Delaware corporation can bring many advantages for your small business, including liability protection and tax advantages.
Delaware is widely recognized for its pro-business laws, making it an attractive state to set up companies in. Venture capitalists and angel investors frequently opt for Delaware when setting up new companies.
Cost
Delaware offers business owners many advantages for setting up operations here, from strong asset protection laws and low taxes to an easy registration process.
However, you should keep certain drawbacks of incorporation in mind before choosing this route. One such drawback is its expense – Delaware LLC formation can be expensive.
Dependent upon the nature and industry of the business being formed in Delaware, formation fees can range anywhere from hundreds to thousands of dollars.
Maintaining an LLC requires annual franchise tax and registered agent fee payments to the state. These expenses must be covered each year to remain operational.
These fees may not be prohibitively costly, but they can hinder a small business in meeting profitability goals while adhering to legal compliance, distracting its owners from their main goals for creating and running their companies.
Taxes
Delaware LLCs stand out among other business structures by offering various taxation options suited to their members. You may elect between taxing as a pass-through entity, C corporation or S corporation depending on your particular needs.
Another key advantage of incorporating in Delaware is that your business will not need to pay state sales tax or gross receipts tax if it does not sell goods or services within its borders. You may still be required to file quarterly or monthly Gross Receipts Tax returns depending on its revenue levels and activity levels, however.
Even with its numerous advantages, Delaware LLCs may not be best for most small businesses that are just starting up and have less than 10 employees. Due to dual registration costs and franchise taxes as well as other responsibilities involved with owning multiple LLCs simultaneously. It would be prudent to consult an experienced legal representative regarding what benefits this form of incorporation could bring your organization before considering creating one.
Requirements
As part of starting a business, it’s essential that you comply with all state requirements. One of your first tasks will be filing a certificate of formation with the state government.
Establish a registered agent and acquire an occupational license if you operate within a regulated industry as part of incorporating your business in Delaware. These are among the common requirements you’ll need to meet for successful incorporation.
Registered Agents are third parties designated to represent your LLC in state court proceedings and help keep track of records for your business while receiving legal notifications on its behalf.
No matter if you decide to handle it yourself or seek legal advice, make sure that whichever service you select provides one year of free registered agent services and multi state support if your business grows beyond what was anticipated.
Licensing
LLCs are an increasingly popular form of entity for businesses, offering personal liability protection with minimal reporting requirements and tax advantages not available through C corp structures.
Delaware is an ideal location to establish an LLC, as its court of chancery specializes in corporate matters, reducing legal risks for entrepreneurs.
Delaware does not mandate you to disclose the identities and addresses of your members on public records, providing a valuable safeguard to ensure their privacy and safety.
As part of the process of creating an LLC, the first step will be naming your company. This could either be something specific to your industry or an “doing business as” (DBA) name that does business under.
