Question

BACKGROUND INFORMATION

On August 30, 2017, Richard and Eric formed New Co. (“NEW CO.”) as a Delaware corporation. On that date NEW CO. issued 2,400,000 shares of common stock to Eric and 2,400,000 shares of common stock to Richard. Eric and Richard each paid $0.0001 per share for their stock (which equaled the fair market value “FMV” on August 30, 2017). Their stock is subject to a “Repurchase Option” (at the lower of cost or FMV) in favor of NEW CO. Each Repurchase Option “lapses” over a 48-month vesting period (which includes a 12-month “cliff”), provided that Richard and Eric continue to provide services to NEW CO. That is, for example, if Eric quits NEW CO. before August 30, 2021, NEW CO. can repurchase Eric’s “unvested shares” for $0.0001 each (even if the FMV value is much higher on that date). Specifically, each Restricted Stock Purchase Agreement includes the following language:

2,400,000 shares of the Stock (the “Restricted Stock”) are subject to the Repurchase Option as of the date of this Agreement. On the date 12 months from August 30, 2017 (the “Vesting Anniversary Date”), 12/48th of the Restricted Stock shall vest and be released from the Repurchase Option; thereafter, 1/48th of the Restricted Stock shall vest and be released from the Repurchase Option on a monthly basis measured from the Vesting Anniversary Date, until all the Restricted Stock is released from the Repurchase Option (provided in each case that Purchaser remains a Service Provider as of the date of such release).

In 2017, NEW CO.’s total income exceeded its total deductions by $500,000. NEW CO. has never paid any dividends. Despite NEW CO.’s success, assume that Eric will resign from NEW CO. on September 7, 2018. Assume further that NEW CO.’s common stock has a FMV value of $2.0001 per share on both August 30, 2018 and September 7, 2018.

1. What document(s) has NEW CO. filed with the Delaware Secretary of State in order to form its corporation?

Assume that NEW CO.’s business and team is physically located in the Mount Pleasant, Michigan area (and that it transacts business and conducts affairs there). When transacting business in Michigan, would NEW CO. be considered a domestic or foreign corporation?

Answer 1

I think the question only asks that whether it is a domestic or foreign company.

A Delaware corporation is a company that is legally registered in the state of Delaware but may conduct business in any state. Delaware first began to adapt its laws in the late 19th century, making changes that would attract businesses away from other states such as New York.

As far as I understand----

"NEW CO." Is incorporated in delaware, but operates in michigan. When you incorporate in delaware, your company is domestic to delaware and foreign to every other state.