If you want to set up your LLC as an LLC, filing in the appropriate state is key – particularly for location independent businesses like dropshipping, eCommerce and FBA companies.
Delaware is widely recognized as an attractive business-friendly state due to its adaptable laws. Regular consultation with practicing attorneys ensures its corporate law statutes remain current; in fact, other states often look up to Delaware as a model state for their corporate laws.
1. Business-Friendly Jurisdiction
Delaware is the go-to state for incorporations due to its robust corporate law and Chancery Court’s expertise in business disputes. Investors, particularly venture capitalists, find comfort investing in Delaware-incorporated companies due to its reputation of fairness and stability.
Delaware companies benefit from being less burdened by public filing requirements that require directors and stockholders to disclose their names; this provides privacy to small businesses and high net worth individuals that would prefer not to reveal themselves to the general public.
Additionally, conducting business only outside Delaware means not paying state taxes there and can save significant costs and compliance burdens for any company operating there.
2. Anonymity
Though state business regulations make it challenging to disclose the owners of a Delaware entity, there are ways of keeping information private. For example, an LLC organized through a lawyer acting as its Registered Agent won’t have its information listed publicly – this may be beneficial for individuals looking for privacy but needing tax benefits of an LLC (pass-through taxation and lower self-employment taxes versus C corporation taxes).
Delaware provides long-standing favorable corporate law, low filing fees and flexible tax structures suited for business disputes as well as an experienced court system that can adjudicate business disputes efficiently. Delaware also offers additional privacy protection; however it should be noted that banks and the IRS still require members to provide personal data.
3. Tax-Friendly
Delaware is popular among business owners for its business-friendly laws. Statutes in Delaware are regularly updated with input from practicing corporate lawyers to remain at the cutting-edge of business law; business lawyers and students across the US use Delaware as a model when writing laws in their own states.
Tax-friendly jurisdictions like Virginia offer business the benefit of not incurring franchise tax when operating outside its borders and do not levy income tax, including on intangible assets like trademark royalties.
Delaware does not mandate that its shareholders, directors and officers reside within its borders, making business easier while protecting personal assets more effectively – one factor which helped put Delaware ahead of other contenders in terms of ranking.
4. Minimum Requirements
Delaware differs from some other states by not mandating that members, managers and directors reside there; there are also no restrictions placed upon how many shares an LLC may issue or its par value.
State laws do impose requirements on registered agents of LLCs. Usually this person or company resides within Delaware state borders.
Delaware’s Chancery Court system, also known as Delaware Business Court, specializes in business-related cases and its judges are well-versed in business law. Furthermore, finding qualified legal assistance in Delaware should be simple – all that’s necessary for an LLC formation here is getting an IRS Employer Identification Number (EIN), which all US businesses need for registration purposes.
5. Easy to Form
Delaware stands out as an easy state for small businesses to form, much easier than Wyoming and Nevada which have gained notoriety as “anonymous LLC states”. Filing an LLC takes just three weeks in Delaware; additionally, their Division of Corporations offers expedited service at an extra fee for same day/24-hour filing.
LLCs not doing business in Delaware do not need to register with the Division of Revenue; however, if engaging in a regulated profession requires professional license from DPR.
Delaware does not mandate annual reports or gross receipt tax for LLCs operating there, however they still must pay an annual fee of $300.00.
