For legal and financial activity in Delaware, businesses require an Employer Identification Number (EIN), which the IRS uses to oversee registered entities’ finances.
Delaware LLCs provide double-way liability protection unavailable in other entity types, making it highly sought after among both owners and investors alike.
Articles of Organization
Articles of organization are key components of setting up a Delaware LLC. They outline essential details about your business, such as its place of operation, registered agent (someone available during regular business hours to accept service of process), and management team.
Use an attorney-drafted form or create your own. Make sure the form includes space for the name and signature of an organizer who has authorization from your company to sign on its behalf.
For your company to qualify as limited liability, it must demonstrate its own legal existence independently from its owners. An operating agreement and opening bank accounts with EIN numbers can assist with this.
Bylaws
Corporate bylaws go beyond simply outlining the basics of your corporation, to set out rules and regulations specific to how it will run internally. Bylaws may address issues like how the corporation will be run, who makes decisions, profit distribution among shareholders etc.
Bylaws should contain any provisions not in conflict with law or your certificate of incorporation, such as those related to membership rights, management structure, voting procedures and transfer restrictions (as detailed by Delaware Code SS109). Northwest can prepare a template bylaw that you can then customize according to your specific needs; we will also explain its implications in order to ensure your company complies with relevant legal obligations.
Shareholders
Delaware corporations must have shareholders. Their corporate bylaws outline policies regarding shareholder and board meetings, conflicts of interest, and other pertinent issues. While not required publicly available by Delaware state law, corporate bylaws are an invaluable internal document that provide oversight of company processes and build the basis for success.
An LLC Operating Agreement, also known as Limited Liability Company Agreement, provides the framework for an LLC. It includes provisions regarding admission of new Members, transfer of ownership interests and distribution of profits among others as well as management responsibilities.
Details regarding the specific structure of an LLC, such as its management style (member-managed versus manager-managed), membership structures with different economic, reporting and voting rights arrangements or multiple classes of Members with distinct economic reporting rights arrangements – popular strategies among family LLCs that use nonvoting capital to reduce estate taxes through nonvoting capital investments.
Directors
Deliberate operating agreements add credibility and provide protection if ever sued by creditors and other businesses. A strong operating agreement gives companies more credibility with bankers and other business partners as it shows they exist as separate entities from their owners and can help establish who the owners of an LLC actually are.
An operating agreement can include provisions that allocate various economic, reporting and voting rights among members, providing flexibility to tailor it specifically to each company’s investment requirements.
An additional unique aspect of LLC structures is allowing Members to waive fiduciary duties of Managers. This could give management more freedom in running the business while protecting them against possible lawsuits from minority investors.
Officers
Delaware’s freedom of contract legal premise gives founder(s) of an LLC tremendous flexibility when creating an operating agreement to define how their corporation will run, one reason over 70% of entrepreneurs opt to form one here.
Many states mandate separate president and secretary positions within a corporation; Delaware allows any person to fulfill both functions simultaneously. Furthermore, most states forbid two businesses with identical names from being registered within their state; Delaware allows their names to be as similar as desired under its standard bylaws.
Newly formed corporations should include in their certificate of formation an exclusionary clause to reduce personal liability of officers, while established corporations may add this provision into their bylaws.
