Delaware - overview
KEY FEATURES AVAILABLE PACKAGES
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INTRODUCTION Delaware is famed to be the "incorporation capital" of America - more than 60% of Fortune 500 companies are incorporated in Delaware. According to Delaware Department of State, Division of Corporation's 2006 Annual Report the number of active business entities in Delaware has grown 50% in the last six years to a total of more than 765,000. In 2006, Delaware welcomed more than 145,000 new businesses. The reason why so many Fortune 500 companies are drawn to this state is the fact that Delaware has an excellent body of corporate case law spanning 110 years regarding such matters as management/shareholder issues and mergers/acquisitions. |
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The Delaware LLC is often referred to as hybrid company because it combines the advantages of a corporation with pass-through tax status of a partnership.
LLC member
A Delaware LLC formation requires at least one member (single member LLC). There is no maximum number of members for a Delaware LLC. Anyone, no matter of which nationality and where resident in the world, can be a member. Corporate members are permitted and widely used.
LLC manager
The members either decide to manage the LLC themselves (member-managed LLC) or appoint a third-party manager (manager-managed LLC). Any person(s) the members consider to be suitable can be appointed as a manager.
Operating agreement
The members voting rights, company operation procedures and manager's duties are drafted in the LLC operating agreement. In absence of such operating agreement the default provisions of the Delaware company laws apply. The term "freedom of contract" was invented in Delaware, therefore the operating agreement can even be written in foreign languages and there is no English translation required. Delaware LLC Operating Agreement
No minimum capital
There is no minimum capital required to form a Delaware LLC. Capital contributions to the LLC may be made either in cash, goods, services or know-how.
Delaware registered agent
There is a legal requirement to maintain a registered agent in Delaware. Westmoore's local company in Delaware, Delaware Fiduciary Services, Inc do provide registered agent services in Delaware and the registered agent fee for the first year is included in the formation
The Delaware LLC advantages
Online company formation, often completed within minutes
The LLC has a separate legal personality from its owners
A Delaware LLC may operate in the USA or worldwide
Only one member required to form a Delaware LLC
A third-party manager can be appointed (optional)
Privacy: Member / manager names not held on public record
No minimum capital contribution required
Members and managers are not personally liable for debts
Easy to administer, only minimal annual compliance required
Tax-transparent entity / pass-through taxation
A Delaware LLC can be used for
Any type of international business
To start a company or subsidiary in the United States
As an investment or finance vehicle
To own real estate and property
To own a yacht, aircraft or a car / truck
Member / manager privacy
Unlike many other countries and most US states, Delaware allows so called "anonymous filing". Neither the LLC member/manager names and addresses nor the operating agreement are part of the public company record in Delaware. This provides an extra layer of privacy.
Asset protection
A Delaware LLC separates a member's personal assets from the ones owned by the LLC. Members are neither personally liable for debts of the LLC nor can a member's creditor take over her/his voting rights in the LLC.
Pass-through taxation*
The LLC is not taxed at corporate level and therefore not subject to corporate income tax. Delaware LLC's are fiscally transparent pass-through entities. If all LLC members are non-US resident and the business is done abroad the LLC is not subject to Delaware taxation (apart from franchise tax).
No annual meeting required
There is no requirement to hold annual meetings for a Delaware LLC. This simplifies admin matters for a small business and also avoids creditors "piecing the corporate veil" as they could do with a corporation not run according to strict rules.
Delaware LLC franchise tax*
All Delaware LLC's, regardless of where they do business, pay a flat $250 annual LLC franchise tax to the State of Delaware. Due date for franchise tax payments is the 1st day of June in subsequent years.
