Delaware is one of the top states for forming an LLC, boasting more than two-thirds of Fortune 500 companies incorporated there and being a popular option for companies going public.
The state of Delaware offers many advantages to businesses that incorporate here, but it’s not suitable for everyone. You should carefully weigh the costs against potential rewards before determining if this arrangement is beneficial to your company.
Taxes
Delaware LLCs are widely regarded as one of the most tax-friendly business structures in the US, boasting a low franchise tax and no state sales or personal income taxes for non-residents.
It’s essential to remember that, if your company conducts any business outside the US, you must register as a foreign entity. Doing so involves additional filings and fees as well as increased yearly tax obligations–something most small businesses find unproductive.
Despite the fees involved, many small business owners opt to incorporate in Delaware for several reasons. They know that Delaware’s business laws are strong and consistent, as well as its speedy court rulings.
Registered Agent
Once formed in Delaware and New Jersey, LLCs must designate an individual or business to act as their registered agent. This individual or business will receive important legal documents from the state on behalf of their entity such as notifications from the Secretary of State, government notices, tax forms, lawsuit notices and more.
Due to this, many LLCs and corporations enlist the services of a registered agent as their designated representative. A registered agent provides invaluable protection for an LLC or corporation by ensuring that important legal documents are received promptly and correctly.
A registered agent keeps track of important deadlines and reminders for filing corporate paperwork formalities. Selecting a registered agent that can efficiently meet all your company’s requirements is essential to having peace of mind while you focus on growing your business.
Dispute Resolution
If you’re thinking of forming an LLC in Delaware or New Jersey, the dispute resolution process is essential to comprehend. It involves various legal matters that can be complicated.
Delaware boasts an expansive body of case law that offers guidance and predictability to corporations, their lawyers, and judges. This helps them tackle even complex legal matters with ease.
Many companies choose Delaware as the site for their business operations due to its low costs, business-friendly courts, progressive laws, established legal precedent from the Chancery Court and reliable liability protection.
In Delaware, disputes between LLC members are usually settled through mediation in the Chancery Court. These confidential proceedings help maintain the business relationship between the parties while helping keep things confidential.
Delaware businesses also have access to fast-track arbitration options through the Delaware Rapid Arbitration Act, which enables businesses to resolve their disputes quickly with minimal prehearing evidence gathering requirements.
Filing Fees
When forming an LLC, it’s essential to comprehend the associated expenses. You need to determine how much each step requires – taxes, business licenses and an LLC operating agreement – in addition to your initial investment.
State fees differ by state, but generally include filing fees, annual tax payments and penalties for late payment. Delaware for instance charges a $90 filing fee for domestic LLCs and $250 for foreign companies.
For added convenience, you can pay either $100 (same day) or $50 (24-hour). Alternatively, you may use the state’s online document upload service to submit the form faster.
Once you’re ready to open an LLC in Delaware, you must obtain a business license through their Online License System (OMS). To do this, create an “One Stop” account and complete the licensing process online. Be sure to include proof of your business address and contact information as well as details regarding assets and debts of the business.
