Why Should I Incorporate in Delaware?

The reason most people incorporate when they are starting a new business is to protect their personal assets so that all of their business and personal belongings remain separate and apart.

The State of Delaware is a leading domicile for U.S. and international corporations. More than 850,000 business entities have made Delaware their legal home. More than 50% of all publicly-traded companies in the United States including 63% of the Fortune 500 have chosen Delaware as their state for incorporation.

Businesses choose Delaware for many reasons. The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation.

The Delaware Court of Chancery is a unique 215 year old business court that has written most of the modern U.S. corporation case law. 

What are the Benefits of Incorporation in Delaware?

  • One person can hold all the offices of President, Treasurer and Secretary and be the sole director. Most states require a minimum of three people to hold offices in a corporation.
  • There is no minimum amount of money required in a company bank account.
  • The States corporation and trust laws are known for their unparalleled flexibility regarding freedom of contract.
  • The annual franchise tax is very favorable and can be as little as $100 per year including all filing fees.
  • There is no inheritance tax on stock held by non-residents of Delaware.
  • There is no estate tax on shares of stock held by non-residents.
  • There is no State income tax for Delaware corporations who do not operate within the State.
  • There is an established body of laws which protect the Corporations in Delaware. Shares of stock owned by individuals outside the State are not subject to any Delaware taxes.
  • The director has the power to make or alter by-laws.
  • Directors may fix any price on shares of stock they wish to sell.
  • Recent legislation limits abusive takeover tactics.
  • Corporations can become Sub-chapter "S" if all qualifications are met.
  • Shares of stock owned by individuals outside the State are not subject to any Delaware taxes.

Why Should I Select Delaware For My New Company?

The State of Delaware is a leading domicile for U.S. and international corporations. More than 850,000 business entities have made Delaware their legal home. More than 50% of all publicly-traded companies in the United States including 63% of the Fortune 500 have chosen Delaware as their state for incorporation.

Businesses choose Delaware for many reasons. The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation.

The Delaware Court of Chancery is a unique 215 year old business court that has written most of the modern U.S. corporation case law. In addition:

  • No minimum capital is required to form a Delaware corporation
  • Corporate records can be kept anywhere in the worldIt is only necessary for one person to act an officer, director and/or share-holder of a corporation or member of a limited liability
  • No formal meetings are required and shareholders need not be U.S. citizens
  • Any legal business may be conducted in Delaware
  • Delaware is recognized as having a favorable tax climate
    • No Sales tax
    • No Personal property tax
    • No Intangible property tax
    • No Stock transfer tax
  • Ownership of a Delaware corporation or limited liability company is strictly confidential

NOTE: Delaware companies do not have to file an annual corporate income tax with the state of Delaware "unless they have a physical presence in the state." However, all Delaware based companies must be an annual franchise tax or annual report to the Secretary of State of Delaware. Regardless of the tax consequences, all US based corporations are required to file annual Federal Income Tax returns with the IRS, even if they are "informational purposes only".

What is the Difference Between a Delaware Corporation and a Delaware LLC?

Both corporate entities are excellent choices for business owners looking to minimize their personal liability and build greater credibility. Each entity offers distinct tax and business advantages. Choosing the right one depends on the specific needs of the business. Corporations offer

  • Personal liability
  • Tax savings
  • Increased opportunities for raising capital

Corporations are also required to perform certain formalities such as holding annual meetings and keeping detailed corporate records (minutes), however, corporate meetings and records can be held and kept anywhere in the world.

"C" Corporation

  • Personal liability protection for owners
  • Taxed at corporate and individual level
  • Formal meetings and corporate minutes
  • Annual state reports
  • No membership restrictions

"S" Corporation

  • Personal liability protection for owners
  • Income/loss passed directly to shareholders
  • Formal meetings and corporate minutes
  • Annual state reports
  • Membership restricted to 100 shareholders

Limited Liability Companies (LLC)

Offer the same personal liability protection as a corporation, but with fewer of the corporate formalities. The LLC typically are not

  • Required to hold formal meetings or keep detailed corporate minutes
  • Offer great tax flexibility
  • Income/loss passed directly to members
  • Can option to be taxed as either a traditional corporation “C” or “S” or as a "pass-through" entity and file a partnership return if they have two or more members
  • Personal liability protection for owners
  • No membership restrictions

Note: In the state of Delaware the maintenance on a corporation with authorized stock of 1500 shares at no par value is only $125.00 as opposed to an LLC which is $250.00 per year. 

If you are the only member of the LLC, by IRS standards you are considered a Single-Member Limited Liability Company and cannot file a partnership tax return with the IRS. 

Unless you file the LLC with the IRS as either a "C" Corporation  or an "S" Corporation, you will initially be classified as a disregarded entity for the purposes of filing a federal tax return and must file a Schedule C on your personal tax return.

Which Type Of Company Is Right For Me?

General "C" Corporation

The general corporation is the most common corporate structure. This type of corporation is a separate legal entity that is owned by stockholders. A general corporation may have an unlimited number of stockholders that, due to the separate legal nature of the corporation, are protected from the creditors of the business. A stockholder"s personal liability is usually limited to the amount of investment in the corporation and no more.

Sub-Chapter "S" Corporation

With a sub-chapter "S" corporation you can deduct the profits and losses from your corporation on your personal tax return. You will no longer be considered a "C" Corporation. Prior to March 15 you must file an IRS Form 1120-S. To qualify as a "S" corporation, you must be a US citizen or qualified resident filing a personal tax return with the IRS.

Close Corporation

There are a few minor, but significant, differences between general corporations and close corporations. In most states where they are recognized, close corporations are limited to 30 to 50 stockholders. In addition, many close corporation statutes require that the directors of a close corporation must first offer the shares to existing stockholders before selling to new shareholders.

This type of corporation is particularly well suited for a group of individuals who will own the corporation with some members actively involved in the management and other members only involved on a limited or indirect level.

What Is A Registered Agent? Do I Need One?

The registered agent is responsible for receiving important legal and tax documents on behalf of the business. Service of Process (sometimes called notice of litigation), which is the document that initiates a lawsuit, is served to the registered agent for a business. Proper handling of and timely response to this document are vital, as not doing so can result in significant adverse consequences to the business. Additionally, the registered agent often receives mail and tax documents from the state and government on behalf of business. Timely handling of these documents is also important as states typical impose deadlines for annual report and franchise tax payments.

What Is An EIN?

The EIN is issued by the IRS to operate your business. It is similar to a SSN for an individual. Only one EIN is ever issued to a Corporation or an LLC. An EIN is necessary for a Corporation or LLC to open a bank account and file income tax.

How Do I Get An EIN (Federal ID Tax Number). Do I need one?

You can either apply for the EIN directly to the IRS using the application Form SS4 or hire us to get one for you. If you do not have a SSN you can hire a Professional Director who will apply to the IRS on your behalf.

Are There Any Recurring Fees to Maintain The Corporation Or LLC?

Each year in January you will receive a bill for the $90 registered agent fee, if non US a $35 air mail deposit for mail forwarding fee and either the state of Delaware Franchise Tax or Annual Report if an LLC.

How Do I File my Foreign Corporation in the State of Delaware?

if you run a business which has city, state or county requirements for licensing and collecting sales taxes you will be required to file in your own state with either a Certificate of Authority or Certificate of Status. If this is necessary, since we file corporations and LLC"s in all 50 states, we can do this as well. Expanding your business to another state? Many states require that you file a Foreign Qualification or Certificate of Authority to do business in their state. We can qualify and file your corporation or LLC in all 50 states. Call for a free consultation.

Do I Need To File My New Delaware Corporation or LLC in My Home State?

The answer will depend on the type of business you are operating. Call us for a free consultation.

How Do I File my Foreign Corporation in the State of Delaware?

Expanding your business to another state? Many states require that you file a Foreign Qualification or Certificate of Authority to do business in their state. We can qualify and file your corporation or LLC in all 50 states. Call for a free consultation.

Can the same person be shareholder, officer and director?

Yes, one person (U.S. or foreign) can be the President, Secretary, Treasurer, Sole Director and sole stockholder of a Delaware Corporation. Also, one person (U.S. or foreign) can be the member and manager of an LLC.

Do I need a business address in Delaware?

No, you do not need to have a business address or office in Delaware as long as you retain a Delaware Registered Agent for your Delaware Corporation or LLC.

Do I need a business license?

No, Delaware corporations not operating in the state of Delaware do not need to acquire a business license in Delaware.

Does my corporate bank account have to be in Delaware?

No. You can form and operate your corporation under Delaware law without transacting business in Delaware, maintaining a bank account in Delaware or even visiting Delaware. If you do want to obtain a corporate bank account in Delaware we can introduce you to a reputable bank.

Why should I incorporate in Delaware?

Delaware is very popular for setting up an LLC or corporation due to its simplicity of the incorporation process. Privacy and the beneficial tax rules (e.g. no state income tax; no personal income tax; no inheritance tax; no state sales tax) are two other reasons why companies incorporate in Delaware

Can a foreign person or Corporation form a Delaware Corporation or LLC?

Yes. Delaware does not discriminate against non-citizens inside or outside the United States. Many Delaware Corporations and LLCs are formed by foreign persons. However, all businesses owned by non-US persons must register with the US if they ever have $10,000 or more connected to the company. Additionally, income that is sourced from the United States must be reported to the I.R.S.

What is a Registered Agent and why do I need one in Delaware?

A Registered Agent is the liaison between your company and the state in which it is incorporated. In Delaware, your Registered Agent is your intermediary with the state of Delaware's Division of Corporations. This is required by law.

What entity should I form?

A Limited Liability Company (LLC) is the most popular entity in Delaware. Around 90% of the incorporation requests that we process is for LLC’s. However, if a C-corporation is more suitable for you then we are happy to assist you with setting up that type of corporation.

What are the cost of the incorporation process?

We charge an initial setup fee of $XXX . Furthermore there are annual filing fees of $XXX plus annual fees for the registered agent of $XXX. These prices, together with the additional services we also offer, are shown in the menu called: Cost

What type of Business form should I set-up in Delaware?

Neither US citizenship nor residency are requirements for forming a Delaware LLC or Delaware corporation. You can start a business in Delaware from anywhere in the world. In fact, many of our clients are not living in America.
However, non-US citizens cannot be shareholders in an S corp, so this limits your taxable business entity choices. Mostly, non-US residents will choose between LLCs and corporations taxed as C-corps.
Delaware LLC is the most popular choice because of its simplicity. Startups, small businesses, real estate investors, and many other businesses choose an LLC because it only has a few required steps to follow to run it properly.
LLC
Ownership
Delaware non-resident limited liability company (LLC) is not a partnership or a corporation. It 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. Unlike a US corporation, a Delaware Limited Liability Company (LLC) does not pay US state or federal income tax if its owners are not US citizens or green card holders, its offices are located outside of the US, and the LLC does no business in the US. A Delaware LLC is not required to file a US income tax return. Delaware LLCs are popular vehicles for conducting international business.

If you choose a Delaware LLC, your ownership of the company is in the form of membership interests. The members are the owners of Delaware LLC. The members may manage the company themselves or they may hire an external manager. An LLC is governed by a contract called an LLC Operating Agreement that is like a step-by-step instruction manual for the owners. Delaware does not require officer or director names to be disclosed on formation documents. This provides a layer of anonymity.
Taxation
As a non-US citizen, your Delaware LLC will only be taxed in the US on income from US sources, meaning that income from other countries will not be taxed by the US. If you choose to form an LLC, any profits from US-sourced income will be taxed by 30%. Subsequently, income from other parts of the world is not taxed.
Corporation
Ownership
If you choose a Delaware corporation, your ownership of the company is in the form of shareholder stocks. The shareholders elect the directors of the corporation. The directors elect the officers such as president, treasurer, and secretary of the corporation. For US citizens there are two options: a C-corp or an S-corp. Non-US citizens can only select a C-corp.
Taxation
Your corporation will be taxed as like any other US corporation. The corporation will pay the same taxes that any other US corporation would on all US-sourced income and your Delaware corporation would also be taxed on all foreign earnings