The Benefits of Forming an LLC in Delaware

Form LLC in Delaware benefits refers to the unique benefits your business will receive if it is formed as a limited liability company in the state of Delaware. In addition to the many benefits inherent to the LLC, such as limited liability, pass-through taxation, and tax status flexibility, an LLC in Delaware will also receive some unique benefits not available in other states. In fact, along with Nevada, Delaware is the most popular state to form an LLC in if you intend to run a small business or pool your investment assets. It has achieved this status for the following reasons:

  1. Delaware offers two-way protection. In addition to having the strongest limited liability protection for LLCs of any state in the United States, Delaware also lists the “Charging Order” as the only means for creditors to gain reimbursement from LLCs. This means that they can only gain economic reimbursement for debts; they cannot seize control of or liquidate your company.
  2. The Delaware Court of Chancery. This is a court system unique to Delaware that specializes in hearing business disputes. It has an over 200-year history in corporate law, making its expertise much renowned. How the court benefits LLCs specifically, however, is that in it LLC members can file derivative actions against companies or individuals, just like corporate shareholders.
  3. Freedom of contract. Delaware is highly favorable towards enforcing the rights of contracting parties, not only for corporations, but also LLCs. For instance, the Delaware State Legislature in 2010 overturned a Delaware Supreme Court ruling that judged oral operating agreements for LLCs to be unenforceable due to non-compliance with the statute of frauds; thus, Delaware LLCs can use oral operating agreements for their business instead of dedicated written ones.
  4. Confidentiality. Delaware is also very favorable towards those who desire privacy for their personal information. In all states, LLCs must file articles of organization which are made part of the public record; however, in Delaware the addresses and names of the managers or members do not need to be listed. This makes it easier to conceal assets from those trying to discover your wealth or your name. By using a Delaware attorney as a registered agent, you will be concealed from all businesses and people except the IRS.
  5. Series LLC. This is a special kind of LLC available in only seven other states besides Delaware. The series LLC allows you to separate your business assets into a series of cells that are protected from one another in the event of debt or legal action. For instance, if you owned rental properties, poor profitability in one would not drag down the others.
  6. Tax loopholes. There are a variety of benefits to being able to file your LLC taxes in Delaware. For example, if you form an LLC in Delaware but conduct no business in Delaware, you do not have to file a state tax return for the LLC. Or, if you elect to have your LLC taxed as an S corporation, you can save thousands on your self-employment taxes due to Delaware allowing you to split your income evenly between self-employment and “S-dividend” income.
  7. Low formation costs. Forming an LLC is much cheaper in Delaware than in many other states. The filing fee is $250, and for a small company, the annual fees are usually less than $150. There are also no minimum capital requirements to start your business, making Delaware very attractive to startups with few resources or very little capital.
  8. Quick turnaround. In Delaware, it might only take an hour to complete your filing. Additionally, the Secretary of State’s office keeps extended hours for business filing.
  9. Geographic Flexibility. Delaware permits foreign investors, so you can operate your Delaware LLC from just about any country or state. Your LLC does not have to even do business in Delaware, nor does it have to have an office or bank account in the state. However, you must have a registered agent with a physical address in the state. This can be either an individual or a business entity who works as your registered agent.

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