Delaware – Company Registration LLC
Delaware has low incorporation fees, low annual franchise taxes and no state corporate income tax for businesses that operate outside the State.
Delaware has an extremely well established body of law; does not seek to tax income earned in other jurisdictions; has an excellent, business court in its Court of Chancery and is very pro-business.
Over 50% of all companies on the NY Stock Exchange are Delaware corporations.
Delaware’s Corporate Advantage
- Delaware courts have a reputation of reaching reasonable and fair conclusions when construing the corporation laws
- Only one shareholder is required.
- There is no minimum capital requirement
- The annual franchise tax is low
- For companies doing business outside of Delaware there is no corporation tax
- Delaware has no sales tax, personal property tax, or intangible property tax on corporations
- No taxation upon shares of stock held by non-residents and no inheritance tax upon non-resident holders
- A corporation may keep all of its books and records outside of Delaware
- You may have a principal place of business outside of the State of Delaware as well
Delaware’s corporation law are written to protect the rights of shareholders, this emphasis is placed on shareholder protection attracts the public companies.
There are two types of companies in Delaware:
- The Corporation
- The LLC – Inc – a partnership which is tax transparent: the partners are the taxable entities and not the corporation.
Limited Liability Company
An LLC is a form of Partnership which has become very popular.
This is different to a Corporation for the following reasons:
- A Corporation has Shareholders as owners. The LLC has Members.
- A Corporation has Director. The LLC has Managers.
- Annual State tax for a Corporation is around $50 and for an LLC is $100
In the annual State tax form for a Corporation you must include:
- Director name and address.
- Principal place of business outside of Delaware.
- Nature of business.
Any profits or losses are passed to the members of the LLC to report on their personal income tax. Therefore the LLC does not pay any income taxes.
General procedures after you receive filed Articles of Organisation
- Create an LLC operating agreement, which sets out the rights and responsibilities of the LLC members.
- Issue membership certificates to members.
- Apply for EIN – Tax ID number.
- Establish a LLC bank account.
- File initial list of Managers or Members. This has to be done within 30 days after incorporation date.
LLC’s with non-resident shareholders and which conduct no business in the US and which have no US-source income are not subject to US federal income tax and are not required to file a US income tax return.
Incorporating in Delaware
The LLC is a distinct business entity that offers an alternative to partnerships and corporations by combining the corporate advantages of limited liability with the partnership advantage of pass through taxation.
US limited liability companies that conduct no business in Delaware with non-resident members are generally not subject to state income tax and are not required to file a state income tax return.
Limited Liability Company
LLCs can elect to be taxed like partnerships, only at the individual level when profits are paid as dividends. This yields a considerable advantage over C corporations, which are subject to double taxation – once at the corporate level, and again at the individual level when profits are paid as dividends to the shareholders.
Organisational structure of an LLC
An LLC is owned by its members. An LLC may be managed by its members or by selected a manager.
If an LLC is managed by its members, it operates similar to a partnership. Each member has an equal say in the management of the LLC.
Advantages of an LLC
LLCs offer numerous advantages:
- Limited Liability: For the members of an LLC, liability is limited to the amount of capital which the member has invested in the LLC. Therefore, members of an LLC are offered the same liability protection as a corporation’s shareholders.
- Pass Through Taxation: LLC’s allow for pass-through taxation. That is, the earnings of an LLC are only taxed once.