If your Maryland LLC is considering doing business in Delaware, the state offers numerous advantages to entrepreneurs such as low taxes and proximity to major East Coast metropolitan areas.
Before forming your Delaware company, there are a few things to be aware of. For instance, select a name unique to your venture and verify its availability with the Division of Corporations.
Taxes
Many entrepreneurs assume that incorporating their business in Delaware will save them costs, provide access to sophisticated corporate law, and other advantages. However, this may not be the best strategy for every small business.
Delaware may be known as an ideal state for incorporation, but there are plenty of taxes to contend with. For instance, Delaware imposes an 8.70 percent corporate income tax and a gross receipts tax.
Furthermore, all single-member and multi-member LLCs must pay an annual franchise tax to the state on June 1. This fee can be paid online on or before that date.
Franchise taxes can be a costly burden for some businesses. To determine if it makes financial sense for your business, weigh the additional expenses against its advantages.
Registered Agent
As a small business owner, you likely invest a great deal of effort into running your company’s operations. This includes hiring employees, getting business insurance and investing in marketing and sales tools.
However, it’s essential that your small business remains compliant with relevant laws. One way of doing this is by designating yourself, another member of the company or a third-party as your registered agent.
A registered agent is a business that receives and forwards legal documents on behalf of a company, as well as notifying the state of any changes to that registered agent’s contact information.
To guarantee the smooth running of your registered agent, ensure they are reliable, accurate and consistent. They should be physically present at the registered office during normal business hours to ensure all hand-delivered legal documents receive due attention.
Annual Reports
As a Delaware maryland LLC, it is essential to monitor annual reports. Not only do they keep your company’s records up-to-date, but they also serve as legal documentation of your entity and its activities over the past year.
Many states require companies to file annual reports with basic information about your company’s address, ownership/officers, registered agent and other details. These documents can be submitted online through the secretary of state website or sent by post.
Delaware requires domestic corporations to file an annual report and pay a franchise tax. Both of these documents must be filed no later than March 1 of every year.
Failure to file an annual report and/or pay the franchise tax can result in late fees and penalties. Depending on the type of entity, corporations (domestic only), nonprofit organizations, LLCs, LPs or general partnerships will be charged a $200 late fee plus 1.5% interest each month no report or tax is filed.
Foreign Qualification
Many states require foreign qualification requirements for businesses that have formed in one state but wish to conduct operations elsewhere. These standards typically apply to LLCs and Corporations.
You may need foreign qualification for your LLC if you have hired employees, shipped products to the state, or have a physical presence there. Different states have different criteria that determine what constitutes “doing business” within their borders; so it’s wise to consult an attorney before starting operations in another jurisdiction.
Foreign qualification can be a complex and time-consuming process, depending on your individual situation. Utilizing an online service that handles foreign qualification for you can save you valuable time, money and hassles. They file the LLC Registration Form with the state on your behalf and often provide other services as well – usually at a nominal charge to expedite the procedure.
