If you’re considering the formation of a Limited Liability Company (LLC) in Delaware, its multiple advantages could make it the better choice over other business entities. One major reason is its flexibility for customizing corporate governance rules.
Due to the state’s longstanding policy of freedom of contract, an LLC operating agreement allows you to set out the structure and terms of the business.
Liability protection
Forming an LLC is the surest way to protect both yourself and your business, and Delaware is a popular jurisdiction for this purpose, hosting over one million business entities that call this state home.
Limited Liability Companies (LLCs) are hybrids between corporations and partnerships that offer enhanced protection to their owners from liability. Their owners enjoy one of the strongest levels of protection available anywhere in the U.S.
In such an instance, if a member or manager of an LLC breaches his fiduciary duty by illegally or negligently damaging another’s business relationships, assets and accounts belonging to the LLC could be taken over to pay any resulting judgments.
LLCs can also be established so as to offer limited liability protection for its members and managers. Delaware law permits this option and permits an LLC’s operating agreement to stipulate limits on managers’ fiduciary responsibilities.
Flexibility
Delaware LLCs are an excellent business entity choice for small business owners due to their flexible management and ownership structures, as well as many of the same benefits offered by corporations – such as liability protection and tax advantages.
Though LLCs tend to be highly flexible entities, there may still be certain restrictions placed upon their Shareholders, Directors, and Officers by statute or their LLC’s own Bylaws that limit what these persons may do – for instance selling or transferring stock.
As part of an effort to address this pliability, Delaware General Corporation Law recently revised its statutes so that boards of directors may delegate certain fiduciary duties to management.
Amendments to the Delaware General Corporation Law allow limited liability companies to delegate authority for issuing capital stock, rights or options to acquire shares of capital stock, to management instead of the board of directors, thus increasing flexibility when awarding equity awards and furthering freedom of contract as per statutes.
Confidentiality
Delaware LLC governance offers an expansive confidentiality structure to protect both members and managers from public records, making this ideal for entrepreneurs or small business owners who prioritize privacy in the workplace.
As opposed to corporations, an LLC doesn’t need to disclose information regarding ownership in public documents and offers greater flexibility regarding management and ownership structures. Furthermore, the LLC Act permits directors/members to waive fiduciary duties provided that this is included in an operating agreement.
Delaware stands out as an ideal state for starting businesses due to its flexible management and ownership structures, favorable corporate laws, minimal filing fees and low taxes.
Tax benefits
Delaware LLCs can be an excellent way for business owners to reduce their tax liabilities. As hybrid entities that combine both corporations and partnerships, they provide numerous advantages over traditional forms of organization.
First and foremost, an LLC does not pay federal taxes at an entity level like a corporation would; rather, profits and losses are passed-through directly to individual members who then pay their own individual taxes.
Delaware does not tax the income of foreign LLCs, providing a substantial savings opportunity for entrepreneurs residing outside Delaware.
Delaware makes incorporation easy, with few requirements that need to be fulfilled when setting up an LLC there. You can get it up quickly and cost-effectively!
