No matter your business size or scope, forming a Delaware LLC can help you reach your objectives. Forming is effortless and low-maintenance costs make it the go-to choice for business formation – just one of many reasons why.
Delaware LLCs are easy to start up and offer limited liability protection for their owners. In case a lawsuit is filed against the LLC, judgment creditors cannot seize members’ personal assets (like houses or cars).
Limited Liability
Limited liability companies (LLCs), an amalgamation of corporations and general partnerships, have seen tremendous growth in recent years. Many entrepreneurs are finding success with this hybrid structure.
If you’re starting a small business or managing significant real estate properties, Delaware could be the ideal jurisdiction for incorporation. There are numerous reasons why incorporation may be beneficial for you and your venture.
One major reason is the limited liability provisions offered by Delaware LLCs, which shield members’ personal assets from the debts incurred by the business.
Another advantage of Delaware is that it does not tax intangible income such as patent and trademark leases. This makes it attractive to international businesses, particularly non-citizens who don’t operate within the US.
Members of an LLC have the power to set their own terms for operating and managing the company through a contract known as an Operating Agreement. This document is legally binding and enforceable by all those who sign it.
No Annual Reporting Requirements
LLCs formed in Delaware do not need to file an annual report. Nevertheless, these business entities remain subject to other tax obligations within the state.
The franchise tax is the most significant tax obligation of all, costing $300 that must be paid by June 1. A late fee of $200 applies for late payments, so it’s best to make your payments on time.
Delaware LLCs must file the Form Foreign Bank And Financial Accounts Report (FBAR), which is mandatory for US persons engaged in foreign financial activities or businesses with foreign bank accounts. Learn more about this form and other essential info at Must-Know Things.
Corporations, however, must file an annual report and pay a $50 filing fee along with a franchise tax of $10 per employee. Domestic corporations and foreign corporations registered in Delaware must do this by March 1. Nonprofits do not need to pay this tax.
One-Stop Licensing Process
If you plan to operate a business in Delaware, there are certain licensing requirements that must be fulfilled. Some of these standards are the same as those required elsewhere, while others will vary according to your industry.
Registering your LLC with the State of Delaware through their One-Stop Business Registration and Licensing System is a relatively quick and painless process that involves creating an account and filling out online forms. Although it takes up to 10 days for processing your application, this system ensures a speedy experience for you.
Delaware requires a business license for all businesses with a significant physical presence (known as “nexus”) or employ employees there. This includes owning or leasing property, hiring workers, and selling products or services to consumers within the state.
The cost of a Delaware business license varies based on the type and number of locations. For starters, each location costs $75 annually; additional locations range between $25 and $450 annually.
Taxes
One of the primary reasons small business owners opt for Delaware as their home state is that it provides numerous tax advantages, particularly to investors.
The primary tax advantage of incorporating in Delaware is that your company does not need to pay income or gross receipt taxes. You do, however, need to register with the Division of Revenue and pay a $300 LLC franchise tax annually.
Another advantage of forming in Delaware is its dedicated court for business cases, the Court of Chancery. This makes the resolution of lawsuits quick and efficient.
Delaware LLCs may be taxed as partnerships or corporations, depending on which option they elect. Those who elect to treat their Delaware LLC as a corporation are entitled to certain tax planning strategies not available to those taxed as partnerships – including claiming the 20% deduction for qualified business income.
