Alerts

2019 DELAYS ≠ 2022 DELAYS

COVID closures, logistical bottlenecks, and short-staffed filing offices continue to pose challenges for customers used to submitting and receiving filings on an expedited basis. Unfortunately, we’re seeing these significant delays in very high-volume jurisdictions further exacerbating the impact on closings. We mentioned Delaware delays in the last issue of our newsletter and we’re not seeing much of an improvement there. “Next Day” expedites are currently running about 3-5 days to receive filed evidence, but that is far superior to the 4-month turnaround for routine processing. Delaware, however, is not alone. UCC Filing acknowledgments in New York are a good 10-15 days out and copy requests can also run 2 weeks out. Unfortunately, there is no expedited service available there.

In California, most filings are taking anywhere from 1-4 weeks to finalize evidence and expedite is only available for online filings with additional fees upwards of $750. UCCs in the Golden State are taking their time as well — about a week. Even in Texas where, thankfully, we have seen some improvement, preclearances and mergers can still cause us to wait 3 weeks for evidence. We’ve said it before and we’ll say it again: Don’t miss your filing date. File early. There simply are no margins for error and unfortunately, though we’ve fielded so many of your pleas, there is very little we can do to get our contacts at the filing offices to prioritize, or even offer an estimate of completion for all of our many pending submissions. Don’t wait! Contact us now to get your filings on the fast(ish) track!

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Five Fun Facts About Delaware

Delaware definitely likes to be first. It was the first state to ratify the Constitution, and it’s often the first choice for many business entity formations. Below are 5 possibly lesser-known facts about this “Small Wonder”:

  1. Delaware is home to more businesses than people.
  2. The Delaware Court of Chancery was established almost 230 years ago and has written most of the U.S. corporation case law.
  3. Approximately 340 of the Fortune 500 claim Delaware as their legal home.
  4. Delaware registers more businesses annually than any other state with nearly 250,000 new businesses registered in 2020.
  5. Our Delaware office is staffed from 8am – 7pm Eastern with industry veterans well-versed in the intricacies of any form of filing and not just in Delaware.

Capitol Services likes to be first, too. We’d love to be your go-to service provider when you need assistance with your Delaware registration and beyond!

These and other interesting facts about Delaware can be found at www.corp.delaware.gov.

Comptroller Switches to Electronic Notices

The Texas Comptroller has changed its annual franchise tax notification method. Historically the agency mailed the annual notice to the mailing address it had on file for the entity. This year, the Texas Comptroller is only mailing notices to first-year filers and those for which it does not have an email address. Do not forget to check your email, including your spam folder, for your franchise tax notice this year!

Annual franchise tax reports are due on May 16 this year. Even if you have no tax due or no activity to report, you are required by law to file a franchise tax report and information report every year. Online filing is easy with WebFile — you will need your Texas taxpayer number and WebFile number, both listed on your franchise tax report notice.

If you need assistance with your 2022 franchise tax report filing, the Texas Comptroller offers FAQs on reporting and filing franchise tax, as well as current year instructions. You can also receive assistance by calling 1-800-252-1381.

Utilize Expedite Options to Secure File Dates

You may have noticed increased messaging from Capitol Services related to delays in one of our busiest filing jurisdictions: Delaware. As circumstances change, so too do the specifics of processing turnaround. At the time of this post, routine processing of Delaware filings is over a month behind. Further, if a filing is in process, you cannot obtain good standings or filed documents because the entity’s filing history and status is incomplete during this pending period.

Expedited processing is a “must” if you have an upcoming closing or a required filing date. Avoid unexpected delays and choose a level of expedited processing that will best fit your needs:

DELAWARE EXPEDITE OPTIONS
Turnaround Time Expedite Fee Submission Cutoff*
24 Hour $50-$100 6:45p EST**
Same Day $100-$200 1:45p EST
2 Hour $500 4:45p EST
1 Hour $1,000 5:45p EST
30 Minutes*** $1,500 6:15p EST

* Submission Cutoff Time refers to time submitted to Capitol Services.
** 24 Hour Expedited Filings submitted after 6:45pm EST can still be processed until 8:30pm EST if they are submitted directly through the [email protected] email address.
*** The state will not guarantee 30 minute processing, rather, they will guarantee that all 30 minute processing requests will move ahead of other service requests in the queue. If the 30 minute timeline is not met, the price will be adjusted to match the expedited time level they were able to accommodate.

It’s important to note that while Delaware has stopped offering preclearance checks, they do still allow a 5 business day grace period wherein you can make corrections to rejected documents and still maintain your original date of submission. As with so many things in recent months and years, news and events are changing rapidly. Be sure to ask your customer service representative about the latest delays and turnaround for expedited processing.

Registered Series LLCs are Coming to Texas

The Texas legislature has followed the State of Delaware’s lead by providing for a new type of series LLC, a “registered series,” which is formed by filing a certificate of registration with the Texas Secretary of State.

Since 2009, Texas law has permitted the creation and use of series LLCs, a unique form of limited liability company in which the articles of formation allow for unlimited segregation of membership interests, assets, and operations into independent series. Until recently, however, LLCs in Texas did not have a mechanism to register their series with the Texas Secretary of State or to obtain a certificate of good standing (called a certificate of fact) from the Secretary of State for a series. This lack of transparency often caused consternation from third parties transacting with such series.

 

Benefit Corporations Map

Effective (21)
Gray Area (4)
No Legislation (28)

 

In 2021, the Texas legislature passed Senate Bill 1523 to address this issue. The legislation, effective June 1, 2022, provides LLCs with the option of formally registering their series with the Texas Secretary of State through the filing of a certificate of registration. The existence of a registered series will be confirmable in the Secretary of State’s public records, and interested parties will be able to obtain a certificate of fact from the Secretary of State for each registered series. The legislature anticipates that this legislation will enhance the attractiveness and improve the functionality of series LLCs in Texas. The original type of series will remain available and has been renamed a “protected series.”

Readers will note that this legislation is very similar to legislation passed in Delaware in 2019, which allowed for the formation of registered series through a filing with the Delaware Secretary of State and acted as a model for the Texas bill.

Series LLCs are becoming an increasingly popular option for businesses as more and more states pass legislation authorizing their creation and use. Currently, around twenty states (plus Washington, D.C.) have adopted statutes permitting series LLCs.

What is behind this increase in popularity? Series LLCs offer a method of liability segregation without the cost and upkeep of forming multiple LLCs. Instead, they permit a single LLC to be formed with the designation that it will allow for series to be created within the limited liability company agreement. Thereafter, each individual series will operate like a separate entity with a unique name, bank account, and separate books and records. Each series within the LLC may enter into contracts, sue or be sued, and hold title to real and personal property, and the assets owned by each series are shielded from the risk of liability of the other series within the same series LLC.

Business Organizations Code Amendments

The Texas Legislature recently amended the Business Organizations Code to provide that acting as a governing person of a domestic or foreign entity that is registered to transact business in Texas is not an activity that constitutes transacting business in the state. A “governing person” is a person entitled to manage and direct the affairs of an entity and the governing documents of the entity. This change, effective September 1, 2021, is meant to address any contrary implication created by a 1983 Texas attorney general opinion. Another notable change to the Business Organizations Code is the requirement that certificates of formation include the initial mailing address of the filing entity. A “filing entity” is a domestic corporation, limited partnership, limited liability company, professional association, cooperative, or real estate investment trust. This change, effective January 1, 2022, was requested by the Texas Comptroller’s office to enhance its ability to communicate with new filing entities and assure franchise tax reporting compliance.