Delaware Limited Liability Company Act: Everything You Need to Know
The Delaware Limited Liability Company (DLLC) Act creates benefits for owners and companies that include avoidance of double revenue taxation, and more.3 min read
2. Limited Liability
3. Formation is Easy
4. Business Location Can Be Anywhere
6. More Information
What is the Delaware Limited Liability Company Act?
The Delaware Limited Liability Company (DLLC) Act creates benefits for owners and companies that include avoidance of double revenue taxation, unmatched contractual flexibility, and limited legal responsibility. A DLLC could be structured in nearly any way that fits an enterprise’s needs. This flexibility could make a DLLC preferable to a normal company and, in most circumstances, preferable to other various business entities such as restricted partnerships or normal partnerships.
A limited liability company, also known as an LLC, is a business entity designation that offers its members incredible flexibility and protection. The LLC designation offers its owners similar benefits to the protection of corporations while also adding a lot of the tax benefits that are afforded to partnerships and sole proprietorships. LLCs can be thought of as hybrid business entities because of their flexibility.
Delaware statutes governing limited liability companies (LLCs) can be found in Chapter 18 of Title 6 of the Delaware Code. It provides, among other things, laws relating to the formation, management, governance, mergers, and dissolution of LLCs. LLCs are largely ruled by contract.
One of the most interesting facets of the DLLC is the restricted legal responsibility afforded to DLLC owners and operators. The DLLC Act usually refers to owners of a DLLC as “members,” and to individuals designated to handle the business and affairs of the entity as “managers.” Members of a DLLC could be managers of the DLLC, thus opening the door for buyers or different non-managerial individuals or entities to benefit from the advantages of the DLLC. The DLLC Act supplies that no member or supervisor is liable personally for any debt, obligation, or legal responsibility of a DLLC.
Formation is Easy
If you want to form a Delaware LLC (DLLC), you must have: 1) an LLC agreement between member(s) which does not need to be written and (2) a certificate of formation submitted to the Delaware Secretary of State.
Whereas the certificate of incorporation is required solely to set forth the title of the DLLC, the name and address of the DLLC’s registered agent, and registered workplace in Delaware; it could additionally include every other issue that the members decide to incorporate therein.
Business Location Can Be Anywhere
Just because you form a DLLC doesn’t mean you have to conduct business operations in Delaware. In fact, all you need is a registered agent and registered office in Delaware. If you’re looking for a registered agent who has a Delaware office, there are plenty of viable options.
Other than having to pay an annual franchise tax, which is payable to the State of Delaware, a DLLC isn't obligated to pay taxes both to the U.S. federal government and to the State of Delaware solely because the DLLC is created under the legal guidelines of Delaware. On the whole, a DLLC might grow to require revenue taxation from the State of Delaware if it conducts business within the State of Delaware or if it receives revenue from a source within the State of Delaware. Equally, a DLLC might grow to require revenue taxation from the U.S. authorities if it conducts business in the U.S. or it receives revenue from a source in the U.S.
Tax benefits are one of the biggest reasons to consider forming an LLC. You are even able to pick which tax designation you want with the IRS. For example, if you want to be taxed like a sole proprietor or a partnership, you will be taxed through your individual tax return without having to file a business tax return. If you tax your LLC in this manner, you’ll avoid being taxed twice, as corporations are. Corporations are forced to pay taxes on their profits and again on the income paid to their members. LLCs are able to avoid double taxation by filing like a partnership or sole proprietorship.
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