Glossary Terms

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Amendment

A formal filing with the Secretary of State that amends the original Certificate of Formation to change company name or Registered Agent.

Annual Agent

Same as “Registered Agent.” Annual Agent is required by statute to be appointed by the company to receive and forward legal and government documents on behalf of the company. Sometimes called Annual Agent because services are paid for on an annual basis.

Annual Members Meeting

Not required for LLCs, but still a good idea. A yearly meeting of an LLC's members wherein the previous year is reviewed and the upcoming year is planned. Actions are taken by vote and documented in minutes and resolutions

Annual Report

In Delaware, for LLCs this “report” is simply an invoice for franchise taxes due. Only information contained on the Annual Report is the name of the entity and the franchise tax due.

Apostille

A separate document required by foreign countries that are parties to the 1961 Hague Convention that attests to the validity of a signature on a document. The apostille allows the foreign country to accept the validity of the U.S. document for use in its territory. Order Apostille

Asset

An object possessed or owned by an LLC that has value.

Asset Protection

A method by which an individual or entity protects their assets through the use of multiple LLCs and other entities such as statutory trusts.

Authorized Stock (or Authorized Capital Stock)

LLCs may have stock, but most don't. They usually have Membership Units that denote ownership.

Beneficial Owners

Those with an ownership interest in an entity, usually they are called Members in an LLC.

Cancellation

The act of formally dissolving an existing LLC entity that no longer intends to conduct business.

Certificate of Authority

A document filed with the Secretary of State that officially authorizes an entity formed in another jurisdiction to conduct business in the state where the Certificate was filed.

Certificate of Correction

A filing with the Secretary of State that corrects a clerical error in a previously filed document.

Certificate of Existence

Official document issued by the Secretary of State that confirms an entity is in good standing with the state, i.e., franchise taxes are current, registered agent appointed, etc. This is also called a Certificate of Good Standing

Certificate of Formation

A document filed with the Secretary of State that officially creates an LLC in Delaware.

Certificate of Good Standing

Official document issued by the Secretary of State that confirms an entity is in good standing with the state, i.e., franchise taxes are current, registered agent appointed, etc. To order a Certificate of Good Standing, please click here.

Chancery Court

Specialized court in Delaware staffed by judges who are experts in business and commercial transactions. This court specializes in business cases, and has established a 200 year history of case law precedents protecting the rights of business owners.

Common Law Trust

A trust created pursuant to and governed by English Common Law precedents. Normally, a grantor of assets into a common law trust cannot maintain control over those assets without those assets still being considered a part of the grantor’s estate and subject to attachment.

Consideration

What someone pays to someone else in exchange for receiving something in return.

Consolidation

The act of joining two separate and distinct existing entities into one new entity. Normally authorized by resolution and achieved by executing an Agreement of Consolidation between the parties involved. A Certificate of Formation is required for the new LLC entity.

Contract

A private agreement entered into by two or more parties, and supported by valid consideration, wherein the parties agree to adhere to certain terms and conditions for an established period of time, or indefinitely.

Contribution

Money, services rendered, or other consideration paid to an entity in exchange for ownership in that entity.

Corporate Veil

A shield of limited liability afforded to Corporations and LLCs that maintain their corporate compliance. Creditors cannot proceed against owners’ personal assets.

Delaware

The Incorporation State

Delaware Court of Chancery

See Chancery Court

Delaware Limited Liability Company Act (DLLCA)

The leading body of law governing LLCs formed in Delaware

Delaware: Better Than Offshore

This is a protected mark of Harvard Business Services, Inc. that refers to Delaware's status as an Offshore Financial Centre. Better refers to the fact that Delaware and the U.S. government does not require the entity or its registered agent to disclose who holds beneficial interests in the entities formed here.

Directors

Individuals elected to manage the affairs of a Corporation. Sometimes, LLCs choose in their Operating Agreements to have directors, but usually LLCs are managed either by the Members or by one or more Managers.

Distribution

The transfer of money or other property from an LLC to one or more Members.

Doing Business As (DBA)

The act of conducting business under a trade name that is different than the official or true name of the LLC.

Domestication

The act of changing the home state of an entity from one jurisdiction to another, preserving the original date of formation.

Double Taxation

The taxation of corporate earnings at the corporate level and again at the shareholder level. A Corporation pays income tax on its annual profits. Then, if it issues a dividend to shareholders, these shareholders must pay taxes on this income again on their separate returns. Double taxation is eliminated with an LLC.

Electronic Signature

A mark, symbol, notation or signature in electronic form that is utilized to indicate one’s intent to be bound by that document.

Electronic Transmission

Any form of communication not in paper form that creates a record that can be retained, retrieved and reviewed by the recipient. Delaware allows voting by and notice to Members to be provided via electronic transmission.

Employer Identification Number (EIN)

The tax identification number provided by the Federal Government to each entity that applies. Single –member LLCs are disregarded entities to the IRS and therefore they are not given an EIN. Also see Federal Tax Identification Number. Get your EIN.

Estate Planning

The process of creating, while still alive, a mechanism for preserving assets for distribution to others upon one’s death or even before. LLCs are commonly used to hold real estate for estate planning purposes.

Family Limited Partnership (FLP)

A limited partnership created to help protect the family’s real estate and personal assets. Normally, one or both the parents act as the General Partners and place real estate into the FLP. The children are designated as the Limited Partners and contribute no assets to the FLP. Typically, the Limited Partners are not permitted to operate the FLP so the General Partners can maintain control but have a very small ownership percentage. LLCs are now often used to clone FLPs.

 

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