A Guide to Start an LLC in Delaware

We know how beneficial it is to form an LLC. The limited risk, differentiation of personal risk and professional risk and lesser chances of business bankruptcy make it a preferred business route for most companies. It can be described as a hybrid between partnership and corporation. It provides protection, guarantee and has liability protection of a corporation. That is the liability is limited to the investments you put in. this flexibility is what makes it a chosen route over others. The ease of administration and inherent flexibility are bonuses. In LLC, many entities take advantage and prefer the Delaware services. Let us see why in the article.

What is a Delaware Series LLC?

The Delaware LLC is one that provides for an independent and separate liability regarding each asset within each series. This is without creating a separate LLC for each asset. In this one can save on annual entity taxes and registration fees. In a Delaware entity search, one should look up and make sure the name is new and not used by any other existing company. In this one trustee should be a Delaware resident or have an interest in the principal place of business.

Key Elements of a Delaware LLC

  • Unmatched contractual flexibility
  • Non-resident aliens of US can avoid being taxed in the US
  • Increased protection against creditors
  • Ease of operating agreement filing
  • Limited personal liability

Why should one choose Delaware?

Delaware is hands down the most popular state for forming a corporation. This is because of the following reasons-

  • Corporation laws offer great flexibility
  • The terms of mergers, takeovers, stock, and investments are clear
  • The familiarity is always preferred by investors
  • Corporate friendly laws
  • Quick and straightforward process
  • Does not collect royalty tax payments and other intangible assets
  • Time-saving as one has defined packages

What to do before you incorporate in Delaware

  • Choose the type of business entity that you want to operate in (LLC)
  • Identify the right business name that has the right requirements
  • You should choose a name that has not been used. You can look up the Delaware Secretary of state records.

Advantages of incorporating in Delaware

  • Large businesses have great benefits as compared to smaller ones
  • No personal income tax for those who are not residents
  • They have flexible business laws
  • They have a court that hears business cases and uses judges
  • It has good legal proceedings for shareholders

Disadvantages of Delaware incorporation

  • Smaller entities have lesser benefits
  • To hire a professional, it may cost you
  • Franchisee fees can be high
  • You have to comply with the yearly reporting requirements

How to incorporate in Delaware

After choosing the right business name and looking up the register, you can start the actual process of incorporation. This includes-

  • Filing a certificate of incorporation with the secretary of state
  • You should have specific information like business name, shares, types of shares, economic purpose, information regarding registered agent, names and address of the members and incorporators.
  • Recording the purpose of business and filing legal norms

Prohibited Elements while incorporation

Delaware law states that corporation names should and cannot include the following words-

  • Bank
  • Trust
  • University
  • College

These can be incorporated on prior approval of the respective Commissionerate.

In addition, a name cannot have any vulgar, degrading and unacceptable words. It means one can choose a distinguishable name that does not have any profanity.

What are the Delaware LLC fees and taxes?

LLCs do not have to file an annual report but they have to file an annual tax. This is a cost of approximately $300. They are to be due or paid before or on June 1 every year. This penalty for late or non-payment is $200 and this interest can accrue up to 1.5% per month. The tax is a minimum of $175.00 for authorized corporations.