By Wayne W. Carlson, Michael S. Raum & Elizabeth L. Alvine
The end of the calendar year is a busy time for business lawyers and their clients. Each year we handle a number of transactions that clients want completed before year-end. These matters may include the purchase or sale of business assets, real estate transactions, financings, business formation and a host of other transactions.
Many of these matters will necessitate business filings with the North Dakota Secretary of State. A non-exhaustive list of frequently required business filings includes:
- Filing Articles of Incorporation to form a North Dakota corporation, Articles of Organization to form a North Dakota limited liability company (LLC), or registering a limited liability partnership (LLP) or limited liability limited partnership (LLLP);
- Registering a corporation or limited liability company formed in another state to conduct business within North Dakota;
- Trade name registrations for corporations or LLC’s;
- Partnership fictitious name registrations;
- Filing mergers or conversions; and
- Filing final dissolution of any legal entity.
Such business filings often take a number of weeks to be processed by the Secretary of State’s office, and North Dakota does not offer expedited or online service. It is important for business owners to recognize this delay in planning for year-end transactions. Clients sometimes get wrapped up in the details of a transaction and put off entity formation or other business filings until late in the game. This can jeopardize closing dates and perhaps even derail transactions. While the Secretary of State will sometimes try to accommodate hard closing deadlines, there is no guarantee that the office will do so in any particular case.
We often see this with real estate financings. Lenders frequently require that commercial real estate be held in a “single purpose” entity (SPE) as a condition of putting mortgage financing in place. Clients understandably focus on the deal particulars – interest rates, financial covenants, fees and penalties, etc. – and put off formation of the SPE until the tail end of the negotiations, only to discover too late that it may take weeks to get the entity formed. This can delay closing, which is especially problematic when trying to close a deal by December 31 and the clock is ticking.
For clients looking to form a new business or close transactions before year-end, the sooner that you can discuss deal particulars with your attorney, the better. If business filings are needed, they can often be sent in to the Secretary of State on the front end, with deal specifics left to work out going forward while the filings are in line for processing. Putting business filings off until the end of a transaction can have serious consequences. Even if you do not think a proposed deal is “ready” to go to your lawyer, a quick call early on can help to identify any particular issues that may arise, whether due to required business filings or other factors.