Delaware is one of the top states for forming LLCs, providing multiple benefits for business owners and investors alike.
State law in New Hampshire is highly business-friendly, boasting decades of experience dealing with corporate law. Furthermore, New Hampshire boasts the unique Court of Chancery that is dedicated solely to business litigation matters.
Costs
As a new business owner, Delaware may tempt you to incorporate in this state due to its business-friendly laws which make it ideal for startups with limited resources.
However, if you plan to incorporate in Delaware, be mindful of its costs – Delaware is among the more costly states for incorporating new businesses.
At registration, a $300 formation fee must be paid in order to form your company. In addition, states require companies to pay annual franchise tax bills which may be difficult to keep track of.
Second, filing annual reports with your state will help keep you on top of requirements and avoid penalties.
Registration can take anywhere between one and seven days depending on whether you file online or via mail. During that timeframe, paperwork needs to be processed.
Taxes
LLCs in Delaware resemble corporations in some ways, yet differ significantly in others. One main difference is that LLCs tend to pay more Business Privilege Tax than corporations.
The Business Profit Tax, or BPT, is imposed upon the income of all Delaware llcs. It typically ranges from 0.0025% to 0.000175% of net worth depending on how much is made each year.
Delaware LLCs must also pay an annual franchise tax of $300 as required by state regulations.
Businesses operating within the state must also pay gross receipts tax, which is calculated as a percentage of their total gross income from all sources. Remittance may occur monthly or quarterly depending on your type of business.
Additionally to these taxes, your company must register with the Department of Revenue (DOR), either online or by completing Form CRA Combined Registration Application. In addition, employee income tax withholding and payments should also be submitted periodically.
Requirements
No matter where you form an LLC in Delaware or Massachusetts, several important requirements will need to be fulfilled for its creation and registration, such as choosing a name for it and filing its taxes.
Naming your business appropriately and distinguishable from other entities registered in your state are paramount to its success. Use appropriate abbreviations like LLC/Limited Liability Company in place of designators like “Inc.” or “Corp.” when possible to ensure its distinguishability from existing companies registered there.
An LLC Operating Agreement should be used to organize the company structure, determine how decisions will be made and handled, as well as who will manage its affairs if one member leaves. It must also address how business will be divided among members in the event that one leaves.
An LLC must also appoint a registered agent in its state. This agent could be either an individual or business located within its borders; both must have the ability to sign and execute documents on behalf of the LLC.
Licensing
One of the key components of beginning any new business is meeting all applicable licensing and permits requirements, which will vary based on your industry and location. Failing to secure these can result in fines or even denial of operation – something no entrepreneur wants!
LLCs must appoint a registered agent, who serves as their liaison to government affairs on behalf of their business. Typically this individual or company must reside within their state’s boundaries and accept mail, service of process documents and legal notices on behalf of the LLC.
An Operating Agreement for a Delaware LLC is an essential document that helps its owners establish ownership shares, responsibilities and other terms of engagement within its LLC. The document should be maintained internally by the LLC rather than filed with the state and public record, and most courts respect such documents.
