Facts: The client has provided a private web site link to us. The web site claims that a Delaware formed LLC enjoys certain advantages.

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1 ONE STOP DESTINATION FOR WORLD CLASS LEGAL SUPPORT SERVICES SKJ Juris Services (P) Ltd. 2 nd Floor, Kundan Chambers, Thube Park, Shivajinagar, Pune , MH, India. Tel: , Fax: E. Mail: info@skjjuris.com Web site: To: Mr. From: SKJ Juris Services (P) Ltd. Date: December 21, 2011 Subject: Memo regarding advantages in connection with formation of a Delaware LLC v. Georgia Facts: The client has provided a private web site link to us. The web site claims that a Delaware formed LLC enjoys certain advantages. Query: The client sought our legal research service in order to find out the Delaware law/s that supports the web site claims, and if the web site claims are found to be legally correct, the client instructed us to carry out a comparative study in order to ascertain whether such advantages are available to a LLC formed in Georgia. Analysis: Purpose Website provided by the client: mpany.com/why_delaware. aspx Delaware Georgia Members You do not have to be a US citizen to form a regular Delaware C corporation or Conclusion: Our extensive research of Lexis Nexis does not reflect provisions stating that non US citizens can/ cannot be a member in a Conclusion: Our extensive research of Lexis Nexis does not reflect provisions stating that non US citizens can/ cannot be a member in a Liability Members / Managers The Delaware ASSET PROTECTION Advantage: Owners of Delaware LLCs and corporations receive limited liability protection. Owners' assets cannot be Title 6, Subtitle II Subchapter III, Section 303 (a) of the Delaware Code, states that all debts, obligations and liabilities arising out of a 1 Article 3, Section 303 of O.C.G.A, states that a member, manager, agent, or employee of an LLC shall not be liable for personally, for any debt,

2 seized as a result of the LLC or corporate liabilities. contract, tort, or otherwise, the LLC shall be solely responsible for it. And that no member or manager of an LLC shall be liable, personally. Conclusion: The law of Delaware protects the members and managers. obligation, or liability of the (partly amended in 2009) Conclusion: The law of Georgia protects the members and managers. Indemnification Delaware LLCs and corporations offer generous protection (sometimes called indemnity) from personal liability. Title 6, Subtitle II Subchapter I, Section 108., provides indemnification to LLCs. Conclusion: No difference Article 3, Section 306, of O.C.G.A., provides indemnification to LLCs. Conclusion: No difference Ownership Company ownership need not be disclosed to the State of Delaware. Title 6, Subtitle II, Subchapter II, Section 201 of the Delaware Code, states the contents of Certificate of Formation, setting forth the name of the LLC, the address of the registered office, name and address of the registered agent, any other matters the members determine to include. Conclusion: Delaware law does not require disclosing of owner s name. Article 2, Section 204 of O.C.G.A. states the contents of Articles of Organization, setting forth the name of the LLC, whether management is vested in one or more managers, or any other provisions not inconsistent with the law. Conclusion: Georgia law does not require disclosing of owner s name. Capital Investment Delaware does not impose a minimum capital investment requirement for LLCs and corporations. Title 6, Subtitle II, Subchapter V, Section 501 of the Delaware Code, states The contribution of a member to a limited liability company may be in cash, property or Article 4, Section 401 of O.C.G.A., states A contribution to the capital of a limited liability company may be in cash, tangible or intangible property, services rendered, or a promissory 2

3 services rendered, or a promissory note or other obligation to contribute cash or property or to perform services. Conclusion: Delaware law does not specify the amount of minimum capital investment requirement. note or other obligation to contribute cash or tangible or intangible property, or to perform services. 1 Conclusion: Georgia law does not specify the amount of minimum capital investment requirement. Physical Address of Owners Aside from a registered agent address, owners are not required to maintain a physical address within the state. Conclusion: Our extensive research of Lexis Nexis does not reflect provisions stating that the owners need not maintain a physical address within the state. In Georgia, a registered agent can be hired for forming an LLC, if the owner does not have a physical address. 2 In other words, maintaining a physical address by owner is not necessary for forming a Sales Tax There is no sales tax in Delaware. There is no provision in the Delaware law that states no sales tax. There is no provision in the Georgia law that states no sales tax. Conclusion: Other sources state that there is a 4% Georgia Sales Tax, besides the local taxes. 3 Additional Information 1 Also see, (last accessed December 19, 2011) 2 (last accessed December 19, 2011) 3 (last accessed December 19, 2011), (last accessed December 19, 2011) October 2009, Fiscal Fact Article Tax Foundation 3

4 Annual Report & Franchise Taxes Other Fees Under Title 6, Subtitle II Subchapter XI, Section 1107(b), an Annual Tax of $ 250 US is required to be paid by a However filing of Annual Report filing is not necessary. 4 Under Title 6, Subtitle II Subchapter XI, Section 1105 (a)(3) for forming a LLC and obtaining a Certificate of Formation, the applicant has to pay $ 70 US. Under Title 14, Chapter 11, Article 11, Section 1101(14) of O.C.G.A, an Annual Registration charges of $ 50 US is required to be paid by a In addition, an Annual Report is to be filed with the SOS for which filing fees is $ 50 US. 5 It may be noted that the aggregate charges are $ 100 US only. Under Title 14, Chapter 11, Article 11, Section 1101(1) of O.C.G.A. for forming a LLC and obtaining Articles of Organization, the applicant has to pay $ 100 US. Treatment of a Foreign LLC, which is willing to transact business activities in Georgia Foreign LLC A Delaware formed LLC is treated as a Foreign LLC in the State of Georgia. (Official Code of Georgia Annotated Title 14, Chapter 11, Article 1, Section 101(9)). Under the Georgia law, a Foreign LLC cannot transact business activities without registering the Foreign LLC and obtaining a Certificate of Authority from the Secretary of State, Georgia. (Official Code of Georgia Annotated Article 7, Section 702(a)) subject to provisions of O.C.G.A Title 14, Chapter 11, Article 7, Section 702(b) & (c). Under O.C.G.A Article 7, Section 702(b), the Foreign LLC shall not be considered to transact business merely for the purposes of maintaining or defending any action or proceeding, holding meetings of managers, maintaining bank accounts, effecting sales through independent contractors, soliciting or procuring orders where such 4 (last accessed December 19, 2011) 5 (last accessed December 19, 2011) (last accessed December 19, 2011), (last accessed December 19, 2011) Article not updated 4

5 orders require acceptance outside the state, making loans or creating or acquiring evidences of debt, mortgages, or liens on real or personal property or recording the same, securing or collecting debts or enforcing any rights in property securing the same, owning, without more, real or personal property, conducting an isolated transaction not in the course of a number of repeated transactions of a like nature, effecting transactions in interstate or foreign commerce, serving as trustee, executor, administrator, or guardian, or in like fiduciary capacity, where permitted so to serve by the laws of this state, owning directly or indirectly an interest in or controlling directly or indirectly another person organized under the laws of or transacting business within this state. This list is not exhaustive. Note: The entire list indicates nothing but merely basic administrative functions that don t constitute transacting business. TO ADD IN BRIEF: Under O.C.G.A Title 14, Chapter 11, Article 7, Section 703 a foreign LLC shall continue to do the following activities so long it wishes to transact business in Georgia. A Foreign LLC shall continue to maintain a A registered office, that may or may not be a place of business. A registered agent. Fees for obtaining Certificate of Authority Fees for which is $ 225 US (O.C.G.A. Title 14, Chapter 11, Article 11, Section 1101(a)(5)). Liability of Foreign LLC Under Article 7, Section 711 of O.C.G.A.: (a) In case the Foreign LLC transacts business without registering and obtaining a Certificate of Authority from the Secretary of State, Georgia, will be liable to pay registering fees for LLC in addition to a penalty of $ 500 US. (b) A foreign LLC transacting business in this state without registration, may not maintain an action, suit, or proceeding in a court of this state until it is authorized to transact business in this state. The failure of a foreign limited liability company to procure a certificate of authority does not impair the validity of any contract or act of the foreign limited liability company or prevent the foreign limited liability company from defending any action, suit, or proceeding in any court of this state. 5

6 Conclusion: If the client chooses to form a LLC in Delaware and operates its business in Georgia, then the client needs to comply with relevant laws of Delaware as well as Georgia simultaneously. In our view, the only advantage that a client will have in case it forms a LLC in Delaware is that there is no sales tax and no need to file an annual report. However, the dual statutory compliance may not be a viable and a practical business solution, if the client decides to form a Delaware LLC having entire operation in Georgia. ************************************************************************************************* 6