New Business Entity Laws Cause Delays for Businesses at Secretary of State’s Office

Posted on August 24, 2011

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According to the Birmingham Business Journal, individuals looking to form or register businesses in the State of Alabama may have to face delays of up to six weeks or more.  The January 1, 2011 effective date of new Title 10A of the Code of Alabama, which concerns business and non-profit entities, is largely to blame for this backlog of work for Alabama’s Secretary of State’s office.  This act contains new procedures for name reservations and registering to do business in Alabama that are applicable to Alabama entities and out-of-state entities registering to do business in Alabama.

If a name reservation request is not expedited ($25.00 fee), the name reservation procedure takes more than a month.  An expedited name reservation takes about 3 – 4 business days.  Prior to the effective date of changes contained in Title 10A, an expedited name reservation (which was only required for for-profit corporations) could be obtained in 24 hours.  If the registration of a foreign business entity is not expedited ($100.00 fee), the registration process similarly can take more than a month—and that’s on top of the time it takes to get a name reservation for that entity.  An expedited foreign entity registration similarly takes about 3 – 4 business days.  Prior to the changes in Title 10A, an expedited registration of a foreign corporation could usually be obtained within 24 hours.

Unfortunately, most persons and attorneys are not aware of the expedited process for name reservations and registering to do business.  According to the Associated Press, those foreign companies who were aware of the $100 expedited fee for registration pushed the registration applications of many other business owners—some of them locals using foreign business entities—to the back of the registration line.  In addition to frustrating delays, those who don’t know about the expedited processes for name reservations and registration may face collateral problems as a result of such delays—like loan application difficulties where the loan requires proof of existence/good standing and/or a certificate of authority (proof of registration) or difficulties in securing a franchise agreement that has similar requirements.

Expediting a currently pending request with the Secretary of State does not seem to be an option for businesses.  It is my understanding that the Secretary of State is not allowing persons to expedite an already pending foreign business registration request.  During the past few months, I have been successful at getting the Secretary of State’s office to expedite a currently pending name reservation request.  This option is no longer available.  However, it is my understanding that you can terminate your currently pending name reservation request and submit a new request on an expedited basis.

Until the Secretary of State is able to clear its mountain of backlog, I strongly suggest that business owners look into the above-described expedited procedures.  It’s not often in the business world that delays of a month or more can be fixed by paying a fee of $100 or less.  However, please note that the $25.00 expedited fee is in addition to the $10.00 regular name reservation fee and that the $100.00 expedited fee is in addition to the regular $150 for foreign entity registrations.

Russell M. Cunningham, IV
Cunningham Firm, LLC

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