Delaware Companies Act: Everything You Need to Know
The Delaware Companies Act pertains to Delaware corporate law. A corporation that’s registered legally in Delaware may conduct business in the state.3 min read
The Delaware Companies Act pertains to Delaware corporate law. A corporation that’s registered legally in Delaware may conduct business in the state. Delaware began to adopt laws in the 19th century, making amendments that would attract companies away from New York. Delaware has also become a prime choice among LLC and corporate owners alike.
Over the course of time, Delaware became a state that has a business-friendly reputation. Many business owners have chosen to register in Delaware, especially through the incorporation route.
Delaware incorporation has grown popular among U.S. businesses, and has laws that are friendly to the business community. This also means that the creditors and banks received greater freedoms when it comes to charging higher interests for loans. Such laws may be transferred over to other states, giving businesses a national blanket.
Delaware also has a Court of Chancery, which is a business court designed to settle business-related disputes. The great thing about such a court is that a judge decides on a case instead of a jury that’s not adept in the complexities of business law. Moreover, the Court of Chancery has years of precedent in business cases, which allows you to know whether your case is worth pursuing in front of a judge.
Delaware’s track record as a premier jurisdiction for business law and cases is well-known throughout the nation. Recently, however, Delaware has become a leader in establishing alternatives to the traditional business form.
Advantages of DLLCs
When it comes to Delaware’s Limited Liability Company Act, this governs the alternative business type known as a Delaware Limited Liability Company (DLLC). The DLLC has become an entity choice for advisors, investors, and owners. Additionally, a DLLC may enter into any lawful company activity, including the following:
3.Developing real estate
4.Managing and holding intangible property such as investments or securities
5.Acting as a special entity in financing transactions
The primary advantages of a DLLC entails an avoidance of double taxation. Double taxation occurs when a business must pay business taxes and personal taxes that members or owners must file on their personal tax returns. DLLCs can be set in any manner that owners prefer. Such flexibility can make the DLLC preferable to a traditional business. Moreover, a DLLC is also preferable over other entities, such as general and limited partnerships.
Benefits of a DLLC
One of the most appealing parts of a DLLC would be the limited liability that’s afforded to DLLC operators and owners. The DLLC Act usually refers to DLLC owners, also called members. DLLC members can also be managers as well. However, they do not have to become managers, and this opens the door for other non-managerial entities or people to enjoy DLLC benefits. DLLCs may engage in lawful business activity as any other legal entity.
With that, limitations regarding personal liabilities and a broad scale of indemnification compare favorably with protection enjoyed by the following parties:
When it comes to contractual flexibility, the basic angle of the DLLC Act is to allow parties to define a business relationship in a limited liability company contract, and to offer rules only for those issues on which parties have failed to agree upon. A noted policy of the DLLC Act is to give best effect to the notion of principle of agreement and to the enforceability of LLC contracts. This vital policy means that parties may predictability maintain and create relationships that suit their business interests.
In an LLC agreement, parties may offer various classes of managers or members (with all classes enjoying various duties, powers, and rights, including economic rights, voting rights, or managerial rights). When it comes to DLLCs, however, you must remember that you need to choose a registered agent. A registered agent is a person who accepts official paperwork and court documents on your company’s behalf.
The documents can come in the form of process of server documents and any official state documents from authorities. The registered agent should be someone who resides in Delaware and has a Delaware-based physical address that operates during normal business hours. If you are out of state, you may hire a registered agent service company to act as your agent.
If you need more information on the Delaware Companies Act, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.