ABC’s of Incorporating in NC John Maron Director, Investor Education Program NC Dept. of the Secretary of State Securities Division PO Box 29622 Raleigh, NC 27626-0622 (919) 814-5560 [email protected] Disclaimer This workshop is presented as an educational experience and the information provided should not be construed as legal advice. Consult with N.C. licensed attorney competent in business and securities matters before making any decisions. The views expressed are those of the presenter. Presenter believes all information is truthful and accurate; however, mistakes can occur and laws and regulations may change. Who Am I? Why Am I Here? John J. Maron Who Am I? Why Am I Here? • Joined Secretary of State’s Office in April 2005. • Led team that has conducted +1,250 education events in all 100 counties in North Carolina, reaching +72,000 people. • Spent 13 years with the federal government, including 8 years with U.S. Rep. David Price and 5 years as Director of Constituency Services with former U.S. Senator John Edwards. • Served 3 years as HR Manager for Integrated Laboratory Systems, a research firm in Research Triangle Park. • Co-Chair, NC Senior Consumer Fraud Task Force John J. Maron • Co-Chair of Awareness Committee of the NC Partnership to Address Adult Abuse (NCP3A). • Represent the Department on the Governor’s Advisory Council for Latino/Hispanic Affairs. • UNC-CH graduate (BA, History) • Married with two daughters. NC Department of the Secretary of State Hon. Elaine F. Marshall Secretary of State Responsibilities of the Secretary of State’s Office The Secretary of State’s Office works with the private and public sectors to help strengthen North Carolina’s economy. There are several divisions within the Department. Major functions include: • The Publications Division publishes the N.C. Manual, the Directory of State and County Officials of N.C. and other materials, and acts as the custodian for the original 1868 N.C. Constitution and the Book of Oaths. This division is also responsible for the filing of non-commercial international agreements. • The Authentication Section authenticates documents, such as adoption papers and other documents to be used overseas. Responsibilities of the Secretary of State’s Office • The Certification and Filing Division provides services such as trademarks, lobbyist registration*, notary public and the recording of financial loans and liens. • The Office of International Services serves as a point of contact for International visitors and other governmental agencies on non-commercial matters. • The Charitable Solicitation Licensing Section oversees charitable solicitation and fundraising contributions. *Soon to be transferred to the State Board of Elections and Ethics per SL 2017-6 (S 68) Responsibilities of the Secretary of State’s Office But our main focus today will be on: • The Business Registration Division which handles the creation of new companies and maintains corporate documents; and, • The Securities Division which regulates investment advising, the selling of stocks and bonds and loan broker registration. So, What’s New at the SoS? A LOT! So, What’s New at SOS? 1. New departmental telephone number – (919) 814-5400 • All numbers except our fax and toll-free numbers have all changed! • We have NOT yet updated all of our handout materials with the new number 2. We have a redesigned website (still www.sosnc.gov). 3. “Corporations Division” renamed “Business Registration Division”. 4. We have a new Assumed Business Name (DBA) registry. So, What’s Changed? 5. We have an email notification system (to protect against business ID theft). 6. We have a “Find A Notary” tool. 7. Crowdfunding update. 8. New threat: Cryptocurrencies. Redesigned Website! (Still www.sosnc.gov) Three Ways to Find What You Need Business Registration How-To Videos www.youtube.com/c/NCSecState Link “Corporations” Is Now “Business Registration” Which Business Entity? Some (of many) things to consider • Legal and professional liability • Taxation • Raising money • Other factors: operational ease, administrative requirements, profit-sharing and employment tax implications • You really should consider consulting with a licensed, experienced attorney and tax professional! We’ve Made It Easy for You https://www.sosnc.gov/Guides/launching_a_business Link We’ve Made It Easy for You https://www.sosnc.gov/Guides/launching_a_business Link Choosing a Business Structure https://www.sosnc.gov/Guides/launching_a_business/business_structure Selecting a Name https://www.sosnc.gov/Guides/launching_a_business/how_to_name_your_business Selecting a Name • The name chosen must be distinguishable in SOS’s records from names of other domestic or foreign business entities. • Purpose has to be lawful, permitted by Articles of Incorporation. • Review N.C.G.S. §§ 55D-20 and 55D-21. https://www.ncleg.net/gascripts/Statutes/StatutesTOC.pl?Chapter=0055D • Tip: Do a quick online search to ensure name does not come with bad reputation. Check social media like Twitter, LinkedIn, Reddit. Availability of Name • Make sure name is available: call or search sosnc.gov – check both name and whether the words which make up the name have already been registered as a trademark or service mark in NC • Search SOS’s Business Registration and Assumed Name (DBA) registries • Check with chambers, business directories Availability of Name Certain phrases are prohibited without permission from proper legal authority or licensing board (i.e. evidence legally qualified to provide service), for example: – Bank, Banker and banking; – trust, co-op; – insurance, engineer, architect Articles of Incorporation For domestic corporation, must include: – Corporate name – Registered Office and Agent – Incorporator – Principal Office – In addition, some optional provisions Certificate of Authority For foreign (non-NC) corporations, must include: – Corporate name – State of incorporation and period of duration – Principal office – Registered Office/Agent – Names and addresses of Officers – Certificate of Existence duly authenticated by Secretary of State in state or country incorporated. Filing Fees • $125 for a domestic Corp. or a LLC • $250 for a foreign Corp. or LLC What’s Next? https://www.sosnc.gov/Guides/launching_a_business/whats_next Maintaining Registration Maintaining Registration https://www.sosnc.gov/Guides/launching_a_business/maintaining_registration • Have a current Registered Agent of record with SOSNC and notify within 60 days of any change in RA. • Corp. to have directors, officers, bylaws LLCs similar to Corp. except… • The company’s name must include “limited liability company; or L.L.C or LLC or Ltd. Liability Co. or Ltd. Liability Company” • A domestic LLC is created when its Articles of Organization are filed • A foreign LLC is formed when its Certificate of Authority is filed. LLCs v. Corp. • Business Corporation – annual report filing fee is minimum of $20 (online) or $25 (paper) • LLC – annual report filing fee is $202 (online) or $200 (paper); must file an annual report even if elects to be taxed as “C” Corp. Corporations online help For frequently asked questions: https://www.sosnc.gov/frequently_asked_questions/by_title/_Business_Reg istration_Creating_Business_Corporation Fee schedule: https://www.sosnc.gov/forms/by_title/_Business_Registration_Business_En tities_Common Other Important Information: Bylaws N.C. Gen. Stat. 55-2-06: • Incorporators …shall adopt bylaws • May contain any provision for managing the business…not inconsistent with law or the articles of incorporation Other Important Information: Operating agreement N.C. Gen. Stat. 57D-2-30: • Operating agreement governs the internal affairs of an LLC and the rights, duties and obligations of… • (i) interest owners • (ii) company officials Important, But Not Filed with SOSNC • Bylaws of Corporation • Operating agreement for LLC • Minutes of annual meetings • Watch out for “record retention” scam letters! Important, But Not Filed with SOSNC • Businesses are not required to file a Certificate of Existence in formation process • COE can be obtained directly from Secretary of State’s Office for $15 or less. • Conclusive evidence that a domestic or foreign corp. is in existence or authorized to transact business in North Carolina. Corporate Responsibilities Authorized shares – N.C. Gen. Stat. 55-6-01 – Articles of Incorporation must prescribe (1) classes of shares and (2) number of shares of each class that the corp. is authorized to issue. Annual meeting – N.C. Gen. Stat. 55-7-01 – Corp. shall hold a meeting of shareholders annually Corporate Recordkeeping Responsibilities • A corporation “shall keep as permanent records minutes of all meetings of its incorporators, shareholders and board of directors, a record of all actions taken by the shareholders…” – N.C. Gen. Stat. 55-16-01 (a) • A corporation “shall maintain a record of its shareholders…a list of the names and addresses of all shareholders” – N.C. Gen. Stat. 55-16-01 (c) Other Changes at SOS DBA Registry DBA Registry • Effective Dec. 1, 2017, all certificates of assumed business name must comply with the new law. • All businesses that registered their assumed names before 12/01/17 MUST re-file by 12/01/2022 (all pre- existing filings expire on that date). • All assumed name filings are done at the local Register of Deeds office (nothing filed with NC SoS). NC Assn of Registers of Deeds https://www.ncard.us/ • With a single filing, a business can indicate in which county(ies) it wants to be registered. DBA Registry • Notarization