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Often a company fails to comply with a requirement of a corporation or limited liability company (LLC) law because of a misconception. The information below helps eradicate some of the popular misconceptions that have cost businesses in the past.
MYTH: I’m filing corporate documents outside of the United States. I don’t need to prove the authenticity of the documents or of my signature.
►REALITY: When filing corporate documents in foreign countries you will have to prove their authenticity. This is done by filing either an apostille or a certificate of authenticity—depending upon the country.
MYTH: My bank has asked for a certificate of good standing before it will agree to provide my LLC with a business loan. The LLC is behind in its annual report filings, but the Secretary of State will still provide me with a certificate of good standing.
►REALITY: Probably not. The failure to file annual reports generally results in a company falling out of good standing and the Secretary of State refusing to provide a certificate of good standing.
MYTH: I formed an LLC for my start-up. Now a venture capitalist is willing to provide funding, but its bylaws say it can only invest in corporations. I guess I will have to dissolve my LLC and incorporate my business.
►REALITY: You could convert your LLC into a corporation without dissolving the LLC and forming a new corporation by entering into a statutory conversion.
MYTH: While my company was administratively dissolved for failing to file annual reports, another company was formed under my company’s legal name. Once I reinstate I get my name back and that other company will have to change its name.
►REALITY: In all likelihood, the second company gets to keep the name, and your company will have to change its name in order to be reinstated.
MYTH: Once I file articles of dissolution with the Secretary of State my corporation’s existence ends.
►REALITY: Filing articles of dissolution does not end the corporation’s existence. It still exists but only for the purposes of winding up its business and liquidating and distributing its assets. The corporation’s existence ends when the winding process is completed.
MYTH: My LLC filed a lawsuit. The defendant is claiming the LLC cannot maintain the lawsuit because it is not registered as a foreign LLC in the state where the suit was filed. My LLC will have to withdraw its lawsuit.
►REALITY: Not necessarily. If the LLC was not doing business in the state it would not be required to register and could maintain the suit. And if it was doing business the court may stay the lawsuit and give it a chance to register.
MYTH: I will be incorporating my business soon. I submitted the name I want to the Secretary of State, who found the name was available. Therefore, there is no need to conduct a trademark search.
►REALITY: The Secretary of State only checks its own records to see if any other entity is on file with the desired name. It does not check for state, federal or common law trademark conflicts. If you want to know if your chosen name infringes on someone’s trademark rights you should conduct a trademark search.
MYTH: Every state’s UCC laws are the same because they all have adopted the Uniform Commercial Code.
►REALITY: Even when states adopt a uniform law they can, and do, vary the provisions to meet the state’s unique needs and interests. Consequently, even though every state has adopted the uniform code the UCC laws still differ from state to state.
For more information on company compliance and business entity filings, talk to us today.
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