Limited Liability Companies (LLCs) in Delaware
Many US non-residents are incorporating companies in Delaware; some of these are operating within the US whilst others are operating entirely outside and have no connection with the US other than the registration of their company.
There are three types of incorporations; C-Corporation (C-Corp), S-Corporation (S-Corp) and Limited Liability Companies (LLC). All types offer personal liability protection to the owners so that their personal assets are not generally at risk for business liabilities. Most of our clients that are starting a service company, where the owners are the sole service providers, will choose an LLC.
For US non residents, use of an S-Corp is not possible because one of the requirements of becoming an S-Corp is that all shareholders must be US residents. If you are not an American citizen you will instead have to form a C-Corp or an LLC.
While there is no Corporate Tax in Delaware for a corporation, Delaware Corporation still has to file a tax return, and pay federal taxes. For many people, pass through taxation, or the ability to have their entity treated as a non tax paying entity is important. This objective can be achieved by incorporating an LLC instead of a corporation.
LLCs are easier to run (less paperwork) and you file the LLC taxes along with your own at the end of the year. Corporations have more paperwork (quarterly filings, minutes, and a board meeting), but you have a higher potential for tax savings (with employees or product sales).
If you are trading in the US, you may be subject to self-employment tax on LLC earnings, which you would not be, if you were trading and earning money through a corporation .
If you are trading in a number of states, be aware that some states do tax LLCs as companies, even though the Federal government does not.
You may be better off having a Corporation for one-off transactions. Since an LLC is considered a partnership for Federal Tax purposes, be aware of federal legislation for LLCs. If 50% is sold within a 12-month period, the LLC will crease to be a partnership for federal tax reasons.
How to Incorporate a Limited Liability Company (LLC) in Delaware
After you have submitted your chosen company name to us, approval can be obtained within several hours. You can carry out a free name check now using our Company Name check service). Any name identical or similar to an existing company within the state of Delaware will not be allowed. Additionally, the use of “bank”, “trust”, “insurance” or “reinsurance” within the name of the company is prohibited; special licences and permission must be given if you require such a name. Checking a company name using our online service takes less than 30 minutes and a name may be reserved for 10 days.
For LLCs, the company name must have suffixes to denote the limited liability of your company, i.e. Limited Liability Company and Limited Company or their abbreviations LLC and LC. For corporations, the name must end with Corporation, Company, Incorporated, Limited, Syndicate, Union, Society, Club, Foundation, Fund, Institute, Association; or the relevant abbreviation such as Co., Corp., Inc., or Ltd.
Upon receiving your completed order, we will reserve the name with the state that same day or the next business day. The certificate of incorporation is prepared and filed. The state typically approves filings within seven business days from the date that the filings were received. After the state approves your filing, corporate existence begins for your company, the paperwork is returned and the completed documents will be sent to you via courier.
The general procedures after you receive filed Articles of Organisation is as follows:
- 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.
After your Articles are filed, your LLC should have an organisational meeting where an operating agreement is adopted. We will provide you with the proper operating agreement template. Member certificates can be distributed to members and these transactions should be recorded in the LLC ledger. All of this information can be maintained in a limited liability company record book, which is included in our provided standard corporate kit.
It only takes four days to incorporate your company.
Formacompany has over 20 years’ experience forming companies in the USA and across the world, and our staff will be available to offer advice and support through the entire incorporation process, from initially selecting a suitable company name through to finally commencing taxable activities.
What you need to set up a Limited Company in Delaware
To begin incorporation of your exempted company we will require the following:
- Your company name
- The full name, date of birth, address and nationality of all directors
- The full name and address of all shareholders
- Intended business activities
Documents you are required to provide:
- Proof of identity (passport, national identity card, photographic driving licence)
- Proof of residential address (gas/electricity bill or credit/debit card bank statement dated within the last three months)
All exempt companies must have a registered agent and a registered office. The registered office must be a physical address in Delaware as it is where documents may be legally served on the company and it serves as a local contact for the Secretary of State and other government agencies. The registered office receives notice of any suits, tax notices, etc. and then forwards them to you.
If your registered address is in Delaware you can act as your own registered agent, if you will be based outside Delaware, Formacompany can provide you with a registered address as part of our Corporate Administration Service.
Share Capital requirements
- There is no minimum capital requirement.
- Only one shareholder, of any nationality, is required.
Ready Made Companies
- We have shelf companies in Delaware, with standard Memorandum and Articles designed to permit most general activities, currently available; making it possible to commence business at very short notice. Our ready made companies are in good standing, are not the subject of any insolvency proceedings and have not entered into any contracts or engaged in any business activities.
What you receive after setting up your new business
- Minutes of the first inaugural meetings
- Copies of the Memorandum of Association and Articles of Association
- Original Certificate of Incorporation
- Share Certificates for each shareholder specified, plus two blank certificates
5 Advantages to Setting up a Limited Liability Company (LLC) in Delaware
- Delaware provides a complete package of incorporation services. Businesses choose Delaware because it provides a complete package of incorporation services including modern and flexible corporate laws, a highly-respected Court of Chancery and a business-friendly State Government.
- It is not a requirement to be a US citizen or US resident to incorporate in Delaware. Many US non-residents are incorporating in Delaware as there is no citizenship or residency requirement for shareholders or directors.
- Incorporating in Delaware requires minimal physical involvement. When incorporating your Delaware Company it is not a requirement to visit Delaware nor is it a requirement to have premises in the state.
- A Delaware company requires minimal infrastructure. It requires a minimum of one director and one shareholder to incorporate an LLC in Delaware; these can be of any nationality, need not be resident in Delaware and can be the same person. Corporate shareholders are permitted.
- Delaware LLCs doing business outside of Delaware benefit from low tax incentives. Companies that conduct no business in Delaware with non-resident members are generally not subject to state income tax, companies doing business outside of Delaware pay no corporation tax.
Important Information about incorporating a Limited Liability Company in Delaware
- More than 850,000 business entities have their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 63% of the Fortune 500. Businesses choose Delaware because it provides a complete package of incorporation services including modern and flexible corporate laws, a highly-respected Court of Chancery and a business-friendly State Government.
- Formacompany offers two sorts of company structures in Delaware, the Corporation (Inc.) or the Limited Liability Company (LLC.). We only offer ready made packages as the legal formalities and transfer of documents is generally quicker and simpler.
- There are no restrictions on the ownership of C Corporations but, with S Corporations the shareholders must be US citizens/ residents.