Educational Software Cooperative 4/Educational Software Cooperative 4.iso/mxdb/software/base/s1758.txt

Text File | 1995-10-25 | 10.1 KB | 186 lines

Business: The Company Corporation

In setting up a new business you may be considering forming a
corporation.  By doing this you gain some protection for personal
assets.  The cost of forming a corporation can be substantial.  I spoke
with one software business whose attorney said it would run about $400.
When all was said and done it ended up being $1500.  I don't know if
this is typical but it's reason to beware.  As an alternative you might
consider using one of the "incorporate for $100" services.  The
following is MicroExcel's experience with a business in Delaware called
The Company Corporation.  A number problems occurred with this service
which should be of concern to you.  I have been assured by the Company
Corporation that my experiences were not typical.  The company did
eventually straighten things out with me.  Nevertheless, you should know
this story.

Towards the end of January of 1995 I was getting down the to wire.  A
business needed to be set up very quickly.  I remembered a service was
available on CompuServe that would handle setting up a corporation for
about $100.  I left a message with CompuServe's customer support and
was soon directed to GO CORP.  This on-line service uses a character
based type of interface that I've always had trouble with.  I tried to
order information but apparently failed since nothing came.  After
fishing around the house for a week I came across an ad in the back of
CompuServe's magazine.  This ad compared the cost of The Company
Corporation's service in Delaware at about $100 to that of California's
at $900.  Although I figured there would probably be some other hidden
costs above $100, I did not believe they would be significantly out of
line since there was no advantage in getting me started only to have it
fall apart.

On February 2, 1995 I called for information and application forms to be
faxed.  They arrived shortly there after.  As I expected, the actual
cost was $211.95 after adding in the "extras".  This wasn't a surprise
so I filled out the two page form and faxed it back.  The form had a
space for special instructions.  Since I was very pressed for time I
requested a phone call to confirm the fax had arrived in good shape.
Two hours later a call still had not come so I called them.  The
representative fetched my fax and checked it over.  There was one item
on the form that needed correction.  He left the phone for a couple of
minutes to check the availability of my corporation name while I waited.
All was well so the corporation would go through in 10 days.

In the meantime, I had opted to acquire a federal tax employer ID on my
own instead of paying The Company Corporation to handle it.  This
involved nothing more than calling the local IRS office and having them
fax me a form, filling it out and faxing it back.  It was nice to see
the IRS had gotten into the 20th century.

Two weeks went by and nothing arrived from the Company Corporation so
naturally I called.  A representative checked their computer, confirmed
I was entered and told me to just wait.  Soon a month had gone by.  I
called again and told them the situation was getting serious.  This time
the assistant checked for my application and it was MISSING !  I faxed
another copy of the form sent earlier.  The representative said they
would process it immediately and express mail the materials to make up
of lost time.  They also offered to upgrade me to the Deluxe Corporate
Kit. In early April, an Economy Kit arrived by regular postal service.
Oh, well.  At least I was out of the woods or so I thought.

The Corporate Kit provides a binder to keep various company records,
very nicely printed stock certificates and a heavy duty embossing stamp.
But there are no real instructions on what one needs to know about
corporate forms so for $65 dollars I purchased a copy of The Complete
Book of Corporate Forms.  This book appears to be very well written and
should be considered essential.  Add another $65 to the actual minimum
cost.

Things were in sort of a crises state since it had taken more than a
month longer than expected to nail down the company name.  Everything
had been held up; opening a bank account, check printing, invoices,
business cards....you name it.  Upon rushing over to the bank I was in
for more bad news.  Apparently California required a qualification
certificate.  The Secretary of State said this would cost $900.  This
means my total first year cost would actually be $1241.  On top of this
the state would take additional $800 each year following.  California was
charging out of state corporations the same fees as in state ones.  A
call to the Company Corporation revealed they knew this.  Later
conversations with their operations manager indicates I should have been
told about this when I first sent in the application.  It just got
dropped.

On principle I couldn't pay the state of California that kind of money
for what was in practical terms just a company name.  I had the option
of keeping the corporation out of state in limbo while the actual
business was set up locally until I moved out of state.  I couldn't
decide what to do off hand.  One thing was for sure, filing taxes forms
every year with nothing but zeros wasn't a plus.  Fortunately, it was
early in the year so I figured there was time to think about it.

In the months that followed the Company Corporation notified me twice
that I had paid for S-type corporation but they had not processed
because I hadn't sent the papers in.  It was nice to know their
computers were tracking this even though it was probably irrelevant at
this point.

In the fall I received a notice that my $75 second yearly Delaware
representative fee was due to the Company Corporation.  I finally
decided to kill the thing and wrote them a letter explaining I didn't
like getting drawn into setting up a corporation only to find out about
exorbitant state qualification fees after the fact.  I figured the
letter would be forwarded to the appropriate person for resolution.  To
my surprise they sent a form AND a $65 bill. $10 for the state of
Delaware, $25 for processing and $30 for some sort of penalty.  Gee
whiz, no credit for the unprocessed S-type corporation papers.  Looking
back at the original fax received it says MONEY BACK GUARANTEE in bold
letters but underneath that it says "if your certificate of
incorporation does not comply with ALL legal requirements".  Technically
this means they have to mess up the filing before you are entitle to a
refund.

Naturally I felt like I had walked into a trap where I was getting taken
coming and going so a copy of this review was faxed in with a cover
letter explaining it was going to be published.  Alison Kochie faxed me
back immediately explaining she would call in a day or two after
reviewing my file and she did.  Apparently a number of mistakes
occurred.

1)  I should have been told about the extra in state fees.
2)  The computer system should not have dropped my application for a month.
3)  My letter, requesting termination of the corporation on account of the
    surprises should have been handled differently.

My case was one of those "when it rains, it pours" experiences.  The
Company Corporation's operation manager, Alison Kochie, wants to assure
everyone that they do not want customers unhappy with their service.  My
recommendation to the Company Corporation is to send a state filing fee
fact sheet out with their application to ensure this doesn't happen
again.  If such a practice is not adopted you should take it upon
yourself to contact your own State Department for an application before
filing in Delaware.  This could save you a great deal of trouble.

It is my opinion that the Company Corporation provides a valuable
service.  They should not be concerned about disclosing all costs.  The
application I received in early 1995 lists a $45 agent fee for a
Delaware corporation and $100 for all other states.  An additional $74
must be paid to the state of Delaware if you incorporate in that state.
If you incorporate in Delaware, some states such as California will
require you to register as a foreign corporation and pay additional
fees.  There are some other costs for a corporate kit $57.95 - $177.95
and the Corporate Forms book for $67.95 should also be considered a must
have item.  There is an optional S-type corporation IRS filing for $35
and optional Federal Tax I.D. filing for $35 or $75 for the express
service.  As you can see your first time cost will add up but it is
probably still cheaper than using an attorney.  You can do the optional
items yourself to save a few dollars.

Perhaps more important than the start-up cost are the ongoing yearly
costs.  If you incorporate in Delaware and are not located there, you
will have to pay The Company Corporation a yearly agent fee of $45 the
first year, $75 the second and I believe $100 thereafter.  The state of
Delaware will collect a $20 state filing fee for an annual report and $30
minimum franchise tax.  Some states will charge an additional fee no
matter what state you incorporate in.  In California this amounts to
$800 every year.

I hope I got all the numbers right.  There are quite a few of them.  As
you can see that $100 corporation could end up costing several hundred
dollars to get started with comparable yearly costs as well.  I've done
the best I can to fill you in.  All I can say is be vigilante about
compiling all current cost before starting.  The Company Corporation has
a money back guarantee if they mess up but not if you just decide it was
a bad idea somewhere down the road.

If you feel mislead or mishandled by The Company Corporation, write a
letter to Alison Kochie the operations manager.  If you are not pleased
with the resolution you can always add a review to this database along
with mine.  Positive reviews are also welcome.

The information in this review may be dated so check up on everything.

The Company Corporation
Three Christina Centre
201 N. Walnut Street
Wilmington, Delaware  19801

[phone]
Fax [phone]