Business Law
Business Law
Introduction
Incorporating a company, much like it is to incorporate any other business, requires following a certain legally enforceable procedure. The procedure of incorporating a company is quite long compared to that of having a sole proprietorship registered. The difference in the complexity of the incorporation procedure comes as a result of the fact that a company, unlike all other forms of business, is a legal entity. A legal entity is a body with legal personality. A company is said to be having legal personality in the sense that, legally, a company is recognized as a person having rights similar to those of a natural person (Brough, 2005). It is the incorporation process that grants an organization legal status – a status that separates the organization from its owners in the sense that it can own property in its name, sue and be sued as well as enter and cancel contracts with other parties. Registering a company in the state of Delaware is quite procedural, just like it is in other states. Worth noting however, is the actuality that there are various differences – slight ones – in the procedures of incorporation across the states. This paper seeks to explain the process of incorporating a company in Delaware through the case of Brother’s Automotive, Inc.
Apparently, there is need to conduct a name search with the aim of having the organization incorporated without any legal hitches. In conducting the name search, I will prominently focus on establishing whether the name chosen by the smiths is valid. In establishing whether or not the name is valid I will seek to find out whether the name Brother’s Automotive, Inc is also a name of another existing company. The laws of Delaware do not allow a company to adopt the name of another company. This is the case in all other states. Secondly, the name chosen should not be misleading. It should not make the public have an impression that the organization is doing different business from the one it is currently doing (Sniffen & Company Corporation, 2001). Thirdly, the name should not imply affiliation with the government or any executive or ceremonial royalty. Finally, the name should include the clause “limited” at the end. This is an indication that the liability of the shareholders is limited to the extent of the capital contributions made. There being no similar name to Brother’s automotive ltd, I will approve of the name.
Documents Required By the State
As a matter of the law, there are various documents required by the state in the process of incorporating a company. Among the key documents required by the state are those that determine the relationship between the state and the organization, as well as those that govern the relationship among the internal stakeholders of the company. The documents required are as follows.
The Memorandum of Association (MOA)
This document prominently describes the organization in relation to the external environment. For instance, it prominently describes the location of the business, and all matters pertaining to shareholding in the company. Among the main components of the MOA is the objects clause, statement of liability, amount of share capital, as well as the subscribers of the organization.
Draft
Brother’s automotive ltd
123 Memory Lane, Orange Beach, Alabama, 36561
Memorandum Of Association
Liability clause..
Objective clause.
Capital clause..
Situation clause.
Dividend clause.
Articles of Association (AA)
The Articles of Association is a document that outlines the guidelines governing the internal business procedures in the intended organization. Apparently, it is this document that outlines the procedures of convening and conducting the general meetings such as the Annual General Meeting (AGM) and the Extraordinary General Meetings (EGM). The Articles of Association also outlines the voting rights and procedures pertaining to the transfer of shares and other important procedures such as the appointment and dismissal of directors.
Draft
Brother’s automotive ltd
123 Memory Lane, Orange Beach, Alabama, 36561
Articles Of Association
Procedure of convening meetings
Voting rights..
Procedure of apponting directors.
Dividend policy.
EGM
List of Directors
The procedure of registering a company in Delaware requires the directors to provide the registrar with the list of the people that will act as directors upon the incorporation of the organization. Typically, it is expected that the list of directors will have at least one director and no specified maximum. In the case of Brother’s Automotive, Inc, the smith brothers will be the ones to hold the positions. The list of directors will be expected to be submitted as a way of enabling the state communicate effectively with the organization where and when it deems necessary (Brough, 2005). In Delaware, it is preferable that one of the directors and the company secretary be locals, for purposes of tax compliance. Complying with local taxes is effectively achieved where the director in charge is a person that perfectly appreciates the local taxation procedures.
Draft
Brother’s automotive ltd
123 Memory Lane, Orange Beach, Alabama, 36561
List Of Directors
Directors
1..contacts..occupation.
2..contacts..occupation.
3..contacts..occupation.
4..contacts..occupation.
Addresses of the Company
There will be need serve the registrar with addresses, both physical and postal for purposes of effective correspondence. The addresses are not the private contacts of the company directors, but rather the contacts of the organization as an entity.
Draft
Brother’s automotive ltd
123 Memory Lane, Orange Beach, Alabama, 36561
List Of Addresses
123 Memory Lane, Orange Beach, Alabama, 36561
List Of Directors
Adress 3:..
.
..
..
An Affidavit or Declaration from a Lawyer
When taking the documents to the registrar, the future directors of the organization should carry with them an affidavit indicating compliance. The lawyer should indicate that the organization has fully complied with the requirements of the law.
This is typically, a statement that is written by a lawyer and has no standard format, but has a a leaglly accepted way of delivering the meassage to the registrar.
Methods of Filing
There are various ways of filing the abovementioned documents with the registrar. Among the most recognized methods are as follows.
Attorneys and Corporate Law Firms
This method of submitting the documents allows an organization’s future directors to take the documents to the lawyers and other legal firms for filing. The lawyers represent the intended organization at the office of the registrar. The main reason why people prefer this option is because unlike the other options, the parties registering the organization, also referred to as the promoters, are assured of little or zero legal hitches in the registration process since their agents, the lawyers, are custodians of the law. Using a law firm is an effective way filing the documents; as such agents can offer extra services such as correcting the information in cases where non-compliance is seen in the documents. Currently, this is the most preferred option in Delaware.
Business Service Firms as Proxy
There are firms whose business is to assist other organizations register their company names. Such organizations are concerned with a type of agency referred to as initial legal agency (Tower-Pierce et al, 2009). The main reason why such agency is referred to as initial is because it is used in the registration process. Such firms are a costly option as they endeavor to maximize returns. Even so, this is an effective option as it has a professional approach.
Do-It-Yourself method
In this method of filing the documents, the smiths will be expected to go to the registrar by themselves to submit the documents in person. While this option is comparatively cost effective, it is associated with a number of difficulties, top on the list being the fact that the individuals involved in filing the forms are not well versed with the procedures(Brough, 2005). This means that there are chances that the people will take long in registering the organization. Such procedures as changing names of the organization may be quite costly.
Online Filing
As is the norm with online procedures, this is a lengthy option as far as time is concerned. This involves visiting the website, obtaining the procedures and the requirements, and filing the required documents through the website. While this may appear like an attractive option, the Smiths may not go for it considering that it is lengthy and has a number of hitches.
Fees Accompanied with the Filing Procedures
In filing the documents required by the registrar, the promoters of the organization to be created are expected to pay registration fee and incorporation fee. Incorporation fee is the amount paid so as to have the certificate of incorporation issued. This is to say that the certificate of incorporation will be issued when the promoters serve the registrar with a receipt indicating that they have paid the total amount. Registration fee is paid so as to have the organization registered for taxation purposes such as exemptions and subsidies and other local rates.
The Documents to Be Filed Annually In The Future
Once the Brother’s Automotive, Inc is incorporated, it will embark on its business of buying and selling the racing cars. This will begin immediately the certificate of incorporation is issued. On its first anniversary – one year after incorporation, the organization will be required to file some specific documents with the registrar. Among the documents to be published are such documents relating to:
Annual Return
Annual return, which refers to the profitability of the company, will be filed with the registrar through various accounts and statements. The annual return of an organization can only be published through issuance of the Audited Statement of comprehensive income (Sniffen & Company Corporation, 2001). This statement indicates the trading activities, the annual revenue, the expenses, the revenues, as well as the net income. This document is considered important because of taxation purposes.
Auditor’s Report
Worth mentioning here is the actuality that all companies have to be checked on consistency from both an external and an internal viewpoint. For this reason, there is an internal audit function, an external audit function. The internal audit function checks on the internal business processes for consistency and transparency (Sniffen & Company Corporation, 2001). The work of the external auditor is completely different from that of an internal auditor because it is carried out independently with the aim of establishing whether or not the business accounts indicate a true and fair view of the business transactions of the organization. The report of the external auditor must be filed with the registrar.
Statutory Registers
Since an organization will typically change in terms of ownership and control, it is important that the registrar be informed of such changes. The main statutory registers reflecting such changes are: the shareholder’s register and the list of directors. The shareholders’ register will typically indicate changes in the ownership of the organization (Tower-Pierce et al, 2009). On the contrary, changes in the directors’ report indicate changes in control. Both registers are filed with the registrar after every year.
References
Brough, G. H. (2005). Private limited companies: Formation and management. Edinburgh: Thomson/W. Green.
Sniffen, C. R. J., & Company Corporation. (2001). Incorporating your business for dummies. Foster City, CA: IDG Books Worldwide.
Tower-Pierce, J., Gillies, P. S., & Krolik, L. (2009). Virtual incorporation: A lawyer's guide to the formation of virtual corporations. Chicago, Ill: ABA Pub./American Bar Association.
