Delaware Corporations LLC: Everything You Need to Know
Delaware corporations LLC come with a certain number of advantages over businesses registered in other states.3 min read
2. Delaware Entity Basics
3. Taxation Options
4. Delaware LLC
Delaware Corporations LLC
Delaware corporations LLC come with a certain number of advantages over businesses registered in other states. Many view Delaware as a safe business atmosphere due to its favorable business and legal laws. Moreover, Delaware has been designated as the most suitable legal climate for 10 years straight, according to the U.S. Chamber Institute for Legal Reform. Due to such benefits, more than 50 percent of public companies in the United States, including 65 percent of Fortune 500 businesses, are based in Delaware.
In addition, Delaware has been the best state in terms of incorporation since the twentieth century, and roughly one million businesses have created LLCs or corporations in the state. The state government and the people of Delaware know the importance of maintaining the state’s lucrative business laws, making sure the state remains current and attracts additional business in the future.
Additionally, Delaware has its own business court called the Court of Chancery, where those in the business community can settle legal disputes. Judges issue a verdict instead of juries.
Corporate registration in Delaware yields other advantages in the form of:
- Corporate prestige
- Raising of capital via investors
- Ownership transfer flexibility
- No inheritance taxes on corporate Delaware stock
Delaware Entity Basics
A Delaware business is an entity created under Delaware’s state codes. When it comes to corporations, a business structure maintains its uniqueness and gives owners various choices, which depends on the type of business chosen. It’s also worth noting that corporations can issue stock to investors, but owners are not obligated to do so. Regardless of whether a corporation issues stock, the entity must submit annual reports to Delaware authorities by March 1, and the report should provide essential details about the business, including:
- Physical address
- Business location
- Address of all directors or at least one officer
If you choose to create a corporate entity, your default classification will be C status. Such a status mandates that the corporation pays taxes on profits annually, and the business can dispense profits to shareholders in the form of dividends. When shareholders receive dividends, they also pay additional taxes on the money received. Therefore, corporations must pay a business income tax and individual tax at the shareholder level, otherwise known as double taxation.
Corporations with less than 100 shareholders may choose an S classification by petitioning the IRS via Form 2553, but you must do so within 75 days of the creation date. The S classification itself does not represent a separate corporate entity. Instead, it is a special tax classification given to a corporation by the IRS.
- Note: Non-U.S. citizens cannot obtain S corp classification.
Another tax option for corporations is tax-exempt status, turning the corporation into a non-profit entity. To get an exempt status, the business must file Form 1023 and serve in a charitable, public, or religious capacity.
Delaware mandates little information when filing for an LLC. Also, LLC registration does not mandate the personal addresses and names of managers/members. All states require that LLCs appoint a registered agent to be the representative of the company. A registered can be the following:
- Company attorney
Under ordinary circumstances, obtaining LLC member names can be difficult because they do not need to be disclosed to the public. With that, registered agents must release information if required by law, including transactions involving the business and any organization member.
When filing an LLC, you should also obtain an employer identification number, or EIN. An EIN is what the IRS uses to designate and tax your business accordingly. The IRS labels single-member LLCs as a disregarded entity and multi-member LLCs as partnerships.
- Note: Corporations are more advantageous if you wish to attract investors or raise capital via ownership selling.
With that, registering an LLC in Delaware is the easiest process. The Division of Corporations of Delaware mandates minimal documentation and information during the registration process, and you would use a Certificate of Formation to create your LLC.
The little amount of information required allows for an easier registration process while safeguarding your personal information and identity. This also means that your information does not go on public record. Also, Delaware LLCs do not have to have file annual reports, ensuring that your information remains secure.
For more information on Delaware corporations LLC, submit your legal inquiry to our UpCounsel marketplace. UpCounsel has some of the best lawyers in the nation that will help you determine if a corporate or LLC structure is the right fit for your business. In addition, they will guide you through the necessary filing procedures when you choose to register a business entity in Delaware.