Friday Franchise Minute

What is the Federal Trade Commission and what control do they have over franchising?  A 30,000-foot view

The Federal Trade Commission, or FTC for short, is the governing body for franchising at the federal level.  The FTC Rule that controls franchising is known as “Disclosure Requirements and Prohibitions Concerning Franchising”.  The FTC Rule controls a franchisor’s ability to sell franchises in each of the 50 states, D.C., Puerto Rico and the U.S. Virgin Islands.  There are state specific laws controlling franchising, but we will discuss those another day.

The FTC Rule tells the franchisor what specific information must be included in the Franchise Disclosure Document and when the franchisor must give the Franchise Disclosure Document to a prospective franchisee.

If you are franchising your business, or have recently franchised your business, it may benefit you to read through the FTC Rule’s requirements to ensure that your Franchise Disclosure Document is in compliance.

If you would like to read through the FTC Rule, and have some spare time and a lot of caffeine, you can download it from the FTC’s website at

Should I use the symbol ™ or ® for my trademark? 

We get this question every time we help with a trademark.  Using the ™ symbol asserts your rights in a mark and helps to eliminate doubt as to its usage.  Also, the ™ symbol can be used even if the trademark has not been filed with the state of federal government.

On the flip side, the ® symbol can only be used with registered trademarks or service marks.  (We will touch on the difference between a trademark and a service mark another day).  Once your trademark is registered you should immediately begin using the ® symbol to legally put the world on notice of your actual use of the trademark.

This is just a quick overview of trademarks.  For more information, please call our office at (980) 202-5679 or email us at to discuss your trademark rights.

Friday Franchise Minute

Recently we have been approached by several franchisors with non-compliant and inconsistent franchise disclosure documents.  I am not saying the FDDs are bad (in fact they are good brands and have mutually beneficial terms), but they are missing key elements required by the Federal Trade Commission franchise rule such as incomplete FTC and State cover pages, incorrect information about trademarks, and an overall disconnect between the FDD Items and the Franchise Agreement. These mistakes not only open a franchisor to liability, but also make them look foolish to a potential franchisee.

You should regularly review your FDD with a fine-toothed comb to, at a minimum, make sure (1) you understand what it says and (2) that the terms match up between the Items and Franchise Agreement.

Have a great Friday and a fantastic weekend!

How to convert a North Carolina LLC to a Delaware Corporation

            Sometimes, investors prefer a company they are about to invest in to be incorporated in Delaware.  There are several advantages and disadvantages to incorporating in Delaware, but there are two primary reasons investors care about.  First, Delaware has an extensive, 200 year old body of corporate law that provides predictability in the event that things go wrong.  Second, Delaware law grants minority shareholders specific rights involving the sale of a corporation.  Investors prefer that second reason because they obviously want their investment to be protected.  While there are many other reasons for choosing Delaware for incorporation, they are beyond the scope of this article.  If you need more information on Delaware corporate law, start with a Google search or contact a business law attorney in Delaware.

            Some North Carolina startups begin their journey to success with creating a limited liability company here in North Carolina.  In an effort to attract investors, they may consider converting their North Carolina LLC to a Delaware corporation.  While this may seem easy, looking down from 35,000 feet, the devil is in the details.  The process of converting a North Carolina LLC to a Delaware corporation involves a good amount of paperwork and several filings that must take place in a specific order.

            First, the owner or their attorney must file to create a Delaware corporation.  Two forms must be filed simultaneously: (1) Certificate of Conversion from a Limited Liability Company to a Corporation Pursuant to Section 265 of the Delaware General Corporation Law; and (2) Certificate of Incorporation for a Stock Corporation.  As of 2017, the filing fee for the Certificate of Conversion is $164.00 and the filing fee for the Certificate of Incorporation is $89.00.  Don’t forget to include a cover sheet.

            You will want to proactively follow up with the Delaware Secretary of State in regards to your conversion filing.  We have had several clients’ filings “get lost in the system.”  All we had to do was contact the Secretary of State and ask for a status update – they promptly completed the filings afterwards.  We are not sure if this was because conversion is a more complex filing or because the Delaware Secretary of State simply has a massive volume of corporate filings as compared to many other states.  Regardless, if you do not hear from the Delaware Secretary of State within a few weeks, give them a call or have your attorney reach out to them.

            Once you have successfully filed to create a Delaware corporation, you must wrap things up on the North Carolina side of your company.  Again, there are two separate filings you must complete in order to finish the conversion process.  First, since your company is no longer a North Carolina limited liability company, you must file Articles of Conversion to a Foreign Entity.  The filing fee is $50.00, and you must list Delaware as the state which governs the entity now as well as an address where the North Carolina Secretary of State can continue sending official mail to.  Once you file this, your North Carolina limited liability company will be “withdrawn” or “destroyed” per the North Carolina Secretary of State’s records.  You can technically stop at this point if your startup does not plan on doing business in North Carolina.  However, continue to the final step if you will either be selling products, providing services, or maintaining operations in North Carolina.

            The final step of the process is obtaining permission of the North Carolina Secretary of State for your foreign (Delaware) corporation to transact business in North Carolina.  This is accomplished by filing an Application for Certificate of Authority, which has a filing fee of $250.00.  You need to list a registered agent, which should be an attorney who can receive mail on behalf of your out-of-state corporation.  You must also attach a Certificate of Existence from the Delaware Secretary of State.  Be sure to obtain this certificate ahead of time as it can take a little while to be delivered.  Once you complete this filing, you have officially converted your North Carolina limited liability company into a Delaware Corporation that is authorized to do business within North Carolina.

            There are several nuances to this process, so it is not recommended that you try this on your own.  Work with a business law attorney in North Carolina who has experience in converting North Carolina companies to Delaware Corporations.  Working with an experienced attorney can simplify and streamline this process and eliminate a lot of frustration for you and your potential investors.  Call (980) 202-5679 to speak with one of Barber Power Law Group’s experienced business law attorneys about converting your LLC today.