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Incorporator I. who is neither US citizen nor resident wants to incorporate a Colorado corporation which costs a filing fee of $50. The colorado secretary of state only accepts two payment methods:

a) A prepaid account for frequent filers: This is out of the question due to the minimum deposit of $3000. I. only wants to incorporate 1 corporation.

b) Credit cards: This looks like it is the way to go at first, but then it turns out that SOS requires credit cards to be “issued in the US”. I. gets prompted for a billing address which has to be in the US and has to match the address which the issuing bank has on file. I.'s credit card, however, is issued in country L. and has a billing address in country G., causing the payment to fail.

SOS places an authorization on the credit card, causing $50 to be blocked for several days but the card never gets charged and the incorporation fails.

I. is taken by surprise because he's never seen this before; I. thought that the primary purpose of a credit card was to make international payments.

Now I. could try to work around this limitation by hiring someone in the US to buy a “valid in US only” Visa gift card from a retailer and ship that gift card to his home in foreign country G. Then, he could register the gift card to a false address in the US and proceed with his incorporation. The detour via the gift card would cost I. about $30. Yes, that's a $30 transaction fee for a $50 payment.

Now my question is:

1) Is it legal for I. to register a gift card to a false address?
2) Does SOS's policy of not accepting international payments constitute a default of acceptance? Can I. force the SOS to accept his foreign credit card?
3) What about the annual report filing fee which must be paid one year after the incorporation? Would the same conclusion also apply to the annual report filing fee or are there differences?

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  • The primary purpose of a credit card is to allow a customer to borrow pre-authorised amounts of money as and when they want. International usage is not at all a theoretical or in many cases practical requirement of any such system. – Nij Apr 7 '20 at 20:51
  • What makes you believe it's even legal for a non-US citizen/non-resident to incorporate a business in Colorado? – Ron Beyer Apr 7 '20 at 21:27
  • @Ron: There's no legislation prohibiting non-resident aliens from incorporating in the US. In fact, Colorado explicitly allows Colorado corporations to have their principial office anywhere in the world. – erebus Apr 8 '20 at 6:08
  • @Nij: Actually, when credit cards were introduced over here in Europe, they were at first only useful for people who wanted to travel to North America or maybe shop online. Domestic payments were made using other payment instruments. Although this situation is changing and domestic card payments become more common, nobody would ever think of confining a credit card to a single country or to Europe. – erebus Apr 8 '20 at 6:35
  • @Ron: Oh, and of course, Colorado also accepts foreign addresses as shareholders and as incorporators. – erebus Apr 8 '20 at 6:38
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1) Is it legal for I. to register a gift card to a false address?

No. That would be fraud - the obtaining of something of value through dishonesty.

2) Does SOS's policy of not accepting international payments constitute a default of acceptance? Can I. force the SOS to accept his foreign credit card?

I don’t know what “default of acceptance” means. No.

The Colorado SOS (and anyone else for that matter) can choose what forms of payment they will accept and that they will not accept. If they want to exclude foreign credit cards, or cheques, or cash, or Monopoly money they can.

Everyone has to accept cash (legal tender) for the settlement of debts but paying for a service in advance is not a debt.

3) What about the annual report filing fee which must be paid one year after the incorporation? Would the same conclusion also apply to the annual report filing fee or are there differences?

What about it? Yes.

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  • 1) What if I. contacts SOS and they propose exactly this? Is this still fraud then? 2) “Default of acceptance” is a creditors failure to take someone's money. 3) So you think the annual report filing fee is not a debt either? Once incorporated, a corporation has a statutory obligation to file an annual report which in turn costs a filing fee. Why should this not be considered a debt? – erebus Apr 8 '20 at 6:17
  • @erebus theres no creditor here - no debt exists because the service hasnt been provided yet. And even if there is, the only payment method the creditor has to accept is cash. Im not sure why you think you can force a creditor to accept any random credit card - what if they dont take Amex or Discoverer? – Moo Apr 8 '20 at 10:21
  • @Moo: Well, if they were taking cash our fictional guy would have sent a banknote across the pond. – erebus Apr 8 '20 at 13:33
  • @Moo: Well, the problem is that our fictional guy has no payment option available to him. If he could pay by cash, ACH, cheque or even Paypal, things would be fine. – erebus Apr 8 '20 at 13:51
  • @erebus and as noted, no debt exists yet, so cash isnt an option anyway. The state accepts what they accept, you cant force them to accept something you want to use instead. – Moo Apr 8 '20 at 19:27

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