By Attorney Edward Jesson
A question we frequently get from business owners, small and large alike, is whether they need to register their business in other states. The answer is, as usual, “it depends.” The process of registering your business in another state is often referred to as “Foreign Qualification”. While the laws vary from state to state, the following is a very general guide to whether you need to go through the foreign qualification process for your business.
First of all, depending on the state, there can be serious ramifications for not registering your business in a specific state in which you are doing business. These can range from financial penalties to losing your business’s limited liability status, exposing you, as the individual owner, to liability in that state. In some states, it can also mean that, if your business is not properly qualified to do business in that state, your business is not permitted to bring legal action in that state. For example, if your business wished to enforce a contract in court in a state in where your business is not properly registered, your business may not be able to bring that lawsuit.
To determine whether you need to go through the foreign qualification process, the important question you must ask yourself is whether your business is “doing business” in that state. Again, the rules on this from state to state vary, but there are some general things to look out for when asking yourself that question:
If you have questions about doing business with your LLC or corporation in another state, the attorneys at Jesson & Rains can assist you.
October is National Women’s Small Business Month. Jesson & Rains is proud to represent and work for numerous women-owned businesses.
Charlotte is an exciting place for women entrepreneurs. As we previously reported, in 2018, it was named the “#1 City in America for Female-Owned Business Growth.” Women-owned business growth continued across the country in 2019. Unfortunately, due to the pandemic, Barbara Weltman reports that the number of women-owned businesses fell by 25% from February to April 2020. However, there are plenty of indications that women entrepreneurship is back on the rise.
Participation in women’s networking groups and trade associations is key. Attorneys Kelly Jesson and Danielle Nodar are members of the following groups: National Association of Women Business Owners (NAWBO), Women Lawyers of Charlotte, National Association of Women in Construction (NAWIC), and Women in Networking. Please reach out to Kelly or Danielle if you’d like to drop in on a meeting one day!
By Attorney Kelly Jesson
We previously wrote about the importance of keeping good business records in order to avoid personal liability for business debts. However, did you know that certain business records can act as estate planning tools?
Your interest in your business, whether an LLC interest or corporate stock, is personal property that you can leave to a family member when you pass away. Unfortunately, it will go through probate unless you transfer it to a trust or enter into a transfer-upon-death (TOD) or joint with rights of survivorship agreement with your heir. The court collects a fee based on the amount of personal property that goes through probate, so if your business is worth some money, you want to avoid this.
What if you have a business partner? Perhaps you don’t want to do business with his/her spouse or child if your partner passes away? That’s where an operating agreement or a shareholder’s agreement comes in handy—in either of these agreements, the owners can agree that if one of them passes away, the other will buy out their interest. This is helpful for the survivor, who will remain in control of the company, and this is helpful for the deceased owner’s family, who will get a sum of money. These agreements (also called buy-sell agreements) are oftentimes funded with life insurance, to ensure that there is liquid cash available to pay the family.
In either of these agreements, the owners can promise the other not to transfer their business interest to third parties while they’re alive, which is also helpful for control purposes. The parties can agree to buy the other out when other “triggering events” happen, such as a partner’s bankruptcy or divorce. You don’t want one of these events to cause the forced sale of all or part of the business. It is important to put a plan in place to prepare for the unexpected (that frequently happen).
If you or someone you know needs assistance putting an operating agreement or shareholder agreement in place, or incorporating their business into their estate plan, please give Jesson & Rains a call! We offer flat fee packages for these formation documents. We also offer flat fee annual plans that include preparing annual meeting notices and minutes, filing annual reports with the Secretary of State’s office, and other legal services. More information can be found here.
By Attorney Kelly Jesson
One of the main reasons why business owners formalize their businesses by forming an LLC or a corporation is so that their personal assets and liabilities can be separated from their business assets and liabilities. If the business is sued, the owner’s personal assets will be protected, and vice versa.
However, in certain circumstances, a court may disregard the corporate entity and hold its owners personally liable for business debts if the corporate entity, at the time, had no separate mind, will, or existence of its own. In making this determination, a court will consider, among other factors, whether a business has complied with “corporate formalities.” Corporate formalities include issuing and following bylaws, issuing shares, electing a board of directors, holding annual meetings of the board and shareholders, sending proper notice of these meetings, and keeping minutes and other corporate records. Owners should not intermingle business and personal assets or employees. Owners should not deal with third parties in such a way that the third party does not know they are doing business with an LLC or a corporation.
Some closely-held corporations may enter into a shareholder agreement in lieu of some of the above requirements. With an LLC, some of these corporate formalities do not have to be observed, since LLCs are subject to fewer formal statutory requirements than are corporations.
If the owner of a business complies with corporate formalities and consistently lists the business’s name on contracts and other documents, third parties will be considered to have voluntarily dealt with the business, and a court will be less inclined to hold the individual owner personally liable for the business’s debts. However, if corporate formalities are being ignored, even inadvertently, that could lead to a court ignoring the existence of the LLC or corporation, which may result in the business owner’s personal assets being at risk.
If you or someone you know needs assistance bringing a business in line with its required formalities, please give Jesson & Rains a call! We offer flat fee packages for these formation documents. We also offer flat fee annual plans that include preparing annual meeting notices and minutes, filing annual reports with the Secretary of State’s office, and other legal services. More information can be found here. We work with our clients to reduce the likelihood that they will ever be responsible for business liabilities.
By Associate Attorney Danielle Nodar & Attorney Kelly Jesson
There are numerous to-do items and deadlines business owners must keep up with to successfully run a business. However, many business owners forget that they must file an Annual Report with the North Carolina Secretary of State to keep their business in active and good standing with the state.
The Annual Report is used to keep the business records up to date with the Secretary of State. On the Annual Report, you will provide basic information about your business, such as the name and address of the registered agent, the principal address of the business, and the names and signatures of company officials. Most businesses formalized with the Secretary of State’s Office need to file an Annual Report, such as Business Corporations, Limited Liability Companies (LLC), Limited Liability Partnerships (LLP), and Limited Liability Limited Partnerships (LLLP). Non-Profits, Limited Partnerships, Professional Corporations (PCs), and Professional Limited Liability Companies (PLLC’s) do not have to file an Annual Report. There is also a filing fee due with the Annual Report. For LLC’s and partnerships, the fee is $200, and for corporations, the fee is $25.
The due date for your business’s annual report depends upon the type of business, but generally April 15th is the deadline for most businesses. For 2022, the Secretary of State’s office has given everyone an extra day--the annual report due date is April 18. For corporations and partnerships (LLP and LLLP), the annual report is due to the Secretary of State’s Office the 15th day of the fourth month following the entity’s fiscal year’s end. For example, if your fiscal year ends on December 31, your annual report for that year is due on April 15th.
Jesson & Rains offers a yearly plan for businesses that includes serving as our client’s registered agent and filing their annual report, among other things. This plan helps to ensure your privacy (if your business is ever sued, the lawsuit will be delivered to our office’s address); you will be less likely to fall victim to a scam (we will sort through and destroy junk mail); you will be more organized and have less paper (we will scan and forward your mail immediately to your attention after sorting); and we will ensure that corporate records and Secretary of State records are kept up to date.
We’re also offering an upgraded yearly plan that includes unlimited telephone access to attorneys throughout the year.
The consequence for not filing an Annual Report and/or paying the fee is that the Secretary of State can administratively dissolve your business. This means that you will lose the liability protection you enjoy by being a formal business, and a creditor can come after your personal assets. If you have questions about filing your Annual Report or want to learn more about the new business services offered by our firm, please reach out to Jesson & Rains!
By Attorney Kelly Jesson
Jesson & Rains, PLLC, is offering a couple of new business plan packages that include discounted legal services.
Our clients are busy and they sometimes forget to keep their information updated with the Secretary of State’s Office or file their annual reports; they pay for a registered agent who does nothing more than forward their mail; and they sometimes fall victim to scams like this and this.
We’re offering a yearly plan that includes serving as our client’s registered agent and filing their annual report, among other things. A description of the plan is attached to this email. This plan helps to ensure your privacy (if your business is ever sued, the lawsuit will be delivered to our office’s address); you will be less likely to fall victim to a scam (we will sort through and destroy junk mail); you will be more organized and have less paper (we will scan and forward your mail immediately to your attention after sorting); and we will ensure that corporate records and Secretary of State records are kept up to date.
We’re also offering an upgraded yearly plan that includes unlimited access to attorneys throughout the year. No more billing for .1 emails or .2 telephone calls. We want to encourage people to contact us anytime they need us instead of being afraid to get a bill from us.
This is a continued effort from us to offer flat fees instead of hourly billing. Annual reports are due April 15, and they can be filed now, so this is a great time to switch over to having Jesson & Rains handle it. Please contact us if you’re interested, and please forward to any busy business owners you think may need our help!
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