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Forming Your
Entity Using
"We File Everywhere" Companies or
"Doing It Yourself"
Not infrequently being penny wise and
pound foolish, some people choose to file with
Nevada Secretary of State with a "we file
everywhere" company or they choose to file
themselves rather than seek help. One thing to note
about the apparently inexpensive "we file
everywhere" companies is that they rarely include
filing fees in the price structure making them more
expensive in the end.
Further, while filling out the
Secretary of States forms meets the the minimum
statutory and legal requirements for filing an
entity, most people don't realize that there are
additional statutory provisions considered by most
legal and financial authorities to be both
appropriate and necessary to protect the entity,
its officers, directors and shareholders. Remember,
the "One Page Form" is charged with giving you the
basic rules - not with protecting you. We
find that almost everyone interested in the "Do It
Yourself (DIY)" avenue have not thoroughly read and
understood Chapters(s) 78-80 Corporations, 86 LLC,
88 Limited Partnerships, and 87 Limited Liability
Partnerships, along with their notes which
reference Nevada Case Law. Thus they have not taken
advantage of the additional provisions available to
them, and consequently have not protected the
officers, shareholders and directors as well as
they could have.
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Remember you probably would not
consider yourself qualified to fly a 747 airliner
even after reading the manual over. And the true
test of a pilot doesn't come from an uneventful
flight, but when a flight doesn't go as planned. In
a similar way the quality of a corporate filing may
not be known until adversity strikes.
If you choose to file the Nevada
Secretary of State's form yourself then be certain
everything is correct. Nevada rejects documents for
a number of reasons.
something left undone or
improperly done. The documents will often sit in
a prioritized pile at their office for a couple
of weeks before they bounce them. Then you must
re-file them and wait again. checks submitted with the
wrong payee(s) or amounts. illegible documents or
corrections are unclear.
A few of the provisions that are
often neglected by the "self-filer", but which can
be significant if there is an attack on the entity
by the IRS, a State Agency, the Shareholders, or
3rd Parties that your entity does business with
and/or if there is internal disagreement among
shareholders, officers, and/or directors:
Preemptive Share Holder
Rights Assessment: future assessment
of Shareholders Par Value vs. No Par value are
you sure of what you really want and what the
consequences are? Indemnification of Officers
and Directors
In todays litigious society there are
more lawsuits against Legal Entities
[Corporations, LLC, LP, etc.] and
individuals in the U.S. than in the whole rest of
the world combined. It is wise to be prepared.
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An Indemnification Scenario
Suppose a Director sends the
President, Employer, or Member (LLC) out on a
simple business errand. While on the business
errand, he/she hits a bus or van and multiple
people are injured. The attorney for the injured
sues the entity, the driver, officers or employees
perhaps and in most cases the suit is against the
entity/Inc./Co./LLC AND all potentially liable
individuals.
So we now have a situation where a
bright plaintiff's (the injured's) attorney sues
everybody in sight. Generally speaking because of
potential conflicts of interest and numerous other
legal theories, everyone involved must have an
attorney, the Entity, the driver, officer(s),
employee(s) each must have a different attorney. So
then who pays the individual's attorney's fees?
Guess what, you, the individual do, unless, the
proper indemnification provisions are made in your
documents. This could be expensive.
Indemnification of Directors/Officers
and/or Members is important so that someone's
personal financial life is not destroyed or
disrupted in the event of a law suit naming the
officer /member personally for acts on behalf of
the entity. Insurance of course, can cover this,
but again, how much is enough insurance if the
entity and/or its employees are found liable? Ask
your favorite plaintiff's attorney or even your
insurance agent "How Much Insurance is Enough?"
Remember the McDonalds HOT CUP of COFFEE CASE?
Our point is that the entity can
insure or indemnify officers against these attorney
fees, BUT if the other members, directors,
shareholders are without adequate provision for
indemnification in your articles, other officers,
directors or shareholders could say, "too bad, we
don't want to pay this for you."
Indemnification lets the entity get
insurance and/or pay the individual for his/her
losses occasioned by the persons actions on behalf
of the corporation/LLC.
If you still choose to use the "One
Page Form", or to draft your own Articles or LLC
Organization and you would like us to file it for
you, give us a call and we can discuss your
options.
*see our pricing packages
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