This chapter includes sample letters to be used in connection with the formation or dissolution of entities for small-business clients, including for assisting a nonprofit in obtaining tax-exempt status and dissolving a nonprofit.
Some common issues are addressed in this chapter, such as:
Also addressed are ministerial tasks, such as submitting documents for filing and obtaining endorsed filed copies of the same. There are sample “long form” letters in this chapter that forward organizational documents to newly formed entities and provide guidelines for operating as a corporation or a limited liability company. Many of these guidelines would be the same for other types of entities, such as limited liability partnerships and limited partnerships, and the sample letters can easily be adapted.
The samples were typically prepared for Delaware or California entities, so review the requirements in your jurisdiction to personalize your forms if you practice elsewhere. In addition, check for any applicable changes in the law before finalizing your own letters and documents.
Some letters, such as those forwarding stock certificates to a client for review and signature, are largely neutral in terms of jurisdiction. However, keep in mind that the legends on the backs of your client’s stock certificates should always reflect the applicable restrictions on transfer, which may vary according to jurisdiction and the existence of a shareholder or other agreement with first refusal rights or other transfer restrictions.
One sample letter in this chapter encourages a client to enter into a founders’ agreement with co-founders. Similar concerns arise or remain after company formation and can be addressed through a shareholder agreement, operating agreement, or general buy-sell agreement. The owners of closely held entities should always be encouraged to adopt such an agreement, as a dispute among the founders or an ownership change can ruin an early-stage company’s chances for success.
Choosing Between a Corporation and a LLC
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Choice of Entity
Dear {Salutation}:
We have received your signed engagement letter and retainer—thank you!
As you may have noticed, our engagement letter left open the issue of the type of entity to be organized. In our recent telephone conversation, I think we agreed it makes sense to organize the entity in STATE, but we didn’t finish our discussion regarding the type of entity to be formed. As we discussed, the two logical options for the formation of the subsidiary are (1) a corporation and (2) a limited liability company (LLC).
The primary difference between the corporation and the LLC for your purposes is the tax treatment. Generally, corporations are subject to corporate taxation and even double taxation to their owners where profits are taxed at the entity level and again at the shareholder level upon distribution. This wouldn’t be true in the event the corporation made an election under Subchapter S of the Internal Revenue Code (i.e., if it was an S Corporation), but you are not eligible to make an S Corporation election. The LLC, on the other hand, can elect partnership tax treatment in which the entity is essentially disregarded for tax purposes and the profits and losses of the entity “flow through” to the shareholder, thereby being taxed only once. However, the flow-through tax treatment may not be desirable if, for example, profits will be left in the entity to fund growth, in which case the shareholder would be taxed on profits it does not actually receive and may pay tax at a higher rate than a corporation would have paid.
Please give me a call at your convenience to discuss the differences between operating as a corporation versus an LLC in more detail. Alternatively, I would be happy to talk with your accountants about the best structure for this venture. I look forward to hearing from you.
Very truly,
FIRM NAME
Lawyer Name
Tax Planning in Connection with Corporate Structuring
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
|
RE: |
Tax Planning in Connection with Determining Corporate Structure |
Dear {Salutation}:
Regarding your corporate structuring and tax planning for COMPANY, I recall giving you the names of a few CPAs, and it occurs to me you may have come up with a tax strategy in conjunction with the company’s new CPA. If that is the case, perhaps it is time I speak with your CPA directly so that I may fully understand and help implement your strategy.
If you have not yet conferred with a CPA, perhaps that should be your next step, as tax planning appears to be a driving factor for you in planning the next stage of the company’s growth.
I look forward to hearing from you.
Very truly,
FIRM NAME
Lawyer Name
Deciding Whether to Form a Subsidiary or a Division
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Subsidiary versus Division
Dear {Salutation}:
Pursuant to your request, the following is a brief overview of some of the considerations in connection with the possibility of establishing corporate divisions or subsidiaries of COMPANY.
Divisions. A corporate division is an organization within a company—a branch of the organizational chart representing a particular product, brand, or line of business; it is not a separate company. A division typically keeps separate books (i.e., is treated as a separate profit center, with its own budget), has its own clearly defined chain of command, and operates under a different name from the rest of the company, such name being a “dba” pursuant to a fictitious business name registration and registered trademark of the company. Some reasons to choose to operate a line of business as a division rather than as a subsidiary are ease of formation, efficiencies of operating within one organization, flexibility to move employees in and out of the division and to promote from other divisions of the company, and ease of reorganizing or discontinuing a division (organizational lines can simply be redrawn).
Subsidiaries. An alternative to a corporate division is the formation of a subsidiary of the company, which can be wholly or majority-owned by the company. The subsidiary approach is often preferable where the business of the division is highly regulated or particularly risky (and the company has other lines of business). In the case of a highly regulated business, a subsidiary structure permits review by regulators of just the regulated business, excludes review of other lines of business, and isolates the regulated business from potentially conflicting or impermissible activities. For businesses involving a higher degree of risk, the subsidiary structure can insulate the rest of the company from losses and/or failure in the event of a catastrophic loss (in the absence of corporate guarantees or joint liability). Another potential advantage of the subsidiary is that it can be used as a vehicle for a joint venture in which the company shares ownership with a strategic partner. The subsidiary approach can also help to streamline a merger or sale of a line of business by simplifying the due diligence and approval processes. A subsidiary does not have to be formed in the same venue as its parent, so the company could form one or more subsidiaries in the state where they will be operated to reduce the costs of corporate compliance, as compared with forming in Delaware and qualifying to do business in the state of operation.
Licensing and Franchising. Licensing and/or franchising can be used as a revenue/growth model in combination with either the division or the subsidiary approach discussed above. You are already familiar with technology licensing, since the company holds some of its intellectual property as a licensee, so you know that IP licenses can vary widely in terms of use, fees, royalties, exclusivity, territory, etc. Licensing arrangements are not subject to any particular regulation based solely on the existence of a license relationship.
Franchising, on the other hand, is a highly regulated form of doing business (by the Federal Trade Commission and at the state level), which applies to all relationships that satisfy the elements of the definition of a franchise:
(1) trademark/marketing element;
(2) control/assistance element with regard to the franchisee’s method of operation;
(3) required payment element, which may be based on the payment of fees, payment for services, and/or the purchase of materials, inventory, and equipment.
Similar to license arrangements, the terms of franchise agreements can also vary widely in terms of use, fees, royalties, exclusivity, territory, etc. However, parties can inadvertently find themselves subject to franchise law, regardless of what their relationship is called (e.g. dealership, license, distributorship, etc.), if their relationship involves all of the elements of a franchise. It is important to avoid such “hidden” or “accidental” franchises because of the protections afforded to franchisees, including the requirement of a disclosure document (similar to your private placement memorandum in some respects), called a “prospectus” or “offering circular,” covering specified information in connection with the sale of a franchise, and because failure to comply with franchise regulations can result in liability for damages, rescission, criminal penalties, civil fines, and the award of attorneys’ fees.
Because franchising is based on a successful product or business, it may make sense for the company to form a subsidiary to produce the product or conduct the business that it later intends to franchise in order to establish its success separate from the company’s other activities.
Please call me at your convenience to set up a meeting to discuss this in greater detail and in the context of some of your goals for the company. In the meantime, please don’t hesitate to let me know if you have any questions.
Very truly,
FIRM NAME
Lawyer Name
Enclosure
Drafting a Founders’ Agreement
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Drafting a Founders’ Agreement
Dear {Salutation}:
As we have discussed, it is highly recommended that you enter into an agreement among founders. The Founders’ Agreement can be extremely useful to ensure that each founder understands his or her relative ownership, contributions, restrictions, obligations, and vesting requirements in connection with the formation of COMPANY, including the rights of first refusal, valuation method, and buy/sell provisions that we have already discussed.
You should budget some time and money to complete a Founders’ Agreement before you proceed much further. Prior to incorporation, while you and your co-founders are jointly pursuing the business of COMPANY, your legal status is that of general partners, with the ability to legally bind the other general partners and unlimited personal liability. You obviously don’t want to continue in that capacity any longer than necessary. Hopefully, you and your co-founders have already discussed and can readily agree on the various components of the Founders’ Agreement, such as those mentioned above. If it would be helpful to have a sample agreement to review and discuss among the founders prior to our meeting, please let me know. Otherwise, I will walk you through the recommended provisions, present alternatives, answer questions at our meeting, and draft an agreement specific to your preferences.
Please give me a call at your earliest convenience to schedule a meeting to discuss appropriate terms for the agreement and the details for your incorporation.
Very truly,
FIRM NAME
Lawyer Name
Forwarding Articles to the Secretary of State for Filing
{Date}
Secretary of State Filing Unit
State of STATE
{Address}
{City, State, Zip Code}
RE: Filing Request on behalf of COMPANY
Dear Sir or Madam:
Enclosed please find an original and two copies of the Articles of Incorporation of COMPANY. Also enclosed, please find a check made out to “Secretary of State” in the amount of $______ for your filing fee.
Please file the original Articles of Incorporation, certify the copies, and return the endorsed filed copies to me in the enclosed self-addressed, stamped envelop as evidence of filing.
If you have any questions or need anything further in connection with this filing request on behalf of COMPANY, please call me directly at TELEPHONE. Thank you in advance for your prompt handling of this matter.
Very truly,
FIRM NAME
Lawyer Name
Enclosures
Forwarding Organizational Documents to a New Corporation (Short Form)
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Organization of COMPANY
Dear {Salutation}:
Enclosed please find the following documents prepared in connection with the organization of your corporation:
Please sign your stock certificate where indicated and keep it in a safe place. If you have any questions or changes, please do not hesitate to call me directly.
Very truly,
FIRM NAME
Lawyer Name
Enclosure
Forwarding Organizational Documents to a New Corporation (Long Form)
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Organization of COMPANY Inc. and Operating a Corporation
Dear {Salutation}:
Congratulations on the formation of COMPANY Inc.! Enclosed please find a copy of your Articles of Incorporation, which were filed with the California Secretary of State on DATE. COMPANY Inc. was assigned California corporation number ______________. Also enclosed, please find a draft Statement of Incorporator, Bylaws, and initial Directors’ Written Consent for your review and consideration.
You will need to obtain a Federal Employer Identification Number (FEIN) for the new entity, which you can do online by completing and submitting a Form SS-4 application. The start page is at http://www.irs.gov/businesses/small/article/0,,id=102767,00.html. Click on the “Apply Online Now” link on that page and follow the instructions. If you get stuck, give me a call. Once your FEIN is obtained, please send me a copy of your completed Form SS-4 and the assigned FEIN for my files. Tip: Don’t use any punctuation on the application.
With the enclosed endorsed filed Articles of Incorporation and a FEIN, your bank should allow you to open a bank account for the new entity. I will forward additional information to you shortly.
The balance of this letter is information I typically provide to newly formed U.S. corporations. It is an outline of corporate governance and operations requirements, including the roles of officers, directors, and shareholders in a U.S. corporation. Please keep this with your corporate records for future reference.
I. BASIC STRUCTURE OF A CORPORATION
Corporations are just one of a number of forms in which one or more persons can come together to conduct a business in the United States. Corporations are owned by shareholders, who elect directors to manage the corporation. The management duties of the board of directors include making decisions regarding key policies and transactions and establishing the broad guidelines within which the business of the corporation will be conducted. The directors, in turn, appoint officers who carry out the day-today business of the corporation. Additional employees may be hired as well.
Perhaps the main distinguishing feature of a corporation is the provision of a limitation on the liability which the owners of the business—the shareholders in the case of a corporation—can incur as a result of the corporation’s business affairs. As long as the corporation observes proper corporate formalities, the shareholders will not be personally liable for the corporation’s obligations and liabilities. In other words, if the corporation’s debts exceed the value of its assets, the corporation’s creditors normally are not entitled to seek repayment from the shareholders’ personal assets. Of course, a personal guarantee of an obligation would give rise to individual liability, as well as certain tax obligations, e.g., withholding taxes not remitted, and obligations based upon the personal tortious behavior of an officer or director. But generally the corporate shield protects individuals from corporate obligations.
The following is a brief description of the roles of the major players in a corporation, i.e., the shareholders, the directors, and the officers.
A. Shareholders
The shareholders own the corporation and provide the capital with which it commences its business. Shareholders per se do not take an active role in running the business. Beyond electing the directors and voting on certain key events in the corporation’s life, the shareholders entrust management of the corporation to the directors and officers. The areas where shareholders need to vote and get involved in the corporate decision-making process are set forth in greater detail in the section below, “Observance of Corporate Formalities.”
B. Directors
The board of directors manages the business and affairs of the corporation and exercises its corporate powers. The board may either perform these duties itself or, as is the more normal case, these duties can be performed by the officers under the direction of the board of directors. The board also has the power to delegate some of its duties to committees, although it is un-likely in your case that there will be much need for board committees in the near future.
In carrying out these duties, directors have a “duty of loyalty” and a “duty of care,” which run both to the corporation and to the shareholders as the ultimate owners of the corporation. These are often referred to as “fiduciary duties” in favor of the corporation and the shareholders. Failure to abide by these duties can result in personal liability for the directors.
The duty of loyalty dictates that a director must act in good faith and must not allow personal interests to prevail over interests of the corporation and its shareholders. Concerns as to whether a director is violating the duty of loyalty arise whenever it is proposed that the corporation enter into a transaction that benefits a director or where there may be a conflict of interest between the director and the corporation or its shareholders. Such “self-dealing” transactions are not prohibited but must be approached with great care to ensure that proper corporate approval is obtained and that the transactions are fair to the corporation.
The duty of care requires a director to be diligent and prudent in managing the corporation’s affairs. This concept is sometimes referred to as the duty to exercise good business judgment. While directors may be liable for actions that injure the corporation, whether the action results from the directors’ negligence or from participation in or approval of a wrongful act, directors are not held liable merely because a carefully made decision turns out badly for the corporation. This idea, referred to as the “business judgment rule,” is sometimes expressed as a recognition that as long as directors exercise their judgment without fraud or conflict of interest, they will not be second-guessed by courts based on how the decisions happen to work out.
C. Officers
Officers are appointed by the board of directors and serve at the pleasure of the board subject to any contracts of employment with the corporation they may have. The officers perform the bulk of the day-to-day running of the corporation’s business. Every corporation must have a president, a chief financial officer (also referred to as the treasurer), and a secretary. More than one of these offices can be held by the same individual. A corporation may have additional officers as well. These additional officers are appointed either by the board of directors or by the president or another officer if the board has delegated authority to make such appointments.
The following is a brief summary of the standard duties of the president, chief financial officer, and the secretary. All of these could be modified by the board of directors.
1. President. The president is the chief executive officer and general manager of the corporation unless the corporation has a chairman of the board and has designated the chairman as chief executive officer. The president has general supervision, direction, and control over the corporation’s business and its officers.
2. Chief Financial Officer. The chief financial officer (or treasurer) keeps the books and records of account of the properties and business transactions of the corporation. These duties include depositing corporate funds and other valuables in the name of the corporation and disbursing funds as directed by the board of directors.
3. Secretary. A corporation must keep written minutes of the proceedings of its shareholders, board, and committees of the board, and must keep a record of the shareholders, their addresses, and their holdings. The secretary usually has the duty of carrying out these functions and giving notices of shareholders’ and directors’ meetings. In your context, where the shareholders and directors are unlikely to have separate meetings, these duties will be simplified.
II. OBSERVANCE OF CORPORATE FORMALITIES
The regular observance of corporate formalities is an important aspect of maintaining the protections and advantages that the corporate form offers, not the least of which is the protection of shareholders against imposition of personal liability for obligations incurred by the corporation. Three of the most important areas of corporate formalities are shareholder decision making, director decision making, and separation of corporate assets from personal assets. In general, it is appropriate to observe the following formalities in connection with the ongoing operations of a corporation:
A. Shareholder Action. The shareholders should take action to elect the board of directors of the corporation annually. The election can occur at an annual meeting of the shareholders or by written consent if all of the shareholders consent to it in writing. In addition, certain specified fundamental changes in the form of operations of the corporation require the consent or approval of the shareholders. The consent or approval can be obtained either through a formal shareholders’ meeting or by written consent. These fundamental changes include the following:
1. Amendment of the Articles of Incorporation.
2. Sale of all or substantially all of the assets of the corporation.
3. Merger or consolidation of the corporation with or into any other corporation.
4. Winding up and dissolution of the corporation.
B. Director Action. Matters of more general operating policy should be considered and authorized by the board of directors of the corporation. Although there is no statutory requirement with respect to how frequently the board of directors should act, it is typical that the board of directors meets at least quarterly. In addition, a specially convened meeting of the board, as authorized by the bylaws, may be called if action is required before the next regular meeting. Action by the board may also be taken by unanimous written consent of the directors. Although board actions may be taken by written consent without a meeting, it may prove useful to you to schedule the recordation of decisions on significant matters that have arisen on a quarterly, or at least annual, basis. Board meetings can generally be held either in person or by conference telephone as long as all of the directors in attendance can hear each other simultaneously.
Matters appropriate for director action, which can be immediately approved by written consent or which might arise and be accumulated, pending approval by the directors, include the following:
1. Appointment of officers, setting of salaries, and declaration of bonuses (at least annually, typically at a meeting of the board of directors immediately following the annual meeting of shareholders).
2. Appointment of board committees, if any.
3. Opening of corporate bank accounts and the designation and change of corporate officers authorized as signatories (any bank’s corporate account form invariably includes a corporate resolution which the party executing the form represents to have been adopted by the board).
4. Corporate borrowing and the giving of security in connection therewith.
5. Consummation of material contracts for the acquisition or lease of significant assets or services or the disposition of assets or for the rendition of services outside the ordinary course of the business of the corporation.
6. Policy decisions with respect to the construction of material assets or the investment of material amounts in research and development projects.
7. The adoption of pension, profit-sharing, bonus, and other employee benefit plans.
8. The declaration of dividends or the redemption of shares.
9. Amendment of the bylaws.
10. Review of financial statements.
11. Appointment of auditors, if any.
12. Any action that requires a shareholder vote.
13. The issuance and sale by the corporation of additional shares or the grant of options to purchase additional shares.
In the case of any such actions, the secretary of the corporation should prepare minutes of the meeting at which such actions were approved or prepare the form of written consent evidencing any such director or shareholder actions.
C. Separation of Corporate and Personal Assets. With respect to the small and/or closely held company, owners are often careless in observing the requirements and formalities of doing business in a corporate form. This informality may lead to imposition of personal liability where the extent to which the financial affairs and accounts of a corporation and those who control it are confused to the prejudice of creditors, or where there has been an undue diversion of corporate funds or other assets to individual use. In other words, the owners of a corporation may be held personally liable when they treat the assets of the corporation as their own and add or withdraw capital from the corporation at will.
III. POST-INCORPORATION MATTERS
Although it is not intended to be exhaustive, the following checklist summarizes some of the legal requirements of a new corporation. Some of the requirements arise as a consequence of incorporation; others apply to all new businesses regardless of the form of entity. Certain requirements are highly formal and technical; many must be satisfied within a specified time period. Care must be taken to comply with these matters as they arise because in many cases serious penalties can be assessed for failure to comply.
A. Qualification to Do Business in Other States. If a corporation is doing business in a state other than its state of incorporation, it must qualify to do business in each such state, typically by appointing an agent for service of process and filing qualification documentation with, and paying a fee to, such state’s secretary of state.
B. Local Business License. A corporation is typically required to obtain a business license from the city or cities in which it intends to operate.
C. Employer Identification Number (EIN). Every employer must obtain an employer identification number that will be used on federal tax returns and certain other documents.
D. Annual List of Officers, Directors, and Agent. Each year, or biannually in some states, a corporation must submit to each state in which it is qualified to do business a list of officers, directors, and agent for service of process. These forms are typically filed with the state’s secretary of state.
E. Estimated Federal Income Tax. A corporation may be required to pay estimated federal income tax in installments. Your accountant should keep you current with this requirement.
F. State Tax. State franchise taxes are imposed on corporations for the privilege of exercising the corporate franchise in each state where the corporation is qualified to do business. Your accountant should also be able to keep you current with the tax requirements in each of the relevant states.
G. Tax Returns. Both federal and state income tax returns must be filed on or before the fifteenth day of the third month following the close of the taxable year, unless a timely extension to file is obtained.
H. Personal Property Taxes. If the corporation owns significant personal property, it may be required to file a property statement with its local county assessor and may be subject to a personal property tax. Forms may be obtained from the relevant county assessor.
I. Sales and Use Taxes. If the nature of the corporation’s business includes the sale at retail of tangible personal property (goods), then the corporation may be subject to sales and use taxes and would need to obtain a sellers’ permit or retail license. In California, the issuing authority for this type of license is the State Board of Equalization.
J. Payroll Withholding. The corporation will be required to comply with state and federal withholding requirements with respect to wages paid to its employees. Funds withheld must be deposited in certain depositories accompanied by deposit forms. Employers’ returns must also be filed quarterly. Any officer or other person charged with the withholding of taxes may become personally liable for a 100% penalty if he or she fails to file the appropriate forms or fails to pay the withheld funds to the Internal Revenue Service or state authority.
K. Federal Unemployment Tax. The “Unemployment Tax Return” (IRS Form 940) must be filed and any balance due paid annually on or before January 31. Details may be found in IRS Circular E, the “Employer’s Tax Guide.”
L. Unemployment Compensation Insurance. Registration with a state-administered unemployment compensation insurance program may be required in any state where the corporation has employees. Ask for the appropriate forms when setting up your payroll service.
M. Workers’ Compensation. Check for state requirements regarding workers’ compensation liability in each state where the corporation has employees. The required insurance may be obtained through a state compensation insurance fund or equivalent, or it may be placed with a licensed workers’ compensation private carrier.
IV. GENERAL
A. Signing on Behalf of the Corporation
Whenever the officers are signing documents or correspondence on behalf of the corporation, care should be taken to include the corporation’s name in the signature block and to indicate the title of the signing officer. An example of an appropriate signature block is included below.
Failure to do so may lead, in the context of litigation involving a signed document, to including in the lawsuit the person who signed in his or her individual capacity.
B. Bylaws
The bylaws of a corporation are an important source of advice on corporate governance matters. While the bylaws are not exhaustive, they contain a summary of many of the laws pertaining to corporations. Other rules exist in the general corporation law of the state in which the corporation was incorporated and of each state in which the corporation is qualified to do business.
C. Official Documents
It may be useful to designate one of the officers, such as the corporate secretary, to be the recipient of all official correspondence concerning the corporation and its relationships with the various agencies with which it deals. This should help avoid forgetting to submit regularly filed forms, such as the annual list of officers, directors, and agent, which, though simple to complete, can lead to problems if they are not timely submitted.
D. Finances
An important feature of observing corporate formalities is to scrupulously keep the corporation’s money separate from the personal funds of shareholders, directors, officers, and employees. Failure to keep funds separate is a common problem with closely held or newly formed corporations. Such a co-mingling of funds is often seized upon by persons suing a corporation as a reason why the corporate entity should be disregarded, thus enabling them to sue the shareholders for the corporation’s debts, as discussed above under “Separation of Corporate and Personal Assets.”
If you have any questions with regard to the above, or changes to the enclosed draft documents, please feel free to give me a call.
Very truly,
FIRM NAME
Lawyer Name
Enclosures
Following Up on Organizational Documents for New Corporation
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Additional Organizational Tasks for COMPANY Inc.
Dear {Salutation}:
Enclosed please find the following additional organizational documents for COMPANY Inc.: a draft Initial Written Consent of the Sole Director and a form of stock certificate for your review and consideration. Don’t hesitate to call with any questions or changes with regard to the enclosed or the Statement of Incorporator and Bylaws forwarded to you previously. When finalized, please send me copies of the signed Bylaws and Written Consent for my files.
Please note that there are a couple of blanks in the Director Written Consent document where we need to designate the value of the consideration (cash and/or other) that is being contributed to the corporation in exchange for the shares being issued. Let me know if you need help deciding what that amount should be.
Several other items will require your attention in connection with the organization of COMPANY Inc.:
1. In case you have not yet obtained a Federal Employer Identification Number (FEIN) for the new entity, this is a reminder that the start page is available online at http://www.irs.gov/businesses/small/article/0,,id=102767,00.html. Click on the “Apply Online Now” link on that page and follow the instructions. If you get stuck, give me a call. If you have already obtained your FEIN, please send me a copy of your completed Form SS-4 and the assigned FEIN for my files.
2. You need to complete an IRS Form 2553 to elect to be treated as an S Corp. The form can be completed online and submitted via fax. Form 2553 is available online at: http://www.irs.gov/pub/irs-pdf/f2553.pdf. The instructions are available at: http://www.irs.gov/instructions/i2553/ch01.html and http://www.irs.gov/pub/irs-pdf/i2553.pdf. This will allow the profits and losses of the corporation to flow through to the owners without incurring corporate-level taxation. Please note that the election must be made in a timely fashion to be effective for this tax year. Check with your accountant if you have any questions in that regard.
3. You need to complete a Statement of Information for the secretary of state and pay the $25 filing fee by DATE to maintain the company’s good standing. This can be done online at the following link: https://businessfilings.ss.ca.gov/ (just drop in the name or the corporation number, ______________, to get the correct form).
4. Finally, please don’t forget to go through the list of “Post-Incorporation Matters” in the letter I sent you on DATE for some of the other things you may need to put in place for the new entity (e.g., a business license, unemployment and worker’s compensation insurance, etc.).
Please do not hesitate to call me with any questions in regard to the above.
Very truly,
FIRM NAME
Lawyer Name
Enclosures
Determining the Size of the Board of Directors
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Size of the Board
Dear {Salutation}:
As we recently discussed, California law imposes some restrictions on the size of a corporations’ board of directors. To assist you in your decision as to the appropriate size of the board for COMPANY, the following summarizes the parameters set forth under California law:
Whatever you decide in this regard will be set forth in COMPANY’s bylaws. Please do not hesitate to call me to discuss the matter further.
Very truly,
FIRM NAME
Lawyer Name
Forwarding Investment Documents to a New Corporation
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Organization and Investment Documents for COMPANY
Dear {Salutation}:
Enclosed please find the following documents in furtherance of the organization of COMPANY:
Revised Initial Written Consent of the Board of Directors. Please review the enclosed revised draft Unanimous Written Consent of the Directors of COMPANY to complete the organization of COMPANY. Please review it and, if it meets with your approval, have it signed as indicated and returned to me for inclusion in the company’s minute book.
Subscription Agreement. A copy of the COMPANY Subscription Agreement is enclosed for your convenience.
Assignments. Please note that the Assignments referenced in the Written Consent, to be signed by CORPORATION 2 and INVENTOR to ensure that ownership of all COMPANY-related intellectual property resides in COMPANY, are being prepared by patent counsel and will be forwarded under separate cover.
Stock Certificates. I have enclosed certificates for each of the five initial shareholders of COMPANY. Please review them and, if they meet with your approval, sign them as indicated and make copies. Once you have received a signed Subscription Agreement for each of the investors and an Assignment in the case of CORPORATION 2 and INVENTOR, you may distribute the certificates and forward the copies to me for inclusion in the company’s minute book.
Notice of Sale. Finally, I have enclosed a Notice of Sale pursuant to California Corporations Code Section 25102(f) to be filed with the Department of Corporations in connection with the company’s stock issuances. Please review the form and, if it meets with your approval, return the signed original to me at your earliest convenience. I will see that the notice is filed promptly upon receipt.
I look forward to receiving signed originals and copies as outlined above. In the meantime, please do not hesitate to call me with any questions.
Very truly,
FIRM NAME
Lawyer Name
Enclosures
Forwarding Stock Certificates
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Stock Certificates
Dear {Salutation}:
Please review the enclosed Series A Preferred Stock Certificates numbered 1 and 2 for Investor 1 and Investor 2.
Also, please review the enclosed Common Stock Certificate numbered 16 for Founder 3, as well as the documentation for Founder 3’s stock transfer, including the original canceled Common Stock Certificate 3 for your files.
If the certificates meet with your approval, including the restrictive legends on the reverse of each, please have them signed where indicated, make copies for your files, and have the certificates delivered to the shareholders.
As always, if you have any questions or changes, please do not hesitate to call me.
Very truly,
FIRM NAME
Lawyer Name
Enclosures
Forwarding Organizational Documents to New LLC (Long Form)
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Organization of COMPANY LLC
Dear {Salutation}:
Enclosed please find an endorsed filed copy of the Articles of Organization for COMPANY LLC, which was formed as of DATE. Also attached please find a copy of the Instructions for Form FTB 3522 and Limited Liability Tax Voucher for the payment of the company’s annual $800 tax to the California Franchise Tax Board, which you may wish to provide to the company’s CPA. Pursuant to our discussions, I will prepare a draft “no frills” Operating Agreement (one member, one manager, no officers, no bylaws) and forward it to you shortly for your review.
In the meantime, please complete the following:
1. Obtain a Federal Employer Identification Number (FEIN) for the new entity, which you can do online by completing and submitting a Form SS-4 application. The start page is at http://www.irs.gov/businesses/small/article/0,,id=102767,00.html. Click on the “Apply Online Now” link on that page and follow the instructions. If you get stuck, give me a call. Once obtained, please send me a copy of your completed Form SS-4 and the assigned FEIN for my files. Tip: Don’t use any punctuation on the application.
2. Complete a Form LLC-12 Statement of Information for submission to the secretary of state no later than DATE to maintain the company’s good standing. The form is available online at the following link: http://www.ss.ca.gov/business/llc/forms/llc-12.pdf. The company’s Secretary of State File Number is ____________. There is a $20.00 filing fee. If you have any questions about completing the form, please do not hesitate to call me.
With the enclosed endorsed filed Articles of Organization and a FEIN, your bank should allow you to open a bank account for the new entity.
The remainder of this letter is for reference purposes and will provide you with some general information regarding the operation of a limited liability company and the role of members, as well as of managers and officers, if any, in a limited liability company. This e-mail is intended to call to your attention some of the basic legal requirements to which limited liability companies are subject and which may require your attention. Please consider the matters described herein with care and keep a copy of this e-mail with your limited liability company records for easy reference, as failure to observe some of the requirements may compromise the limited liability company or result in personal liability to its members, managers, and/or officers.
I. BASIC STRUCTURE OF AN LLC
The owners of the LLC are the “members” as defined in the California Limited Liability Company Act (the Act). The LLC may be managed by its members, or it may be managed by one or more managers elected by the members (the managers). The governing agreement for the LLC is called an “Operating Agreement.” In a member-managed LLC, each member has the power to bind the LLC. However, in a manager-managed LLC, no member has the power to bind the LLC (just as no shareholder of a corporation can bind the corporation); only a manager or authorized officer of the LLC can bind the manager-managed LLC.
Management duties include decisions about key policies, LLC transactions, and establishment of guidelines within which the business of the LLC will be conducted. The managers can hire officers and employees to perform the LLC’s day-to-day business.
The principal distinguishing feature of an LLC is the limitation of liability that the members of the LLC enjoy (like a corporation), as well as the pass-through income tax treatment enjoyed by the LLC and members (like a partnership). As long as the LLC is properly formed and in existence, and is properly operated, the members will not be personally liable for the LLC’s debts, obligations, and liabilities. In other words, if the LLC’s debts exceed the value of the LLC’s assets, the LLC’s creditors should not be entitled to seek repayment from the members’ personal assets.
Of course, a personal guarantee of an LLC obligation by an LLC member would give rise to personal liability of that member to the extent specified in the guarantee (as it would for a shareholder in a corporation). Failure by a member to remit employee withholding taxes can provide another basis for personal liability of a member (as it would for a shareholder in a corporation). Liability based on the personal tortious behavior of a member would of course provide the basis for personal tort liability of that member (as it would for a shareholder in a corporation). But generally the LLC liability shield, like the corporation’s liability shield, should protect individual members from LLC debts, obligations, and liabilities.
The following is a brief description of the roles of the major players in an LLC—the members and the managers. Although the following is written as if members and managers are separate persons, the same individuals could serve as both members and managers.
A. Members
The members own the LLC and provide the capital with which the LLC commences its business. In a member-managed LLC, members by definition manage the business of the LLC. In a manager-managed LLC, members as a group often do not take an active role in running the business. Normally, one or two members will be intimately involved in day-to-day operations of the LLC, and other members will be passive, non-active investors. Beyond electing the managers and voting on certain key events in the LLC’s life, the members of a manager-managed LLC entrust its management to the managers (much like the shareholders of a corporation entrust its management to the directors and officers of the corporation). Matters requiring member votes are discussed in “Member Votes” below.
B. Managers
Managers are elected by the members. At the outset, managers can simply be specified in the operating agreement, which is of course approved and signed by all members. Thereafter, if the operating agreement so permits, members can hold annual or other regularly scheduled meetings to elect managers. Managers manage the business and affairs of the LLC and exercise the LLC’s powers. Managers can either perform these responsibilities themselves or delegate their performance to officers and employees under the direction of the managers.
In performing these responsibilities, the Act imposes on managers the same fiduciary duty with respect to the LLC and its members that a general partner owes to a general partnership and the other partners of that partnership. It is permissible to modify and otherwise refine the fiduciary duty of the manager in the operating agreement. Indeed, it is advisable to do so. Typically, the operating agreement will specify fiduciary duties, such as the “duty of loyalty” and the “duty of care,” for LLC managers.
The duty of loyalty dictates that a manager must act in good faith and must not allow personal interests to prevail over interests of the LLC and the LLC’s members. A standard example that raises these issues is a proposal that the LLC enter into a transaction that either benefits a manager or involves the manager in a conflict of interest with the LLC or its members. Such transactions are often called “self-dealing” transactions. They are not prohibited, but such transactions must be predicated upon (i) full disclosure, (ii) proper approval from disinterested managers and members, and (iii) fairness to the LLC and its members.
The duty of care requires a manager to be diligent and prudent in managing the LLC’s affairs. This is sometimes referred to in corporate law as the “business judgment” rule. If a manager makes a decision, conscientiously and without fraud or conflict of interest, such manager will not be second-guessed by courts based on how that decision happens to work out for the LLC. A manager is not held liable merely because a carefully made decision turns out badly.
C. Officers
Like a corporation, the LLC members and managers can appoint officers for the LLC who serve at the pleasure of the managers, subject to contracts of employment (if any) such officers may have with the LLC. The officers perform the bulk of the day-to-day operation of the LLC’s business. Normally, an LLC will want at least a general manager (or president), a chief financial officer, and a secretary. More than one of these offices can be held by the same individual. An LLC may have additional officers as well. These additional officers are appointed by either the general manager or another officer if such officer has been delegated authority to make such appointments.
The following is a brief summary of the standard duties of the following officers. All of these could be modified by the managers.
1. General Manager or President. The General Manager is the Chief Executive Officer and general manager of the LLC unless the LLC has a Chairman of the Board and has designated the Chairman as Chief Executive Officer. The General Manager has general supervision, direction, and control over the LLC’s business and its officers. The General Manager can also be called the President of the LLC.
2. Chief Financial Officer. The Chief Financial Officer keeps the books and records of account of the properties and business transactions of the LLC. These duties include depositing corporate funds and other valuables in the name of the LLC and disbursing funds as directed by the managers. The Chief Financial Officer also typically serves as the “tax matters partner” for the LLC as required under the Internal Revenue Code.
3. Secretary. The Secretary of an LLC keeps the LLC’s Articles of Organization, Operating Agreement, record of members’ addresses and holdings in the LLC, and written minutes (if any) of the proceedings of the LLC’s members and managers. The Secretary usually has the duty of giving notices to members and managers of members’ and managers’ meetings.
II. OBSERVANCE OF “CORPORATE FORMALITIES”—NOT REQUIRED
Unlike a corporation, the observance of “corporate formalities” is not an important part of maintaining the shield from liability and other protections and advantages offered by the LLC form of doing business. The term “corporate formalities” normally means holding annual (or other regularly scheduled) meetings of the members and managers, providing written notice in advance of such meetings, preparing detailed minutes of matters decided upon at such meetings, and so forth. The Act specifically states that failure to observe such corporate formalities “shall not be considered a factor tending to establish that the members have personal liability for any debt, obligation, or liability of the” LLC where the Articles of Organization or Operating Agreement of the LLC do not specifically require such formalities to be observed.
This does not mean that LLC members are completely free to ignore the separate legal identity of the LLC. For example, members must always keep in mind that the LLC assets and funds are in the name of and owned by the LLC, not by the LLC’s members. Separation of LLC assets from personal assets of the members is very important. See “Separation of LLC and Personal Assets” below.
III. MEMBER VOTES; MANAGER ACTIONS
A. Member Votes. Certain fundamental changes in the life of an LLC, such as a merger or liquidation, require a vote by the members. These fundamental changes include amendment of the Articles of Organization, amendment of the Operating Agreement, merger or consolidation of the LLC, and winding up and dissolution of the LLC.
B. Manager Action. Matters of general operating policy should be considered and authorized by the general manager or managers of the LLC. Although there is no statutory requirement with respect to how frequently the managers should act, it is advisable that they meet at least quarterly. In addition, a specially convened meeting of the managers may be called if action is required before the next regular meeting. Action by the managers may also be taken by unanimous written consent. Although it is likely that most manager actions will be taken by unanimous written consent without a meeting, it may prove useful to schedule regular managers’ meetings to address significant matters on a quarterly or at least annual basis. Manager meetings can be held either in person or by conference telephone as long as all managers in attendance can hear each other simultaneously.
Matters appropriate for manager action that can be immediately approved by written consent or that might arise and be accumulated, pending approval by the managers, include the following:
1. Appointment of officers, setting of salaries, and declaration of bonuses (at least annually, typically at a meeting of the managers immediately following the annual meeting of members).
2. Appointment of manager committees, if any.
3. Opening of LLC bank accounts and the designation and change of LLC managers and officers authorized as signatories.
4. LLC borrowing and delivery of collateral in connection with such borrowing.
5. Consummation of material contracts for the purchase or lease of significant assets or services or the disposition of LLC assets or for the rendition of services outside the ordinary course of the business of the LLC.
6. Policy decisions with respect to the construction of material assets or the investment of material amounts in research and development projects.
7. The adoption of pension, profit-sharing, bonus, and other employee benefit plans.
8. The repurchase of LLC interests.
9. Amendment of LLC bylaws (if any).
10. Review of financial statements of the LLC.
11. Appointment of auditors, if any.
12. Any action that requires a member vote.
13. The issuance and sale by the LLC of additional interests in the LLC.
In the case of any such actions, the secretary of the LLC should prepare minutes of the meeting at which such actions were approved or prepare the form of written consent evidencing any such manager or member actions.
IV. SEPARATION OF LLC AND PERSONAL ASSETS
It is important for any company to respect the difference between its bank accounts, property, equipment, and other assets and personal assets owned by the company’s owners. An LLC, like a corporation or other legal “person,” is a separate legal entity with assets that are owned by the LLC. Any attempt by an LLC member to dispose of or use LLC property would be no more proper than an attempt by that member to dispose of or use another member’s personal property. Members must respect the fact that the LLC’s assets are the property of the LLC, not the members. Similarly, an LLC member should not mingle his or her personal assets with the company assets of the LLC.
The Company’s books, records, and financial statements should be maintained clearly to reflect the separation of the Company’s assets from the personal assets of the members. The Company must conduct business in its own name (not in the individual name of any manager or member). All letterhead, business card, bills, checks, invoices, and other Company forms should show the Company’s full legal name (and fictitious business name, if any), and the Company’s current address, telephone number, and fax number.
As a statement of sound business practice, the observations made about separation of personal assets from company assets are fairly obvious. There is an additional, less obvious reason to follow those rules.
Creation of an LLC shield from liability for LLC members inevitably gives rise to attempts to pierce that shield by creditors of the LLC. This has long been the case for the liability shield of corporations. As long as there have been corporations, there have been attempts to “pierce the corporate veil.” Published cases in which such attempts have been successful usually involve a recitation by the court of a dozen or so factors in support of the court’s ruling that the shareholders of the corporation should be held personally liable for the debts, obligations, or other liabilities of the corporation. At the top of this list of factors are (i) failure by the shareholders to respect the corporation’s separate identity (by combining corporate and personal assets) and (ii) some other form of misconduct by the shareholders with respect to the corporation.
Although the failure of an LLC to respect corporate formalities generally cannot be considered a factor “tending to establish that the members have personal liability” for any LLC debt, obligation, or liability (see “II. Observance of Corporate Formalities—Not Required” above), this is not to say that LLC members can ignore the many years of corporate law developments in this area. LLC members and managers are well advised to bear in mind the foregoing observations about piercing the corporate veil.
V. ADEQUATE CAPITALIZATION
The Company should be adequately capitalized to carry on the Company’s business activities. This is an obvious statement of sound business practice. However, a less obvious reason to ensure that the Company is and remains adequately capitalized is to prevent a piercing of the “corporate veil,” as discussed above. One of the factors considered by courts that have ruled that creditors of a corporation should be allowed to hold the shareholders personally liable for debts and obligations of the corporation is that the corporation was not adequately capitalized. Therefore, adequate capitalization is an additional, very important factor relating to the shield from personal liability for the members of an LLC.
VI. OTHER POST-FORMATION MATTERS
Although it is not intended to be exhaustive, the following checklist summarizes some of the legal requirements applicable to a new LLC. Some of the requirements arise as a consequence of formation of the LLC; others apply to all new businesses regardless of the form of organization. Certain requirements are highly formal and technical; many must be satisfied within a specified time period. Care must be taken to comply with these matters as they arise because in many cases serious penalties can be assessed for noncompliance.
A. Local Business License. The LLC may be required to obtain a business license from the city in which it intends to operate.
B. Employer Identification Number. Every employer must obtain a federal employer identification number (FEIN), which will be used on federal tax returns and certain other documents.
C. Annual LLC Statement of Information. Each year, the LLC must submit a Form LLC-12, providing a current list of names and addresses of the LLC managers (and if there are no managers, of the members), the LLC chief executive officer, and the LLC agent for service of process.
D. Estimated Federal Income Tax. The LLC members will be required to pay estimated federal income tax in installments (like a general partner in a partnership). Your accountant should keep you current with this requirement.
E. State Minimum Annual Franchise Tax. Every LLC organized, registered, or doing business in the state of California is subject to an annual minimum franchise tax of $800.
F. State Graduated Gross Receipts Fee. In addition to the annual $800 franchise tax, LLC’s in California have also been subject to a graduated fee determined on the basis of the LLC’s total income. Your accountant should keep you current with this requirement.
G. Tax Returns. Both federal and state income tax returns must be filed on or before the 15th day of the fourth month following the beginning of the company’s taxable year. Your accountant should keep you current with this requirement.
H. Personal Property Taxes. If the LLC owns significant personal property, it may be required to file a property statement with the county assessor and may be subject to a personal property tax. Forms may be obtained from the county assessor.
I. Sales and Use Taxes. If the nature of the LLC’s business includes the sale at retail of tangible personal property (goods), then the LLC may be subject to sales and use taxes and would need to obtain a seller’s permit from the California State Board of Equalization.
J. Payroll Withholding.
1. Federal. The LLC will be required to withhold income tax and Social Security tax from taxable wages paid to its employees. Funds withheld must be deposited in certain depositories accompanied by a Federal Tax Deposit Form 8109. An “Employer’s Quarterly Federal Tax Return” (IRS Form 941) must then be filed before the end of the month following each calendar quarter. Any manager, officer, or other person obliged to withhold taxes may become personally liable for a 100% penalty if he fails to pay the withheld funds to the Internal Revenue Service.
2. California. The LLC will also be required to withhold California income tax from its employees’ taxable wages. Within 15 days after becoming subject to the personal income tax withholding requirements, the employer must register with the Department of Employment Development. A booklet titled Employer’s Tax Guide for the Withholding, Payment and Reporting of California Income Tax may be obtained from this department.
K. Federal Unemployment Tax. The “Unemployment Tax Return” (IRS Form 940) must be filed and any balance due paid on or before January 31 of each year. Details may be found in IRS Circular E, the “Employer’s Tax Guide.”
L. California Unemployment Compensation Insurance. Registration with the California Department of Employment Development (EDD) can be accomplished at the same time that the LLC applies for a seller’s permit (if needed) from the Board of Equalization. Forms for returns are mailed automatically to all registered employers.
M. Workers’ Compensation. All employers must either be insured against workers’ compensation liability by an authorized insurer or must obtain a Certificate of Consent to Self-Insure from the manager of industrial relations. The required insurance may be obtained through the nearest local office of the State Compensation Insurance Fund or it may be placed with a licensed workers’ compensation private carrier.
VII. GENERAL
A. Signing on Behalf of the LLC
Whenever the LLC members, managers, or officers are signing agreements, documents, or correspondence on behalf of the LLC, care should be taken to include the LLC’s name in the signature block and to indicate the title of the signing person. An example of an appropriate signature block is included below.
[LLC name]
By: __________________________
Name: [name of individual]
Title: [Member, Manager, etc.]
Failure to do so may lead, in the context of litigation involving a signed document, to including the person who signed the document in the lawsuit in his or her individual capacity.
B. Bylaws
The Operating Agreement and Articles of Organization of the LLC are the authoritative source of advice on how to do certain things that will come up from time to time. For certain types of LLCs (normally those with a larger number of members), a form of bylaws similar to the those applicable to a corporation may also be advisable or useful.
C. Official Documents
A number of small LLCs have found it useful to designate one of the officers, usually the secretary, to be the recipient of all “official” correspondence concerning the LLC and its relationships with the various government agencies with which it deals. This helps to avoid forgetting to submit certain of the regularly filed forms, such as the Annual Form LLC-12 (see item IV.C above), which are simple documents but can lead to trouble if they are not taken care of promptly.
I hope this has provided some useful guidance with respect to the process of running a business in LLC form. Please feel free to call me with any questions.
Very truly,
FIRM NAME
Lawyer Name
Enclosures
Forwarding Draft Form 1023 Application to Nonprofit Client
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Draft Application for Recognition of Exemption (Form 1023)
Dear {Salutation}:
Attached please find a draft Form 1023 Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code for COMPANY. For information relating to the application and general guidelines for tax-exempt organizations, please see the government compliance guide at http://www.irs.gov/pub/irs-pdf/p557.pdf.
I am still working on draft attachments to the application. I will forward a complete set of draft attachments to you shortly. In the meantime, please review the draft Form 1023 and let me know of any changes or corrections. Thank you.
Very truly,
FIRM NAME
Lawyer Name
Enclosure
Forwarding Form 1023 Application to IRS
{Date}
Internal Revenue Service
{Address}
{City, State, Zip Code}
|
RE: |
Form 1023 Application for Recognition of Exemption Submitted on Behalf of COMPANY |
Dear Sirs:
Enclosed please find a properly executed Form 1023 Application for Recognition of Exemption submitted on behalf of COMPANY together with a check in the amount of $____ for the applicable user fee, the Form 1023 Checklist, Form 2848 Power of Attorney and Declaration of Representative, Articles of Incorporation, Bylaws, and the applicable attachments to same.
Please do not hesitate to call me directly should you have any questions about the enclosed or need additional information. Thank you.
Very truly,
FIRM NAME
Lawyer Name
Enclosures
Forwarding Exemption Request to State on Behalf of Nonprofit Client
{Date}
Exempt Organizations Unit
Franchise Tax Board
{Address}
{City, State, Zip Code}
RE: Exemption Request on Behalf of COMPANY
Dear Sir or Madam:
Enclosed please find a completed Form 3500A Submission of Exemption Request for COMPANY, with a copy of its 501(c)(3) Federal Determination Letter.
The instructions as to where to send the completed Form 3500A are stated differently in the Exemption Application Booklet than on the form itself, so I have sent the original to the address on the Form 3500A, with a copy to the address in the booklet.
If you have any questions or require anything further, please do not hesitate to call me directly.
Very truly,
FIRM NAME
Lawyer Name
Enclosures
Forwarding an Election to Wind Up and Dissolve for Filing
{Date}
{Name}
{Company Name}
{Address}
{City, State, Zip Code}
RE: Filing Request on Behalf of COMPANY
Dear {Salutation}:
Enclosed please find a Certificate of Election to Wind Up and Dissolve submitted for filing on behalf of COMPANY and one copy to be certified and returned to the undersigned in the enclosed self-addressed, stamped envelope.
Please do not hesitate to call me with any questions.
Very truly,
FIRM NAME
Lawyer Name
Enclosures
Forwarding a Certificate of Dissolution for Filing
{Date}
California Secretary of State
Document Filing Support Unit
{Address}
{City, State, Zip Code}
RE: Certificate of Dissolution for COMPANY
Dear Sirs:
Enclosed please find an original and two (2) copies of the Certificate of Dissolution submitted for filing on behalf of COMPANY, a [nonprofit] corporation. [Also enclosed, please find the original and two copies of a letter from the California Attorney General confirming that the corporation has no assets, as required in connection with the dissolution of a nonprofit corporation in the state of California.]
Please file the Certificate of Dissolution and certify copies of the filed documents to be returned to me in the self-addressed, stamped envelope provided.
If you have any questions or need anything further, please contact me directly. Thank you.
Very truly,
FIRM NAME
Lawyer Name
Enclosures
Letter to Attorney General for Dissolving Nonprofit
{Date}
Office of the Attorney General
Registrar of Charitable Trusts
{Address}
{City, State, Zip Code}
RE: COMPANY Request for Dissolution Waiver
Dear Sirs:
In connection with the filing of its Domestic Nonprofit Corporation Certificate of Dissolution, please let this serve as a written request for a letter confirming that COMPANY has no assets.
As set forth in the executed Unanimous Written Consent of the Directors of COMPANY enclosed herewith, the corporation was formed on [DATE] as a nonprofit public benefit corporation but never commenced operations, never incurred any known debts or liabilities, and never acquired any known assets. The corporation did not have any members and has been dissolved by the vote of all of the directors of the corporation.
Also enclosed, please find copies of the corporation’s final state tax return, executed Certificate of Dissolution to be filed with the California Secretary of State, Form 990s for the last three accounting periods, and endorsed filed Articles of Incorporation.
Thank you in advance for your prompt attention to this matter. Please do not hesitate to contact me directly with any questions.
Very truly,
FIRM NAME
Lawyer Name
Enclosures