LLC in Delaware Benefits: Everything You Need to Know
LLC in Delaware benefits refers to the many advantages one can gain by setting up a limited liability company in the state of Delaware.3 min read
LLC in Delaware benefits refers to the many advantages one can gain by setting up a limited liability company in the state of Delaware. Limited liability companies are a relatively new business type that combine the limited liability protections of a corporation with the favorable tax treatment of a partnership. They are also more flexible and easier to maintain than other business types, making them very popular with small business owners.
Some of the scenarios in which an LLC may be of great benefit include:
- When a company is holding real estate.
- When one is operating a family business.
- When one is performing estate planning.
- When one is the owner of intellectual property.
- When one is the owner of assets that are deemed dangerous, like a fleet of vehicles or apartment buildings.
- When one is forming a joint venture between two individuals or companies.
- When one is dealing with government licenses or contracts.
In Delaware, the LLC has even more flexibility than usual, and for that reason, the Delaware LLC is the preferred business entity for many accounting, legal, and business professionals. In fact, the Delaware LLC is known to attract people from all over the world, and that is because in Delaware they can find LLC benefits that they will not find in any other state. Specifically, such benefits include:
- Favorable conditions for freedom of contract and enforcing contracting parties’ rights. In 2010, Delaware passed an amendment to the state’s LLC law that gave the same freedom of contract that principles have to LLCs. This overturned a previous decision of the Delaware Supreme Court that ruled an LLC’s operating agreement would not be enforceable if it was oral and could not be performed in one year. Now, such an agreement is enforceable, which benefits LLCs.
- The Delaware Court of Chancery. Known as the oldest, most established business court in the country, Delaware’s Court of Chancery is a separate court in Delaware’s legal system that handles only business cases. Its judges are highly experienced, and they are known for acting very quickly, often handling cases in weeks, rather than years.
- Strong privacy protections. LLC owners who place great stock in maintaining their confidentiality often turn to Delaware to do their business because of its stronger stance on privacy. A good example of this is the fact that in Delaware, one is not required to put down the LLC members’ addresses or names on the articles of organization, which must be filed with the state during LLC creation. In all other states, this is public information, but not in Delaware.
- The Series LLC. This a special kind of LLC available in only seven other states. The chief benefit of the series LLC is that it allows you to make separate cells, or series, within your LLC to keep one underperforming asset from negatively effecting your other assets, either fiscally or legally. This is especially helpful for owners of rental properties who wish to separate their properties from one another within their LLC.
- Increased asset protection from creditors. In Delaware, if an LLC member has a judgment filed against them, the LLC cannot be attacked by a creditor nor can that creditor possess any assets of the LLC. The most any LLC member can lose from their LLC’s dissolution is the amount they put into it. There is also a statute of limitations concerning the personal liability of LLC members relating to LLC dissolution, the effect of which is that LLC members are not liable for the debts of failed LLCs.
- Ease of start-up. Forming an LLC in Delaware is easier than it is in many other states. There is little required information for forming your company, there is only a small filing fee, and no meetings or votes are necessary. Also, a Delaware LLC can be made in as little as an hour, and the Secretary of State’s office keeps extended filing hours.
- Economy of maintenance. Just as starting up a Delaware LLC is an economical enterprise, so too is maintaining one. As far as fees go, all that is required is a $300 Franchise Tax Fee annually as well as an annual Registered Agent Fee, as Delaware law requires all LLCs in the state have a registered agent to accept and give out legal papers.
These are just some of the benefits of starting an LLC in Delaware. If you need help concerning LLC in Delaware benefits, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.