Too much information … information … information

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Image courtesy of LWL-Klinik Lengerich

One of the questions I’m asked all of the time is one which no one on this side of the Atlantic Ocean would ever expect, and that is, what are the legal requirements for business letterhead in the US? The answer is, there are none, usually accompanied by a vaguely perplexed look. That’s not entirely true, as I’ll discuss below, but it’s pretty darn close. But first, why the question in the first place?

Perhaps unsurprisingly, Germany does regulate the content of letterhead, as do most European countries to one extent or another. Although the requirements differ for different types of corporations, German letterhead (Briefbogen) typically includes the company name and address, the court at which the company is registered, the company’s number in the corporate registry (Handelsregisternummer), and the managing directors or officers of the corporation. Germans also typically include their complete banking information, including the IBAN or similar bank number and account.

In the US, in contrast, letterhead is typically limited to the company name, address, phone numbers, and website address. personalized letterhead may also include an e-mail address or other contact information, and occasionally letterhead will include a slogan or information about the company’s productions. That’s typically it – no additional information is required or expected. In fact, you can leave most of that information off if you really want, although it may not make as professional an impression.

While not a requirement under the law, it is advisable for companies to include their full legal names somewhere on the letterhead, including “Inc.” or “LLC” or whatever, to clearly indicate to the recipient of any correspondence that they are dealing with a limited liability business entity. Certain industries include additional information by custom (e.g., law firms include the names of partners in the partnership), but that’s not a legal requirement.

It’s also important that the letterhead not be deceptive – while you don’t have to include any particular information on your letterhead, the information you choose to include should be accurate and clear.

So, to be clear, you do not need your EIN (tax number), directors, officers, or bank information on your US letterhead. In fact we recommend against it, because that’s just information that scammers can use to try and social engineer their way into your company bank account.

For more information about German letterhead requirements, see this summary from the Hamburg Chamber of Commerce (in German) or shoot us an e-mail.

State of Incorporation

State of Incorporation

Alas, not the most popular state to incorporate in

Europeans often think that they are catching up to the US, at least in terms of harmonized and consistent laws, but in many instances our system is actually more federalized than that of Europe. Whereas you can now form a European corporation, US corporations are formed under the laws of a particular state, rather than under the federal (United States) law. Typically, that means you’ll have to decide between the state in which you’ll actually be headquartered or operating (assuming you know which state that is) and one of the states which has advantageous tax or corporate laws for corporate formation.

Traditionally, Delaware has been the first choice of most corporations because of its favorable tax and corporation laws, but other states such as Nevada, Alaska, and Wyoming have also been trying to get into the lucrative business of corporate services in recent years. If you’ll be operating completely within the border of a single state, you might as well incorporate in that state, but most German businesses are seeking to sell throughout the United States so a Delaware (or other law-tax state) corporation will be more advantageous. There is no equivalent to the European Corporation (SE) in the United States, so every US company will have to choose a state of incorporation.

Even more confusing, if you will be operating in a state outside of your state of incorporation you will have to file for authorization to do business in that state (or those states) as a foreign corporation. That’s right, a Delaware corporation doing business in California or even neighboring Pennsylvania is considered “foreign” for the purposes of state law, just as a German corporation would be, and may have to register as a foreign corporation. Although state laws regarding filing for authorization differ, it’s a safe bet to say that if you’ll have employees or physical assets based in a particular state you’ll be required to register in that state.

So, for example, if you form a corporation under the laws of Delaware, but will have your offices in New Jersey, you’ll form the corporation in Delaware and then file for authorization to do business in New Jersey. If you also have branch offices in California and North Carolina, you’ll need to file for authorization in those states as well. Filing for authorization in a particular state triggers other obligations as well, including the obligation to file an annual tax return and, usually, to file papers with the state relating to labor, taxes, and other fees. For any state in which you do not have a physical presence you’ll also need to pay a registered agent to accept mail and service of legal process on your behalf, which usually costs no more than $200 per year.

This is the first in an occasional series of posts on starting your business in the US.