SeeQualificationsectionformoreinformationaboutregisteringyourDelawareLLCorcorporationasaforeignentityinanotherstate.OfalltheadvantageousreasonstoformyourLLCorCorporationinDelaware,ifyouryoungUSbasedbusiness

haslimitedcashflowandcapital,youmaybeconsideringformingyourcompanyinanotherstate.ThisoptionispopularwiththosewhofeelthattheywouldbenefitmorefromtheeconomyofsinglestateregistrationthanfromtheprotectionsandbenefitsofregisteringasaDelawarecompany.AlthoughwespecializeinregisteringDelawareCharters,ourIncorporationSpecialistsareexperiencedinperformingregistrationsandbusinessfilingsallovertheUS.Wewouldbehappytoprovideyouwithaquoteifyouarethinkingofforminginanotherstate.

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Q: DontIhavetohaveanaddressinDelawaretohaveaDelawareLLCorDelawareCorporation?

A: No,youonlyneedtohaveaDelawareRegisteredAgent.DBIwillbeyourDelawareRegisteredAgentandyourheadquarterscanbelocatedanywhere;evenoutsideofthestateoroutsideofthecountry.SeeRegisteredAgentsectionformoreinformation.IfyouwishtopurchaseaDelawareaddresswhichyoumayuseforroutinebusinesscorrespondenceweofferMailForwardingServicepackages,pleaseseeDelawareVirtualOfficeunderNewCompanyRegistrationsection.

SelectingEntityType

ThenextoptionstoconsideraretheavailableoptionsforEntityType.StockCorporations,LLCs,LimitedPartnershipsandSoleProprietorshipsareallexamplesofdifferentEntityTypes.LetssubstitutethewordcompanyforEntitytomakeiteasier.Differentrules,lawsandtaxesmayapplytoeachtypeofcompany.Whenwecreateyournewcompany,wewillidentifywhattypeofcompanyweareformingwhenweregisterwiththestate;sowewillneedtodecidewhichtypeofcompanyisthebestfitforyoubeforeweattempttoregister.Thedecidingfactorsareusually:thetypeofliabilityprotection,themethodoftaxation,andthecomplexityofadministration.

LLCs(Briefly)

ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.ThecompanytypeourclientsselectmostoftenistheLimitedLiabilityCompany(LLC).Herearesomefeatures

oftheLimitedLiabilityCompany: ADelawareLLCisnotrequiredtofileanAnnualReportorholdannualmeetings.

DelawareLLCsoffermultipleoptionsformanagementstructureanddistributionofprofitsandlosses.

AnLLCmaybeeligibletoelecttobetaxedbytheIRSasanIndividual,Partnership,SCorporationorC

Corporation.Thisdoesnotchangetheentity(company)type.AnLLCwhichhaselectedtobetaxedasanIndividualorasaCCorporationisstillanLLC.

TheliabilityofallMembers(owners)islimitedtotheirinvestmentsintheLLC(unlesstheypersonallyguaranteeotherdebtincurredbytheLLC).

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Nonresident,NoncitizensareeligibletoformanLLCinDelaware. TheDelawareLLCTaxiscurrently$250ayearandisaflatratenotdependentincome,assetsoractivity.

StockCorporations(Briefly)

ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.ThesecondmostpopulartypeofcompanyselectedbyourcustomersistheStockCorporation.Herearesome

featuresofaStockCorporation: StockCorporationsprovidethemeanstolimitanownerspersonalliabilitytothemoneytheyhaveinvested

inthecompany.

Ourcustomersoftenselectthistypewhentheyplantohavemultipleinvestorsortoraisemoneyfromthepublicbythesaleofstockshares.

NonresidentnoncitizensareeligibletoformstockCorporationsinDelaware(butarenoteligibletoelectSCorporationtaxstatus).

TheDelawareFranchiseTaxiscurrentlyaminimumof$75forCorporationsauthorizinglessthan5,000sharesplusa$50AnnualReportfilingfee.

? Q: Iamnotafranchise,whyshouldIpayafranchisetax?A: ThewordFranchiseasusedhereinDelawareFranchiseTaxmeansaspecial

privilegegrantedtoanindividualorgroup;especially:therighttobeandexercisethepowersofaCorporationanddoesnotmeanachainofbusinesseslicensedbytheoriginalstoreandoperatedpertheoriginalstorespatternundertheoriginalstorestradename.

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BeforeYouOrderNowthatyouhavedecidedwhatstate(s)toregisterinandwhatentitytypeyouwouldliketoform,youare

almostreadytoplaceyourorder.ThereareonlythreethingsleftforyoutodoandtwoofthemarediscussedinthisTopic.SelectingaName

ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.Wait!Dontregisterthatdomainnameyet!Beforeweregister,DBIwillchecktoseeifthenameyouwouldlike

foryournewcompanyisavailableinDelaware(oranyotherstate).Thereisnochargeforthisservice.Westronglycautionyouagainstregisteringadomainname,applyingforaTaxIDorsubmittinganapplicationforabusinesslicensebeforeithasbeendeterminedthatthenameyoudesireisavailableinthestate(s)inwhichyouintendtoregister.

Thecompanynameconsistsoftwoparts:theTitlepartandtheSuffixpart.Forexample,inDBIGlobal,Inc.

theunderlinedDBIGlobalistheTitlepartandInc.istheSuffix.TheSuffixidentifieswhattypeofEntity(company)thisis.Inc.andCorp.aretwowellknownSuffixesforCorporations;LimitedLiabilityCompaniesusuallyusetheSuffixLLC.TheSuffixpartisnotconsideredwhendeterminingifanameisavailable.Trytothinkoftwoorthreenamesyouwouldliketochecktheavailabilityof,bearinginmindthattheonlypartthatmakesadifferenceintheavailabilityistheTitlepart.

SeeNamingYourCompanyformoreinformationaboutNamingConventions(rules)andtipsonhowtogetthenameyouwant.

OpeningaBankAccountandtheFederalEmployerIdentificationNumber(EIN)ThissectionappliestobothUSbasedbusinessesandInternational/OffshoreCompanies,butmaybeofparticularinterestto

International/OffshoreCompanies.Wewouldlovetobeabletotellyouexactlywhatdocumentationyourbankwillrequestwhenyougotoopen

anaccountinthenameofyourbusiness,butitvariesfrombankbranchtobankbranch.Somebranchesevenleavethisdecisiontothediscretionoftheindividualbankrepresentatives.IfyouplanonopeningabankaccountinthenameofyournewDelawareLLCorDelawareCorporationitisagoodideatocontactthebankyouwishtousetofindoutwhatdocumentationtheyrequirebeforeyouplaceyourorderfornewLLCformationorIncorporation.

WecantellyouitwouldbetypicaltobeaskedforacopyofyourCertificateofIncorporation(orCertificateof

Formation),aCertificateofGoodStandingandphotoidentification.AndallUSbankswillrequireanLLCorCorporationtohaveaFederalEmployerIdentificationNumber(EIN)toopenabankaccount.ThisisrequiredforUSbankaccountsregardlessofwhetherthecompanywillactuallyhaveanyemployeesornot.DBIcanobtainanEINforyouatthesametimeweareregisteringyournewcompany.

SeetheOpeningaBankAccountsectionformoreinformation.Youllalsofindaworksheetyoucanrefertowheninterviewingthebanktofindoutwhatdocumentstheywillrequire.SeetheEmployerIdentificationNumbersectionformoreinformationaboutEINs.

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NewCompanyRegistrationThefollowingsectionpertainstoDelawareformation,otherprocessesandtimeframesmayapplyforother

states.IfyouareinterestedinforminginastateotherthanDelaware,contactanIncorporationSpecialistformoredetails.

RegisteredAgentServices

ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.DelawarelawrequiresbothLLCsandCorporationstomaintainaRegisteredAgentinDelaware.TheRegistered

AgentreceivesanylegalnoticesdeliveredbyServiceofProcessonyourcompany.DBIwillbeyourDelawareRegisteredAgentandthefirsttwelvemonthsofDelawareRegisteredAgentservicearefreewithyourpurchaseofaNewCompanyRegistrationpackage.ThisishowyoucanbepermittedtohaveaDelawareLLCorCorporationwithouthavingabusinesslocationinDelaware.

AfterthefirstyearyouwillbechargedanAnnualRegisteredAgentRenewalfeeof$100forUSclientsand$120

forclientsoutsidetheUS.FailuretomaintainaRegisteredAgentwillresultinyourcompanyCharterbeingdeclaredFORFEITbytheDelawareSecretaryofState;thismeansyourcompanywouldbeinvalidandwouldloseitsrighttofunctionasanLLCorCorporation.

SeeRegisteredAgentsectionformoreinformation.CorporateKitsandOperatingAgreementKits

ThissectionappliestobothUSbasedandInternational/OffshoreCompanies.IfyourecallthesectiononPrivacy,thenyoualreadyunderstandhowimportantitistomaintaincompany

recordswithappropriatedocumentation.Insomecasesthecompanyrecordsyoumaintainaretheonlysourceofproofavailabletosatisfytherequirementsofbanks,agenciesandotherswhowishtoverifythelegitimacyorownershipofyourcompanybeforeenteringintoarelationshipwithyou.Thesedocumentsarealsocrucialwhenbringing,settlingordefendinglawsuitsandinsomecasesinsatisfyingIRSinquiriesintoelectedtaxstatus.

Butdontbeintimidated,weofferkitswhichsatisfyDelawarelawsandappropriatelyrecordtheownershipand

leadershipstructureofyournewcompany.InsideyourkityouwillfindStockCertificatesorMembershipInterestCertificates,yourCorporateSealandamodelOperatingAgreementorByLawsinyourchoiceofaWordtemplateorfillintheblankdocument.

DelawareVirtualOfficeThissectionappliestobothUSbasedbusinessesandInternational/OffshoreCompanies,butmaybeofparticularinterestto

International/OffshoreCompanies.

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ByservingasyourRegisteredAgentinDelawareyourDelawareLLCorDelawareCorporationisexemptfrombeingrequiredtomaintainanyotherpresenceinDelawareforthepurposesofobtainingandretainingaDelawareCharter;butyourRegisteredAgentsfunctionsarelimitedtoreceivingServiceofProcessandTaxNotices.ManyofourclientsdesireaDelawareaddresstheycanuseforbusinesspurposes.DBIoffersmultiplelevelsofserviceforthosecompanieswhichdesireabusinessofficeormailforwardingserviceinDelaware. Low Volume Mail Forwarding

DBIofferslowvolumemailforwardingforcompanieswhichdonotanticipatereceivingmorethanthreepiecesofmailpermonth.Thisisoftensufficientforabankstatementandincidentalmail.

Basic Mail Forwarding

ForcompaniesthatdesireaDelawareStreetAddresswithmailforwardingwhichcanbeusedasthecompanysbusinessaddressonwebsites,letterhead,businesscards,salesordersplusroutinebusinesscorrespondence,basicmailforwardingisappropriateforthosewhoexpectupto25piecespermonth.

Basic Package Forwarding

ThisserviceisusedprimarilybycustomerswithoutaUSaddresswhowishtopurchasefromvendorswhowillnotshipoutsidetheUS.

Virtual Office

IncludestheBasicMailForwardingservicewithDelawareStreetAddressplusaDelawaretelephonenumberwithvoicemailandDelawarefaxnumber.Callscanbeforwardedanywhereintheworld.

Delaware Office Space (Time-Shared) with Signed Lease Agreement

IncludesaphysicalofficelocatedatCapitolOfficeCenter,3422OldCapitolTrail,Wilmington,DE19808,USA.Youwillhaveaccesstophone,computer,conferenceroom,andreceptionarea.ThisDelawareofficespacefulfillstherequirementstoopenabankaccountaswellassecuritycompaniesregisteredinDelawareneedingaphysicallocation(DelawareCode1226).

DBIcannotforwardmailwithoutacompleted,notarizedandsignedUSPSForm1583:AppointmentofMail

ForwardingAgent.Theformwillbeprovidedtoyouattimeofpurchase.PleasecontactanIncorporationSpecialistformoreinformation.Contactusifyouwouldlikeaquoteforhighvolumeservice.

SelectingaPackageThissectionappliestobothUSbasedandInternational/OffshoreCompanies.WeofferseparatepackagesforUSbasedclientsandforclientsoutsidetheUS.Ifyouhaveofficesbothinthe

USandoutsidetheUS,youmaycontactanIncorporationSpecialistandwewillhelpyouputtogetherthebestoptionsforacustompackage.Ifyouarenotsurewhichfeatureswouldbebestforyou,contactoneofourIncorporationSpecialistsbyphone,chatoremailforhelp.Wewillbehappytoreviewtheavailableoptionswithyou.

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Inselectingapackagethereareseveralcriteriatoconsider:

1. DoyouneedanOperatingAgreementKit(orCorporateComplianceKit)?Theonlyreasonyoushoulddeclinethisoptionisifyoualreadyplanonmakingyourownarrangementstodocumentyourcompanyownershipandstructure.TheonlypackagesweofferwhichdonotincludeaKitaretheUSEconomypackages.

2. DoyouneedtoregisteryourDelawareLLCorDelawareCorporationinanadditionalUSState?ThisonlyappliestocompaniesthatwilldobusinessinsidetheUS.SeeQualificationformoreinformation.ThisservicecomesstandardwiththeUSExecutivePackageandisavailableasanaddonfeatureforotherpackages.StateQualificationFilingFeesareadditional.

3. DoyouneedaDelawareMailingAddress?ThisoptioncomesstandardwiththeInternationalPlatinumPackageandtheUSExecutivepackageorisavailableasanaddontootherpackages.

4. DoyouneedanApostilleorGoldSealCertifiedCopyforyourCertificate?Thisonlyappliestocompaniesthatwilldobusiness,bankingorinvestmentsoutsidetheUS.AnApostilleorGoldSealCertifiedCopycomesstandardwithallInternationalPackagesorcanbeorderedasanaddonforUSpackages.

5. DoyouneedBusinessLicenseApplicationService?

ThisappliesonlytocompaniesthatwillhaveaphysicalbusinesslocationorhomeofficewithintheUSandcomesstandardwiththeUSExecutivePackageorasanaddontootherUSPackages.

6. DoyouneedtoapplyforanEIN(FederalTaxID)?IfyouareopeningabankaccountintheUS,oremployingwageearningemployeesintheUS,youwillneedanEIN.TheapplicationserviceisincludedintheUSEssentialPackage,theUSExecutivePackage,theGoldInternationalPackagesandthePlatinumInternationalPackages.Youmayalsoaddtheservicetoyourorderseparately.

PlacingYourOrderThissectionappliestobothUSbasedandInternational/OffshoreCompaniesForyourconvenience,youmayplaceyourorderthroughourwebsite,byfax,byphone,byemailorbymail.If

youdonotplaceyourorderthroughourwebsitewewillprovideyouwithanorderformtocompleteandsignthenreturntouswithpayment(theorderformsarefoundintheappendix).Youarewelcometoreturntheorderformbyfax,email,mailorcourier.

Tohelpyouprepare,belowyouwillfindalistoftheinformationwewillcollectwhenyouplaceyourorder.If

youareable,youarewelcometocompletethisinformationontheorderformandsenditin.Ifyouneedassistance,IncorporationSpecialistsareavailabletoansweryourquestionsandhelpyouplaceyourorder;wewillevenfillouttheorderformforyouifyoulike.

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1. WhichEntityTypehaveyoudecidedtoform:LLC,Inc.,etc.?

2. HaveyoudecidedtoIncorporateinDelawareorformaDelawareLLC?DoyouneedtoregisteryourDelawarecompanyinanyadditionalstates?

3. Ifyouhavenotalreadycontactedustochecknameavailability,bereadytosuggest23namesforyourcompany.

4. DidyoudecidetohavethenameoftheInitialDirectororInitialMemberprintedontheCertificate,ordoyoupreferforthenamesoftheprincipalsnottoappearontheCertificate?

5. YouwillbeaskedtoprovidethenameandaddressoftheInitialMemberorInitialDirectorofthecompany.IfyouelectednottohavethenameoftheprincipalappearontheCertificate,thisinformationwillgoonaprivateresolutionnamingthepersonwiththeauthoritytoopenbankaccountsandentercontracts.Youmayprovideanyaddressforthispurpose,althoughwesuggestprovidingtheaddressontheInitialMemberorDirectorsphotoidentification.Ifyouwish,youcanpurchaseoneofourVirtualOfficepackageswhichincludeaDelawareStreetaddressthatcanbeusedforthispurpose.

6. Wewillneedthename,phonenumber,alternatephonenumber(ifany),emailaddressand/orfaxnumber,andmailingaddressofthepersonwemaycontactwithquestionsaboutyourorder.Ifyouareorderingapackagewhichcomeswithacompliancekit,wewillneedyourshippingaddressifitisdifferentfromthatofyourcontactperson.WecannotshipacompliancekittoaPOBox.Ifyouwantyourrenewalbillingtogototheattentionofsomeoneotherthanthecontactpersonortoadifferentmailingaddress,pleasebereadywithyourbillingcontactsinformationaswell.Likewise,ifthereisaspecificpersonoraddresstowhichweshouldforwardtaxnoticesorlegaldocumentsdeliveredbyServiceofProcess,pleaseletusknowthefullcontactdetails.

7. DelawareBusinessIncorporatorswillbeyourRegisteredAgentinDelawareunlessyouinstructotherwise.

8. LLCswillbeformedwithPerpetualExistence(noexpirationdate)unlessyouspecifythatyouwanttheLLCtoexpireonaspecificdate.

9. StockCorporationswillbeformedwiththeGeneralPurposeStatementunlessyouinstructotherwise.TheGeneralPurposeStatementis:ThepurposeoftheCorporationistoengageinanylawfulactoractivityforwhichCorporationsmaybeorganizedundertheGeneralCorporationLawofDelaware.IfyouwishtouseaspecificPurposeStatement,youwillneedtoprovideuswiththeexactlanguageofthestatementyouwishtosubstitute.

10. StockCorporationswillauthorize1,500sharesofcommonstockwithoutparvalueunlessyouinstructotherwise.Authorizingmorethan5,000sharesofstockmayincreaseyourAnnualFranchiseTaxdueandmayresultinanincreasedfilingfee.Authorizingmorethan1500sharesatzeroparvaluewillresultinanincreasedfilingfee.PleasecontactanIncorporationSpecialisttocalculatethefilingfeeifyouwillauthorizemorethan1,500shares.

11. YouwillbeaskedtoselectaNewCompanyRegistrationpackage.IfyouareIncorporatingorforminganewLLCinastateotherthanDelaware,pleasecontactanIncorporationSpecialistforaquoteaspricevariesbystate.

12. YouwillhavetheopportunitytoselectadditionalservicessuchasaCertificateofGoodStanding,BusinessLicenseApplicationService,EINApplicationService,CertifiedCopies,MailForwardingandApostillesatthe

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timewhenyouplaceyourorderforaNewCompanyRegistrationPackage.Someoftheseserviceswillrequiretheprovisionofadditionalinformation.Pleaseseethecorrespondingpagefordetails.

? Q: HowmanyofficersanddirectorsarerequiredformyDelawareCorporation?

A: OnepersoncanbebothanofficerandaDirector.DelawarecorporatelawfacilitatessettingupaonepersonCorporation.NeitherOfficersnorDirectorsneedtobelistedintheCertificateofIncorporation,butthenamesandaddressesofallDirectorsmustbelistedontheDelawareAnnualReport.DelawareLLCsneedaminimumofoneMemberoroneManager.DelawareLLCsarenotrequiredtofileanAnnualReport.

? Q: MustanofficerofthecompanysigntheCertificateofIncorporationor

CertificateofFormation?A: No;DBIwilldesignateamemberofitsstaffastemporaryIncorporatororOrganizer,

whosedutiesandfunctionsareautomaticallyterminatedfollowingthefilingofyourIncorporationdocuments.Thereisnoextrachargeforthisservice.IfyouprefertohaveanOfficer,DirectororMemberofthecompanysigntheCertificate,pleaseadviseusofyourpreferencewhenyouplaceyourorder.

PaymentOptions

ThissectionappliestobothUSbasedandInternational/OffshoreCompaniesIfyouwillbeorderingonlineyouwillhavetheoptiontopaybyCreditCardorPayPal.Foryourconvenience,we

acceptVisa,MasterCard,DiscoverandAmericanExpress.Ifyouprefertoorderbysubmittinganorderformviafax,emailormail,youmaycompletethecreditcardpaymentauthorizationoftheorderform,includingthesecuritycodeofthecreditcardandthesignatureoftheaccountholder.Alternately,youmayencloseapersonalorcompanycheck,oramoneyorderbymailorcourier.IfyouwishtomakepaymentbyWesternUnionorbankwiretransfer(includeanadditional$35.00fee),pleaseforwardthetransmittaladvicefromthemoneytransferagentwithyourorderformandallow310daysforthemoneytobedepositedinouraccount.Paymentinfullisrequiredbeforeyourordercanbyfulfilled.

RegisteringyourNewCompanyOncewereceivepaymentforyourorder,wewillbetakingcareofallthedocumentationrequiredtoformand

registeryournewDelawareLLCorCorporation.ItwillnotbenecessaryforyoutosignorpreparetheDelawareincorporationdocuments.Ifyouorderqualificationinanadditionalstateitmaybenecessaryforyoutosignandreturnanapplicationformafterweprepareitforyou;wewillletyouknowifthisisrequiredforyourstate.IfyouordermailforwardingserviceyouwillberequiredtosignandreturnaUSPostalServicemailforwardingauthorizationwhichwewillprepareforyou.IfyouareanonresidentnoncitizenandyouorderEINobtainmentservicewewillprepareanapplicationforyoutosignandreturnbyemailorfax.

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ProcessingTimeThissectionappliestobothUSbasedandInternational/OffshoreCompaniesOurhoursofoperationareMondaythroughFriday,8:30a.m.to5:00p.m.USEasternStandardTime.Youare

welcometoplaceyourorderwheneveritisconvenientforyou.Whetheryousubmityourorderonlineoronanorderform,anyinformationyousubmitwillbekeptstrictlyconfidential.

IfyourorderforanewDelawareLLCorDelawareCorporationisreceivedduringnormalbusinesshours,wewill

registeryourcompanyintheDelawareCorporateInformationSystemassoonaswereceiveyourpaymentandreviewyourorder.YournewcompanylegallyexiststhemomentwetypeyourregistrationintotheDelawareCorporateInformationSystem.Thisprocessisoftencompletewithinlessthananhour,buteveninthecaseofextremelyhighordervolume,weguaranteethatyournewDelawareLLCorCorporationwillberegisteredwithin24hours(excludingweekends,holidaysanddeclaredemergencies).

WedontadvertisethatyournewcompanywillberegisteredwithinthreeminutesbecauseatDBIyourorder

willbereviewedbyatrainedIncorporationSpecialistbeforeyourcreditcardischarged.IfoneofourexperiencedIncorporationSpecialistsseesapotentialproblemyouwillbenotifiedrightawaybyphoneoremail.

AfterweregisteryournewDelawareLLCorCorporationintheDelawareregistrationsystem,theDivisionof

CorporationswillreturnacopyoftheCertificateofIncorporationorCertificateofFormationbearingastampstatingthefilingdateandtimeplusthefilenumberassigned;thisisknownasaplaincopyandisincludedwithyourpurchaseofaNewDelawareregistrationpackageatnoadditionalcharge.(TheInternationalPackagesincludeaCertifiedCopyofyourCertificateofIncorporationorCertificateofFormationwithanApostilleorandGoldSeal.)

ForUSorderswetypicallyreceivethestampedCertificateofIncorporationorCertificateofFormationfromthe

CorporationsDivisionwithinapproximately24hours.Ifyourorderwasreceivedbefore12:00PMESTwewilloftenreceiveyourstampedCertificatebackfromtheCorporationsDivisionthenextmorning,butthesetimeframesaresubjecttotheCorporationsDivisionsworkvolumesoweadviseyoutoallow13businessdays.Ifyouneedguaranteed24hourprocessingorsamedayserviceyourordercanbeupgradedtoexpeditedserviceforanadditionalfee.

ForinternationalorderswetypicallyreceivetheApostilleorGoldSealCertifiedCopywithin35businessdays.If

youneedthedocumentfastercontactusforaquoteonexpeditedservice.WewillemailthestampedCertificateofIncorporationorCertificateofFormationtoyouassoonaswereceiveit

fromtheState.BecauseCorporationsandLLCsareregisteredelectronicallyinDelaware,thescannedimageweemailyouislegitimateforuse.ScannedimagesofCertifiedCopiesandCertificatesofGoodStandingarealsolegitimateandbearauthenticationnumberswhichtherequestormayverifybycontactingtheDelawareCorporationsDivisionverificationsectionoftheirpublicwebsite.

ForUScustomersthehardcopyofyourdocumentswillalsobesentbyUSFirstClassMailatnoadditional

charge;lookforyourdocumentstoarriveinaDBIenvelope.Yourdocumentsmaybeenclosedinaplasticsleevebehindacoverletter,dontthrowthemaway!CorporateKitsandOperatingAgreementkitsareshippedseparatelytoUSaddressesbyUPSandareusuallyreceivedwithinthreetofivebusinessdaysorless.ShippingtoUSaddressesisfree!

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CorporateKitsshippedoutsidetheUSaretypicallyreadyforshipmentbyFedExInternationalorDHLwithin57daysandtimeintransitandshippingcostvarybydestination.ShippingfeemustbepaidinadvanceforshippingtononUSdestinations.AlldocumentsincludedwiththeDelawareInternationalIncorporationorLLCPackageswillbeenclosedinthesameshipmenttoreduceshippingcost,unlessyouinstructotherwise.

?

Q: DoIhavetowaitfortheoriginaldocumentsbeforemynewcompanysignsacontractoropensabankaccount?

A: ThestateofDelawaredoesnotreturnoriginaldocumentsafterfiling.Scanneddocumentsareaslegitimateasanoriginaldocument,soyoucanopenabankaccountorenteracontractassoonasyoureceiveyourscanneddocumentsbyemail.IfthepartyyouareworkingwithrefusestoacceptyourscanneddocumentitispossibletoorderaCertifiedCopyfromtheStatewhichwillbearanauthenticationnumber.Variousexpeditedservicelevelsareavailable.ContactinIncorporationSpecialistforassistance.

Whattodowiththedocumentsyoureceive

ThissectionappliestobothUSbasedandInternational/OffshoreCompaniesIfyouordertheGold,PlatinumorExecutivepackage,yourcompliancekitwillarriveassembled.Itwillonlybe

necessaryforyoutoprintyourOperatingAgreementorByLawsandyourMinutesofFirstMeetingandfilethemintheappropriatetabsoftherecordsbinder.

Otherwise,youwillreceiveyourCertificateofIncorporationorCertificateofFormation,togetherwiththe

resolutionnamingtheInitialDirectororInitialMember,plusanyadditionaldocumentsyouorder,inawhite9x12envelopedeliveredbyFirstClassUSMail.Insidetheenvelopeyouwillfindasleeveprotector.Yourdocumentsareinsidethesleeveprotectorbehindacoverletter;dontthrowthemaway!FilethesedocumentsinyourCorporateComplianceKitorOperatingAgreementKitbehindtheprovidedsectiondividers.Completeinstructionsareprovidedwiththecoverletter.

Yourcompliancekitisimportant!IfyoudidnotorderakitpleaseSeetheAppendixformoreinformationabout

theCorporateCompliancekitandtheOperatingAgreementkit,orcontactanIncorporationSpecialisttolearnabouttherisksofnotproperlydocumentingtheorganizationandownershipofyourcompany.

TheStateofDelawaredoesnotkeeprecordsofwhotheMembersorShareholdersofyourcompanyare(notever,notanywhere).Thispreservesyourprivacybutitalsorequiresyourvigilantupkeepofyourowncompanyrecords.AlthoughDBIwillhaveanindicationofwhotheInitialDirectororInitialMemberofyourcompanyis,thisisnotproofofownership!Ifadisputeweretoariseregardingtheownershipordistributionrightsofanownerofyourcompany,yourowncompanyrecordsmaybetheonlysourceofevidencetosupportyourclaim.WestronglysuggestthatyoustoreyourCorporateKitorOperatingAgreementKitinasafeorsafetydepositboxandobservethesameprecautionsthatyouwouldindefendingagainstpersonalidentitytheft.

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?

Q: IpresentedthedocumentyougavemewhichnamesmeastheInitialDirector,butthebankwantsadditionaldocumentation.

A: Ifyouareworkingwithabankoragencywhichdoesnotaccepttheevidenceofyourcompanyrecords,DBIcanprepareaStatementbyIncorporator(alsoknownasaBusinessStatementorCertificateofIncumbency)whichisanotarizedstatementattestingtotheorganizationofyourcompanyandisusuallyacceptedbymostauthoritieswhohaverequestedadditionalinformation.PleasecontactanIncorporationSpecialistforanEstimate.

AdministrationofyournewcompanyDelawareCompaniesareamongsttheeasiestintheworldtoadminister.TheDelawareStateLegislaturestrives

togiveyouasmuchflexibilityaspossibleandDBImakesiteveneasier!PleasetakeamomenttofamiliarizeyourselfwiththefewresponsibilitiesyouwillhaveafterIncorporatingorOrganizinganLLCinDelaware.AnnualResponsibilities

ThissectionappliestobothUSbasedandInternational/OffshoreCompanies

Corporations FileAnnualReportwiththeDivisionofCorporationsbeforeMarch1steachyear. PayDelawareFranchiseTaxtoDiv.ofCorporationsbeforeMarch1steachyear. PayDBIAnnualRegisteredAgentServiceRenewalfeeonanniversaryofformation. PayStateandFederalCorporateIncomeTax,ifany. IfyourCorporationisregisteredinadditionalstatesyoumayhaveadditionalreportsandortaxesdueeach

year. Holdannualshareholdersmeeting*.Meetingsmaybeheldonlineorbyphone.

o ScheduletheMeetingo SettheAgenda

Resignationand/orAppointmentofDirectors,ifany Approvalofauditedaccounts Approvaloftheannualbudget Majorbusinessitemstobeconsidered

o SendoutAnnualMeetingNoticesandProxyCardstoallshareholders.o HavetheSecretarykeeptheMinutesoftheMeeting.FiletheminutesintheCorporaterecords

binderanddistributecopiestoshareholders.*ExcludingCloseCorporationsandSoleShareholder/SoleDirectorCorporations

ThereareunscrupulouscompaniesinseveralstatesthatsendoutsolicitationswhichlooklikeofficialnoticesinstructingyoutofiletheMinutesofyourAnnualMeetingwithastateagency.YourAnnualMeetingNoticesandMinutesarenotfiledwiththeSecretaryofStateoranyotheragency.Theyaremaintainedbyyouinyourprivatecorporaterecords.(CorporationsdohavetofileanAnnualReporteachyear,thisisnotthesameasMinutes.Ifyoureceivesomethingthatlookslikeanofficialnoticeandyouhavequestionsaboutitsauthenticity,pleasefaxoremailittoyourIncorporationSpecialist.Wewilladviseyouifthenoticeislegitimateandifyouneedtocomplywithit.

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LLCs PayannualDelawareLLCTaxbeforeJune1steachyear. PayDBIAnnualRegisteredAgentServiceRenewalfeeonanniversaryofformation. PayStateandFederalCorporateIncomeTaxorPersonalIncomeTax,ifany. IfyourLLCisregisteredinadditionalstatesyoumayhaveadditionalreportsandortaxesdueeachyear.

DBIofferstheGoodStandingProtectionProgramtobothLLCsandCorporationssoyouwonthavetoworryaboutfilingyourtaxontimeormissingaRegisteredAgentRenewal.

? Q: Ihaventstarteddoingbusinessyet;doIstillhavetofileareportandpaytaxes?

A: Yes.YouarepayingfortheprivilegeofhavingacompanyCharteredinDelaware;theDelawareFranchiseTax(orDelawareLLCTax)isnotanincometax.IfyoudontwantyourDelawareChartertobecancelled,youwillhavetopaytheFranchiseTaxorLLCTaxwhetheryourcompanyisactivelyconductingbusinessornot.ThetaxisdueeveryyearuntilyoufileaCertificateofDissolutionoraCertificateofCancellation.

AmendmentsandOtherChangesIfyouneedtomakeachangetoyourCertificateofIncorporationorCertificateofFormation,anAmendment

mustbefiledwiththeDivisionofCorporations.DBIoffersthisservice.YoumayamendyourByLawsorOperatingAgreementyourselfandarenotrequiredtofilethatamendmentwiththeState.

ChangesthatrequireanAmendmenttobefiledwiththeState: NameChange Authorizemoreorlesssharesofstock(forCorporationsonly) AuthorizeanewClassofStock(forCorporationsonly) AnychangetothewordsprintedontheCertificateofFormationorIncorporation ChangeofRegisteredAgent(forLLCs)ChangesthatdonotrequireanAmendmenttobefiledwiththeState: ChangestotheOperatingAgreementorByLaws ChangestotheOfficers,Directors,Shareholders,MembersorManagers AuthorizemoreorlessLLCMembershipunits

? Q: OurCertificateofIncorporationnamessomeonewhoisnolongera

Director;dowehavetofileanAmendment?A: ItisnotnecessarytoamendthecertificatetochangeaDirectororMember;although,if

youwishtodoso,youmayamendthedocumentforafee.ContactanIncorporationSpecialistformoreinformation.

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Q: DoIhavetonotifyyouorthestateofDelawarewhenthereisachangeintheofficers,directors,membersormanagersofthecompany?

A: TheDirectorsandprincipalofficerofaDelawareCorporationarereportedonanAnnualReportfiledannuallywiththeDelawareSecretaryofState(SoS);itisnotnecessarytoreportthechangeuntilthenextAnnualReportisdue.TheDelawareSoSisnotnotifiedofchangesoftheMembersorManagersofanLLC.AllchangestotheprincipalsandOfficersshouldberecordedintherecordsthecompanymaintainsatitsheadquarters(mainoffice).IfachangeofownershipwillresultinachangeofcontactinformationitisnecessarytonotifyDBIASAPsothatthetransmissionofyourtaxnoticesandServiceOfProcessisnotinterrupted.Thebestwaytonotifyusofachangeincontactinformationisbyemail.

FORFEIT&VOIDStatusandRenewal&Revival

FORFEITandVOIDStatus

akaAdministrativeDissolution,InvoluntaryWithdrawalIfacompanyfailstopayforRegisteredAgentServicerenewal,DBIwillresignasRegisteredAgentinDelaware.

IfaDelawareCorporationorLLCfailedtomaintainaRegisteredAgentinDelaware,thecompanyCharterwillbedeclaredFORFEITbytheSecretaryofState.

IfaDelawareLLCorDelawareCorporationfailstopayDelawareFranchiseTaxorDelawareLLCTaxin

consecutiveyears,thecompanyCharterwillbedeclaredVOIDbytheSecretaryofState.IfacompanyisdeclaredVOIDorFORFEIT,thecompanywillbecomeinvalidandwilllosetherighttotransact

businessasanLLCorCorporation.TheLLCorCorporationwillalsolosetherighttoExclusiveUseofthecompanyname.IfanothercompanyregisterswithyournamewhileyourcompanyisVOIDorFORFEIT,youcannothavethenamebackevenifyoufileforRenewalandRevival.IfanothercompanyhastakenyournamewhileyourcompanywasVOIDorFORFEITDBIcanhelpyouRenewwithanewname;youwillbepermittedtokeepyouroriginalIncorporationDate.PleasecontactyourIncorporationSpecialistsifyouhavequestionsaboutthis.

RenewalandRevival

akaRestoration

IfyourcompanyisdeclaredVOIDorFORFEIT,thecompanyChartercanberestoredtoGoodStandingbyfilingaCertificateofRenewalandRevivaltogetherwithanydelinquentDelawareLLCTaxesorFranchiseTaxes(andAnnualReportsforCorporations).ContactanIncorporationSpecialistforacalculationofdelinquenttaxdueand/orunpaidRegisteredAgentServiceRenewalfees.DBIwilldrafttheCertificateofRenewalandRevivalandpreparethenecessaryAnnualReportsforCorporationsusingtheAuthorizedSharesMethodofFranchiseTaxCalculationatnoadditionalcharge.CorporationsthatfileusingtheAssumedParValueCapitalmethodmayeitherpreparetheirowndelinquentAnnualReportsorpayDBIsAnnualReportPreparationandfilingfee.LLCsdonotfileannualreports.

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IfyourcompanywasIncorporatedinDelawareoryourLLCwasformedinDelawareandyourbusinessislocatedinanotherstateinwhichyouQualifiedasaForeignCorporation,youcannotallowyourDelawareCorporationorDelawareLLCtogoVOIDorFORFEIT.IfyourCorporationorLLCisVOIDorFORFEITinDelawarethenyourcompanyhasnorighttodobusinessinanystateuntilitisrestored.IfyounolongerwishtoberegisteredinDelaware,contactanIncorporationSpecialistaboutthepossibilityofConvertingyourDelawareLLCorCorporationtoanotherstate.

Dissolution&Cancellation

AkaWindingUpBusiness,Closing

IfyounolongerintendtoconductactivitywithyourCorporation,itisnecessarytolegallydissolvetheCorporationbyfilingtheappropriatedocumentswiththeDelawareSecretaryofState;thisprocedureisknownasDissolution.ShareholdersarenotlegallyentitledtotheirshareoftheCorporation'sremainingassetsaftercloseofbusinessuntilithasbeenlegallydissolvedbyfilingtheCertificateofDissolutionwiththeSecretaryofState.Furthermore,youdonotwanttaxliabilitytocontinuetoaccrueonacompanyyoudonotplantouseanymore.ForLimitedLiabilityCompaniestheprocessisthesame,butisreferredtoasCancellation.

ThefinaltaxliabilityforanypreviousoutstandingyearsplusthecurrentyearmustbepaidatthesametimethatthecompanyfilesitsCertificateofDissolutionorCertificateofCancellation.Taxwillnotbeprorated.ContactanIncorporationSpecialistforacalculationoffinaltaxdue.DBIwilldrafttheCertificateandprepareAnnualReportsforCorporationsusingtheAuthorizedSharesMethodofFranchiseTaxCalculationatnoadditionalcharge.AnnualReportsmustbespecialorderedforcurrentyearfiling;yourIncorporationSpecialistwilldothisforyou.CorporationsthatfileusingtheAssumedParValueCapitalmethodmayeitherpreparetheirownfinalAnnualReportorpayDBIs$55AnnualReportPreparationandfilingfee.LLCsdonotfileannualreports.

Toavoidadditionaltaxliability,youmustcontactDBItofileyourCertificateofDissolution(orCertificateofCancellation)bynolaterthanthelastbusinessdayofDecemberofthecalendaryearinwhichyourcompanyresolvedtoclose,regardlessofyourFiscalYearend.

Disclaimer:ThishandbookisintendedtoprovidegeneralinformationabouthowtoincorporateinDelawareorformanew

DelawareLLCandisintendedforinformationalpurposesonly.Itisnotintendedtoreplacetheadviceofanattorneyortaxaccountantanddoesnotconstituteindividualizedlegaladvice,legalservice,ortaxadvice.Norepresentationsorwarranties,expressorimplied,aregivenregardingthelegal,taxorotherconsequencesresultingfromtheuseofourservices,includingbutnotlimitedtoinformationand/orforms.TheinformationsuppliedbyDBIissuppliedonlywiththeunderstandingthatDBIanditsemployees,agentsand/orrepresentativesarenotengagedinrenderinglegalservices,legaladvice,ortaxadvice.DBIexpresslydisclaimsanyliability,lossorriskincurredasaconsequence,directlyorindirectly,oftheuseandapplicationofanyofthecontentsofthisinformation.

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SECTIONTWO:INFORMATIONFORINTERNATIONALANDOFFSHOREENTREPRENEURS

23


InformationforInternationalandOffshoreEntrepreneurs

DBIhasaspecialrelationshipwiththeinternationalcommunity.Wevebeenhelpinginternationalandoffshoreinvestorsandentrepreneurswiththeirspecialneedssince1986.DBIsexperienceinthisareagreatlyexceedsthatofmanyDelawareservicecompaniesandunlikemostservicesompanies,weofferspecialpackagesforInternationalandOffshoreclients.

WhyisDelawaresopopularwithoffshoreentrepreneursandinvestors?TherearemanyadvantagestoformingaDelawareLLCorCorporation.Herearejustafew: WiththehelpofDBI,youcanformaDelawareUSALLCorCorporationwithoutevercomingtotheUnited

Statesevenifyouarenotaresident,andevenifyouarenotacitizen.

Ifyouareanonresidentnoncitizen,andhavenoOperations(businessactivity,employees)intheUSandnoUSSourceofIncome(suchasrentalproperty)youcanlegallyavoidallUSFederalIncomeTaxesandDelawareStateIncomeTaxes.Seebelowformoreinformation.

ThereisnoStateSalesTaxinDelaware.

Delawarehasnoadvaloremorvalueaddedtaxes(VATs),andnotaxesonbusinesstransactions(TBTs).Delawarehasnousetax,inventoryorunitarytax.

ThecontractualflexibilityofaDelawareLLCisunmatchedbyanyotherU.S.statesLLCstatute,andoffersbenefitstypicalofmanyoffshorejurisdictions,i.e.theGermanGmbH.

DelawareLLCsdonotrequirethenameoftheMembersorManagerstobedisclosedontheCertificateofFormationandarenotrequiredtofileanAnnualReport.TheownersoftheLLCwillnotberecordedinthepublicrecord.

DelawaresCourtofChanceryisaworldleaderinUSandInternationalbusinesslaw.

Delawarescorporatelegalsystemstrivestoprovideacorporatelegalclimateconducivetothegrowthand

profitabilityoftheover900,000companiesCharteredasDelawareCorporations.Ourstatelegislativephilosophyistogivecompaniesfreedomtodefinetheirownpracticesofoperationswheneverpossible,withsensitivitytotheprioritiesofcompanyownersandofficers.

SeenextpageforachartonHowtoDetermineifyouhaveUSSourceIncome.

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How to determine if you have US Source Income

ItemofIncome FactorDeterminingSourceSalaries,wages,othercompensation WhereservicesperformedBusinessincome:Personalservices WhereservicesperformedBusinessincome:Saleofinventorypurchased WheresoldBusinessincome:Saleofinventoryproduced Whereproduced(Allocationmaybenecessary)Interest ResidenceofpayerDividends WhetheraU.S.orforeigncorporation*Rents LocationofpropertyRoyalties:naturalresources LocationofpropertyRoyalties:patents,copyrights,etc. WherepropertyisusedSaleofrealproperty LocationofpropertySaleofpersonalproperty Seller'staxhome(butseePersonalProperty,inChapter2

ofPublication519,forexceptions)Pensions WhereserviceswereperformedthatearnedthepensionScholarshipsfellowships Generally,theresidenceofthepayerSaleofnaturalresources Allocationbasedonfairmarketvalueofproductatexport

terminal.Formoreinformation,seesection1.8631(b)oftheregulations.

*Exception:PartofadividendpaidbyaforeigncorporationisU.S.sourceifatleast25%ofthecorporation'sgrossincomeiseffectivelyconnectedwithaU.S.tradeorbusinessforthe3taxyearsbeforetheyearinwhichthedividendsaredeclared.

YouwillfindagreatdealofinformationabouthowtoformanewDelawareLLCorCorporationinthesectionoftheHandbooktitledUnderstandingNewCompanyFormationMadeEasy.

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?

Q: Howisitpossibleforanonresident(alien)noncitizentoformaUSAcompany?

A: DelawarelawpermitsnonresidentnoncitizenstoformDelawareLimitedLiabilityCompanies(LLCs)andCCorporations.YoudonotneedtoshowusyourpassportandyoudonothavetocometotheUSA.

Q: DontIneedtohaveabusinesslocationinDelawareUSA?

A: No;youonlyneedtohaveaRegisteredAgentintheStateofDelaware.DBIwillbeyourRegisteredAgentinDelawareandthefirst12monthsofourRegisteredAgentServiceisfreewiththepurchaseofoneofourNewCompanyRegistrationPackages.

Q: CanyouprovidemewithaDelawareaddress,telephonenumberandFaxnumberthatIcanputonmywebsite?

A: Yes;wecanprovideyouwithaDelawareaddress,asuitenumberattheCapitolOfficeCenterinWilmingtonDelawareUSA,whichyoucanputonyourwebsite,orderformsandbusinesscards,andwhichyoucanuseinyourroutinebusinesscorrespondence.ThisserviceisnotthesameasRegisteredAgentService.OurVirtualOfficeisavailableforpurchaseseparatelyandBasicMailForwardingisincludedwiththePlatinumNewCompanyRegistrationPackage.WecannotforwardmailuntiltheapplicantreturnstheUSPSform1583authorizingustoserveasyourMailForwardingAgent.OurLegalOfficeIdentitypackagealsoincludesaDelawaretelephonenumberandfaxnumberwhichcanbeforwardedtoyouanywhereintheworld.PleaseseeMailForwardingServices/VirtualOfficeformoreinformation.

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25 REASONS TO FORM A DELAWARE COMPANY

1. YoucanformaDelawareLLCorCorporationbyinternet,fax,ormailWITHOUTEVERCOMINGTO

DELAWARE.DBIcanelectronicallyregisteryournewCorporationorLLCinDelawarewithinaslittleasanhourfromreceiptofyourinternetorderorsignedorderformwithpayment(onordersreceivedduringbusinesshours).

2. Delawarescorporatelegalsystemstrivestoprovideacorporatelegalclimateconducivetothegrowthand

profitabilityoftheover900,000companiescharteredasDelawarecorporations.DelawaresCourtofChanceryisanequitycourtoflimitedjurisdictionwhichexistssolelytoadjudicatecorporatelitigation.Formorethan220yearstheChanceryCourthasbeendecidingcorporatedisputesinvolvingmanyofthelargestcorporationsintheworld,andhasdevelopedafullyestablishedcorpusofcaselawandlegalprecedentwhicharecitedbybusinessscholarsandattorneysalloverthecountryandaroundtheworld.DelawaresCourtofChanceryisoneofthemostimportantcorporatelawcourts,secondonlytotheSupremeCourtoftheUnitedStatesinitsimpactoncorporatelaw.InadditiontotheinfluentialroletheDelawareCourtofChanceryplaysinshapingthecorporatelegallandscape,Delawarescorporatelawsareregularlyreviewed,revisedandsimplifiedbytheDelawareStateBarAssociationandtheDelawareLegislature.KnownasTheFirstStateforitsroleasthefirststatetoratifytheU.S.Constitution,DelawareremainsonthevanguardoflegalinnovationbeingamongthefirststatestoadoptlegislationallowingforthecreationofLimitedLiabilityCompanies(LLCs)andSeriesLLCsandtheconvenienceofelectronicsignatures.

3. Delawarecompaniesmayberegisteredwithoutdisclosingthenamesoraddressesoftheownersinthe

publicrecord;CorporationsarenotrequiredtoidentifyShareholdersontheCertificateofIncorporationandDelawareLLCsarenotrequiredtoidentifyMembersontheCertificateofFormation.DelawareCorporationsarerequiredtoidentifyDirectorsonanAnnualReport,DelawareLLCsarenotrequiredtofileanAnnualReport.

4. ADelawaredirectorshieldlawpermitsDelawarecorporationstosheltertheirdirectorsliberallyfrom

personalliabilityinconnectionwiththeiractionsasboardmembers.

5. Delawareiswidelyregardedbyinternationalentrepreneursandinvestorsasafavorabletaxclimate: ThereisnosalestaxinDelaware.

ThereisnostatecorporateincometaxinDelawareongoodsorservicesprovidedbyDelawarecorporationsoperatingoutsideofDelaware.

ThereisnostatecorporatetaxoninterestorotherinvestmentincomeinDelaware,whenearnedbyaDelawareHoldingCompany.Delawarehasnopersonalpropertytax.TherearenoStaterealpropertytaxes,andthelocalrealpropertytaxesareverylow.

27


Delawarehasnoadvaloremorvalueaddedtaxes(VATs). Delawarehasnotaxesonbusinesstransactions(TBTs).Delawarehasnousetax,inventoryorunitarytax.

ThereisnoStateofDelawareinheritancetaxonstockofDelawarecorporationsoperatingoutsideofDelawareheldbynonresidentsofDelaware.

TherearenoDelawarecapitalsharesorstocktransfertaxes. Delawaredoesnottaxincomefromintangibleproperty.

6. Thedirector(s)ofaDelawarecorporationarepermittedtosetthesalespriceonanystockthecorporationissuesanddesirestosell.

7. Delawarecorporationsmaypurchasesharesoftheirownstock,hold,sellandtransferthem.

8. ThereisnominimumcapitalinvestmentrequiredtoformaDelawareCorporationorLLC.Yourinvestment

maybeaslowaszero.

9. TheliabilityofashareholderofaDelawarecorporationislimitedbytheamountofhisinvestmentinthecorporationplusthecorporatetaxliabilityprovidedthatthecorporationhasconducteditsbusinessaccordingtoallapplicablestateandfederallaws.

10. Thedirector(s)ofDelawarecorporationsmaydeterminewhatpercentageoftheconsiderationreceived

fromtheissueoftheirstockistobeconsideredcapital.Thisisimportantbecauseitgivesthedirectorsgreaterflexibilityregardingtheuseoffundsobtainedinapublicoffering,sothatlargeamountsarenottiedupinthecapitalaccount.

11. TheByLawsorOperatingAgreementofyourDelawareCorporationorLLCmaybeformulatedoraltered

anytimebyitsDirectorsorMembers.

12. YourDelawarecorporationmayownwithoutlimitationsastoamountorvaluestocks,bondsorsecuritiesofothercorporationslocatedinDelawareoroutsideofDelawareaswellasrealandpersonalproperty.ThismeansthatyournewDelawareCorporationcanbesetupas,orlaterbecome,acorporateholdingcompanyorrealestateholdingcompany.

13. YourDelawarecorporationcanbesetuptobeanallpurposecorporationtoconductmultipletypesof

business,tomanufactureand/ormarketanyproducts,toofferallkindsofservices,simultaneouslyorsequentially.AllyouhavetodoisincludeabroadstatementofpurposeinyourDelawareCertificateofIncorporation(CorporateCharter)suchas:ThepurposeofthiscorporationistoengageinanylawfulactoractivityforwhichCorporationsmaybeorganizedundertheGeneralCorporationLawofDelaware.ThispermitsyourDelawarecorporation,forexample,tostartoutasarealestateholdingcompany,addyourspousesretailbusinesstoitsactivitiesandlaterbecomeamanufacturerofpackagedgoodsallwithouthavingtoalteryouroriginaldocumentationorfilenewcorporatedocuments.

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14. Quarterlyorannualmeetingsmaybeheldanywhereorifyouprefer,meetingsmaybeheldentirelyonline,attheoptionoftheboard.Inlieuofsuchformalmeetings,director(s)and/orshareholdersmayactbyunanimousconsent.DelawareLimitedLiabilityCompaniesarenotrequiredtoholdannualmeeting.

15. YourDelawarecorporationstockcanbeprivatelyownedorpubliclytradedonanystockexchangeanywhere

intheworld,whenproperlyregistered.

16. YoudonothavetomaintainaDelawarebusinessofficeaddressasidefromtheaddressofyourDelawareRegisteredAgentwhichisrequiredforserviceofprocess.However,ifyouwouldliketohaveaDelawarebusinessaddresswhereyoucanreceivebusinessmail(otherthanserviceofprocess),DELAWAREBUSINESSINCORPORATORS,INC.offersaVirtualOfficepackagewhichincludesaDelawareMailingAddresswithmailforwardingplusaprivateDelawarephonelineandfaxservice.

17. DelawarehasahighlyspecializedandexpertcorporatebarthatisveryfamiliarwithDelawarecorporatelaw

andwhichappearsregularlybeforejudgesoftheCourtofChancery.StudentsinlawschoolsnationwidetypicallystudyDelawarecorporationlawstatutesandDelawarecorporatecaselawintheircorporatelawcourses.

18. NonCitizenNonResidentsoftheUSAmayformDelawareCCorporationsandLLCs.Noncitizenresidentsof

theU.S.mayalsoformSCorporations.(CanonlybedoneifthenoncitizenshasanITIN.)

19. DelawarepermitsSCorporations,which,withthefederaltaxlawsof1986,canbeveryadvantageous.

20. WithDBIasyourDelawareRegisteredAgent,yourDelawareCorporationorLLCmaybeheadquarteredinanystateorterritoryoftheUnitedStatesorinanycountryintheworld.

21. OnesingleindividualmaysimultaneouslyholdalloftheexecutiveofficesandtitlesofaDelawarecompany,

suchasPresident,CEO,Director,etc.DelawarepermitsyoutobeaonepersonCorporationoronememberLLC.(CanonlybedoneifnoncitizenshasanITIN.)

22. TheDelawareDivisionofCorporationsistheleaderinprovidingservicebasedonitsmanyyears

experienceanditsphilosophyofdeliveringcustomerserviceonparwiththebestprivatefirms.

23. Delawarecorporationsarepermitted,underappropriatecircumstances,topaydividendsoutofnetprofitsifthereisnosurplus.

24. TheDelawarecorporatefranchisetaxisminimalandquitecompetitivewithotherstates(only$75/yearfor

Delawarecorporationswith5,000sharesorless).Thereisanadditional$50filingfee.AllfeeschargedbytheStateofDelawaretocorporationsarekeptdeliberatelylowtoattractincorporationbusinessamajorsourceofrevenuefortheState.

25. 50%ofallU.S.publiclytradedcompaniesand63%oftheFortune500arecharteredinDelaware.

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SECTIONTHREE:REFERENCEINFORMATION

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Limited Liability Companies (LLCs) ALimitedLiabilityCompany,orLLC,isaTypeofEntity(company)whichisoftendescribedasahybrid

betweenaCorporationandaPartnership.TheLLCfeaturestheliabilityprotectionofaCorporation,inthattheliabilityofallmembersislimitedtotheirinvestmentsintheLLC(unlesstheypersonallyguaranteeotherdebtincurredbytheLLC),butismoreflexibleinrespecttomanagementstructureandisusuallyconsideredtooffergreatereaseofadministration.

How are LLCs Managed?

ThemanagementofaDelawareLLCisalmostunlimitedlyflexible.DelawareLLCscanbemanagedbytheMembers(owners)orbyManagers(employeesoragentswhodonotholdanownershipstakeinthecompany).Memberscanbedividedintoclassesorcanallholdthesamevotingrightsorentitlements.AnydegreeofrestrictionsorrightscanbeassignedtoaMember,ManagerorClassofMembers.Herearesomeexamples:AllMemberscanbegivenequalvotingrightsandissuesarerequiredtobedeterminedbymajorityvote;oronepersoncanbegivenabsolutecontrolwhiletheotherMembershavenovotingrightsandaresilentpartners;oraSingleMemberLLCautomaticallypassesalldecisionsbyunanimousconsent.OtherarrangementsarealsopossibleandcanbedefinedintheOperatingAgreement.IfthemembersoftheLLCdesire,theycanevenformaBoardofDirectorsandappointOfficers,althoughthisisneithertraditionalnornecessary.

How are LLCs Taxed by the IRS?

TheLLCisthemostflexibleentity(companytype)currentlyinexistence.LLCscanbetaxedseveralways.AoneMemberLLCis,bydefault(unlesstheLLCelectsotherwise),taxedbytheIRSasaDisregardedEntity;whichmeanstheprofitsandlossesoftheLLCarereportedontheMemberspersonalincometaxreturnandnoCorporateIncomeTaxreturnisfiled.AnLLCwithtwoormoremembersistaxed,bydefault,asaPartnership,whichisalsotaxedasaDisregardedEntity:taxableincomeandlossesPassThroughtoitsmembers.Althoughtheincomeandlossesarereportedoneachpartnerspersonalincometaxreturn,apartnershipmustalsofileaninformationalreport,form1065andScheduleK1.AnLLCmayalsobeeligibletoelecttobetaxedasanSCorporation,seeourarticleaboutSCorporationsformoreinformation.TheadvantagesofbeingtaxedinthismanneraretheavoidanceofdoubletaxationthatwouldoccurifthecompanywereaCCorporationplusthepossibilityofbeingtaxedatalowerrate.AnLLCmayevenbeeligibletoelecttobetaxedasaCCorporation,ifitdesires.ACCorporationmaybetaxedatahigherrate,butsomeMembersprefertofullydeductHealthInsuranceandLifeInsuranceBenefitsastheOwnerEmployeeofaCCorporationmaydo.

How are LLCs Taxed by the Secretary of State of Delaware?

LLCspayaflattaxof$250.00annuallytotheSecretaryofStateofDelawaretomaintaintheirDelawareCharter.Thistaxhasnorelationtoassets,incomeoractivitylevel.TheDelawareLLCtaxisduebeforeJune1steachyearandisneverproratedforanyreason.IftheDelawareLLCTaxisnotreceivedbytheSecretaryofStatebythelastdayofMarch,a$200.00penaltyisassessedwith1.5%interestpermonth.IftheLLCTaxisnotpaidforconsecutiveyears,theDelawareCharterisdeclaredVOID;thecompanybecomesinvalidandhasnorighttotransactbusinessorinvestmentsasanLLC.

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Advantages of Delaware LLCs AsofDecember1997,allstates,plustheDistrictofColumbia,havepassedlawsgoverningtheadministration

andoperationofLLCswithintheirjurisdictions.ButDelawareLLCsdopossesssomeuniquebenefits: OnepersonLLCsarepermittedbyDelawarestatute.

DelawareLLCsmayhaveperpetuallife,thismeansthecompanysCharterdoesnotexpire.

DelawareLLCsmayberegisteredwithoutincludingthenamesoftheMembers/Managersandarenot

requiredtofileanAnnualReport.

What are the advantages of operating as an LLC for non-resident non-citizens?

ANonResidentAlien(NRA)usuallyisonlysubjecttoU.S.IncomeTaxonU.S.SourceIncome(pleasefollowlinkforatable).GenerallyforeignsourceincomereceivedbyanonresidentalienisnotsubjecttoU.S.taxation.Therefore,anonresidentnoncitizenwithnoOperations(nobusinessactivity,noemployees)withintheUS,andnopropertyintheUS,paysnoUSFederalIncomeTax.Furthermore,ifyouronlyU.S.businessactivityistradinginstocks,securities,orcommodities(includinghedgingtransactions)throughaU.S.residentbrokerorotheragent,youarenotconsideredengagedinatradeorbusinessintheUnitedStates.[Source:http://www.irs.govwebsite,November18,2009]

ADelawareLLCisnotrequiredtodisclosethenamesoftheMembersontheCertificateofFormationand

doesnotfileanAnnualReportinDelaware.TheidentityoftheMembersisnotpublicrecord. TheDelawareLimitedLiabilityCompanyActdoesnotrequirethatalimitedliabilitycompanyagreementbe

inEnglish.The LLC as an alternative to a Partnership

AnLLCisverysimilartoaPartnership:amultimemberLLCistaxedasaPartnershipbydefault(althoughitmayelectotherwise),anditisgovernedbyanOperatingAgreementwhichissimilarinmanywaystoaPartnershipAgreement;buttherearedistinctreasonstoconsideranLLCasanalternativetoaPartnership:

EachmemberenjoysLimitedLiability,ascomparedtotheriskofunlimitedliabilitythatgeneralpartners

mustfaceinapartnership.

Unlikelimitedpartners,LLCownersmayparticipateincompanymanagementwithoutfearoflosingtheirprotected,limitedliabilitystatus.

LLCmembersmaybeabletoavoidtheI.R.S.passivelosslimitationsandtakefederalincometaxdeductions

forlossescausedbythebusinessabenefitoftenunavailabletolimitedpartners.

AnLLCownermayobtainadditionaltaxadvantagesfromaspecialstepupoption,previouslyavailableonlytopartnerships,underSection754oftheInternalRevenueCode.

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The LLC as an alternative to an S-Corporation InDelaware,SCorporationisataxstatus,notanEntityType.Infact,anLLCcanbetaxedasanS

Corporation.Forthepurposesofthisdiscussion,wewillfocusonthedifferencesbetweenanLLCtaxedasaDisregardedEntityandaStockCorporationwhichelectsSCorporationstatus.SeeourarticleaboutSCorporationsforadetaileddescriptionoftheSCorporation.BecauseanLLCisbydefaultaPassThroughentityfortaxpurposes,theMembersofanLLCautomaticallyenjoytheliabilityprotectionofaCorporation,withtheavoidanceofdoubletaxationthataSoleProprietororPartnershipenjoys,withouthavingtoelectSCorporationstatusasaCorporationseekingPassThroughstatuswouldhavetodo.Furthermore,theLLCcanenjoyPassThroughstatuswithouthavingtocontinuouslypasstheteststhataCorporationelectingSCorporationstatusmustpasstoqualify.ThisisonereasontheLLCisapopularalternativetoCorporationselectingSCorporationstatus;herearesomeothers:

MembershipisnotlimitedtoNaturalPersonsasisthecasewithSCorporations.Corporations,Limitedor

GeneralPartnerships,estates,charitableorganizationsandpensionplansareallpermittedtobeMembersofanLLC.

UnlikeanSCorporation,anLLCdoesnotlimitthenumberofMembersto100. UnlikeanSCorporation,anLLCdoesnotbarforeignpersonsfromMembership. ThelawallowstheinclusionofliabilitiesoftheLLCinordertoincreasebasisfortaxpurposes(asinthecase

ofapartnership). PaymenttoaretiringMembermaybestructuredsoastoallowpartofthepaymenttobedeductedasan

expensetotheLLC. AnLLCmayown100percentofthesharesofStockofanotherCorporation,whereastheSCorporationis

limitedtoowning80percent(withtheexceptionthatoneSCorporationmayown100percentofasubsidiarySCorporation).

AnSCorporationislimitedtooneshareclass,whileanLLCmayformseparateandmultipleclassesof

Memberswithdissimilarvotingordistributionrights. LLCownersmayobtainadditionaltaxlossesfromtheirallowableindividualpercentagesofcertaincompany

liabilities,ratherthansolelythroughdirectloans,asrequiredinthecaseofSCorporations.

Is there a downside? Thebenefitsforowneremployees,suchashealthcareorlifeinsurance,areonlypartiallydeductiblefrom

theseMembersindividualfederalincometaxreturns,iftheLLCistaxedasaPassThroughentityorSCorporation.ThisistypicallynotaprimaryconcernforentrepreneurswhoareconsideringanLLC.

UnlikesharesofStock,MembershipunitsofanLLCcannotbepubliclytraded. IfyouaretryingtoraiseCapital,somepotentialinvestorsmaybelessfamiliarwithLLCsandtheLLCs

MembershipInterestShareversustheCorporationsStockShare.

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Certificate of Formation LimitedLiabilityCompanieswillbecreatedbyfilingtheCertificateofFormation.Thisdocumentissometimes

calledtheArticlesofOrganizationorArticlesofFormation.DBIwilldraftthisdocumentforyou.Anyinformationneededfromyouwillbeobtainedfromyourinternetorderororderform.The following information will be included on the Certificate of Formation:

1. ThenameoftheLLC2. ThenameandaddressoftheRegisteredAgent3. IfthenameoftheMemberistobeprintedontheCertificateitwillappearastheThirdarticle;ifnot,the

powersoftheMemberwillbeArticleThreeandsoon4. ThepowersoftheInitialMemberareoutlined5. ThedurationoftheLLCisgiventobeperpetual6. ThesignatureoftheOrganizerDBIwillactastheOrganizerofyourLLC.TheOrganizerhasthepowertorepresentthecompanyasanagent

duringtheprocessofcreation.TheOrganizerhastheauthoritytoprepare,signandfiletheCertificateofFormationandanyotherneededdocuments.TheOrganizersauthorityendswhentheLLCisregisteredandtheInitialMemberorManagerisappointed.AnOrganizerisnotanownerorofficer.

OurgoalistoincludetheminimumamountofinformationnecessaryontheCertificateofFormation.Any

additionalprovisionscanbeindicatedintheOperatingAgreement;byincludingadditionalprovisionsintheOperatingAgreementratherthantheCertificateofFormation,wecanavoidthenecessityoffilinganAmendmenttotheCertificateofformationifanyoftheadditionalprovisionschange.WecanalsoavoidcostlyperpagechargeswhichaddupwhenyoufileamultiplepageCertificateofFormation.Filingtheminimumprovisionsallowsmaximumflexibilityandeconomy.IfyouwantadditionalprovisionsincludedonyourCertificate,wewouldbehappytoaccommodateyouifyousupplytheexactlanguageoftheadditionalarticles.

What is the Operating Agreement? MostArticlesofOrganization,alsoknownasaCertificateofFormation,aredeliberatelyspareindetail,

definingonlytheminimumtraitsrequiredtoestablishtheLLC.ThereasonforthisistoallowtheLLCtodefineitsownprovisionsinitsOperatingAgreement;whichsavestheLLCfromhavingtofileanAmendmentwiththeStateifachangeisneeded,andkeepstheorganizationaldetailsofthecompanyprivate.

AnOperatingAgreementissimilartotheByLawsofaCorporationinthatitdefinesthespecificsofthe

regulationoftheofthecompanysbusinessandissimilartoaLimitedPartnershipAgreementinthatitdefinesthetermsthattheMemberswilladheretoregardingadmissionofnewmembers,assignmentofinterest,appointmentofvotingrightsanddissolutionoftheassociation.

YourpurchaseofaNewLLCRegistrationPackage(excludingtheBasicpackage)includesanOperating

AgreementKitwhichcomeswithyourchoiceofamodeltemplate(MicrosoftWord.docorWordPerfect.wpd),orafillintheblanksform.

ThefollowingstandardArticlesareincludedinthemodelOperatingAgreement:1. Definitions2. OrganizationoftheCompany3. Members(Status,RightsandDutiesof)4. ManagementoftheCompany

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5. Managers(Status,RightsandDutiesof)6. Officers7. Capital8. DistributionstoMembers9. ProfitsandLosses10. AdmissionandWithdrawalofaMember;TransferofMembersInterest11. ConversionandMergerwithOtherEntities12. Dissociation,Dissolution,WindingUp&Termination13. BooksandReports14. MiscellaneousIfyouwishtoincludeadditionalprovisionspleaseindicatethatyouwanttheWord.docorWordPerfect.wpd

template.Youarefreetoalter,addordele

Delaware Incorporation Handbook (14th Edition, 2013)

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