Mar 28, 2012|
The CEO of Havard Business Services, Rick Bell, tells us about the benefits for companies to incorporate in Delaware.
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
-- the markets open in June is ecstatic because oil prices are down two dollars a barrel. And a 10526. The rest of the market just it looks like a lot of window dressing the media or not -- lots going on uneventful -- in the red Dow down nineteen NASDAQ flat. S&P pretty much down to the ten years flat gold is down twelve dollars twenty cents and as you said. That oil is now trading at 10516. -- we're joined now by Rick bell he's the CEO of Harvard business services Rick welcome to the show are you doing today. Thanks very thanks for having me I do an area. We know Rick Ankiel I wanted to talk -- about Delaware. You know there's something magical and mystical about incorporating Delaware like if you look at FaceBook it's a Delaware corporation. I have used Delaware corporations for real estate businesses LLC series policies. What is it about Delaware that makes it the place to incorporate. Yeah well it depends on the situation. There are situations where you and not necessarily get a big benefit for incorporating Delaware but for example if you plan to go public you'll be in Delaware corporation. 63%. Of the fortune 500 -- Delaware company and even more important to your readers. In that -- has -- -- 76%. Of all US IPOs. Like pandora media link in Delaware company. Why is that -- what is it like what I'm trying to get to -- You know I know that everybody I like EE I talked to my lawyer the other day and he said -- he -- to set -- but a Delaware corporation what is it about Delaware that makes it's a magical. In for Korver because I'm not and I'm not even taken my company public. It's just something where he told me it was a real estate business he said buried -- to do that dollar and by the way. I did that with your company before -- match. That the cricket -- and it's very. In the bottom line is that Delaware is a small state has -- small legislature is it's easy to pass laws that are fair. And balance between -- corporation's shareholders. And over a period of time a long history a couple of hundred years now. The DuPont Co. has been our biggest company in the Delaware and they pretty much got what they want as far as corporate logos. So you have eighties the legal system that's been well tested in the courts -- -- long period of time. And it is very friendly. And respects let's call -- the goods -- decisions and management over and above the whims of the stockholders. -- what about the venture capital guys that you -- when Nate when you talked to a BC guy they also will say well gee what you know if if you're not incorporated in Delaware they'll scratch their heads say well why wouldn't you have been incorporated in Delaware. Exactly that's it mostly because of the enormous flexibility that Delaware companies. With regard to the number of ways they can raise capital. You've got on loans -- options to ventures. All different combinations of them itself stock some preferred stock. He could have several class a common. So for these guys have approved as a professional investors. They note that they can use the flexibility of the laws in Delaware in order to get what they want which is to raise money for the company. What about privacy for a you know very a big issue. A being that it be in the resent people used Delaware is that the privacy laws are stronger in Delaware than they certainly are in Massachusetts. Well at least for LLC's it's not too much true for corporations. In Delaware corporations do. This their directors and their officers once a year on their franchise tax for. But LLC in Delaware limited liability companies. Only need to have any contact person. You do not need to report anywhere on the public record who owns the company to the members of the company are. You know what affiliations they have so privacy is very strict for an you know and. Right now the other thing that -- that I've seen the law firms using it for his first state planning purposes on the series LLC they're using it to. To take advantage of loss of marketability. And and and loss of of fair valuation encore on largest states Dick -- said might be worth. 1020 million dollars or more they're using the series LLC which is again a Delaware company correct. That's right there are several states have to have the series LC. Including Oklahoma Illinois -- about it Tennessee's center. But Delaware's started at -- was the first went that is in the United States that existed globally before. This series jealousy is -- way to use one company. For a number of different associations. If you own a number of different real estate. Situations it's an -- rental properties. And he went with each one under an LLC that same great way to do it. But then if you have five properties European five franchise taxes -- -- five actually turns the federal government. And if you use the period LLC each one of those properties can be hell inside he won a single company. And that eliminates. And that that'll actually did and just to file one one state returns and one when it returns. I was talking to the I've got client up here in Massachusetts and they had 22 properties inside of their series LLC. Yet there are only filing. One tax return because it would all four of five filed through to the series LLC is there a limit are -- and it does it does Delaware -- out on the series LLC it. A hundred companies start -- -- properties 300 properties that you can put into one of these analyses. It's completely flexible however remember you should have a bank account a separate bank account for each one of those here lies that. Mr. -- purposes. In the accounting purposes and also to legally. You want each one of those series to be a -- not related to the other. And that is somebody's season the whole point is assembly season when -- company's or one of your properties you don't want that to bleed over to your other assets. I got so if you own a four family house and in in in Milton. For instance right you put that into one cell and keep a separate set of books for that. But then he might have another property in in Braintree so if you're Milton property goes bust if you if it if it. If you lose it all you don't lose the other 22 properties they have in the series LLC. Exactly they won't be named in the lawsuit. -- guy like that. Tell us that he can about this Delaware blank check preferred stock never heard that before. That's the only guy and Delaware they call a blank check preferred because it is a blank check. Basically when you form a company or you can demand and I'm an older company and and declared that class of stock corporate bird. You can then break that class of stock opened to a number -- difference here. And each one of those series can have by filing a certificate of designation. Each one of those series can have its own rights and privileges. And by that I mean the number of shares that purse. The number of votes per share it can be zero can be tend to be any number you want them. The guaranteed dividend. Is different for each class a stock -- it's that you negotiated the so one class a stock might not have a dividend of the preferred whereas one class of preferred might get a guaranteed dividend some formula that you make up. -- -- -- -- -- If it's a vehicle to attract investors and it's also it's also a great vehicle. To attract people to your company that are inside he gonna give them stock but you don't necessarily wanna give up the common stock of the company. So you set up one series your preferred for the for the employees of the company and that may have no dividend in May have no voting rights to. But it's their share of the company. Interest to you did you get. Hey Rick what does it cost incorporated door. Anywhere from 350 dollars to 550 dollars depending on. The extremes we have on the service have to ask you wanted to tetris. And it's what fifty bucks a year after that summit here. But the years are registered agency period we are the lows in the business but you'll pay for -- Delaware corporation you'll pay about a 125 dollars a year franchise tax. We're Delaware LLC UP about 250 dollars a year for -- that's so good about that fifty. Got it got it will recht thanks for your time sure appreciate it yet. Are regulated -- -- Eric Bell he's the chairman and CEO of Harvard business services. The facilitate. Companies that want to incorporate in Delaware.