Delaware

Key benefits

The state of Delaware is fast becoming renowned as a business haven for corporations looking for a business-friendly environment. With its low tax incentives and increased confidentiality, these factors can provide an attractive advantage to you and your business.

Delaware is an easy and reliable state in which to incorporate or form an LLC; the annual cost is low and the owners of LLCs as individuals are given the strongest legal protection available by any state. This is demonstrated by a US Chamber of Commerce study of state liability systems that has rated Delaware number one in eight studies conducted throughout all 50 US states.

Key benefits

A few examples of Delaware’s benefits include:

  • Low cost incorporation fees.
  • Delaware law has been tested and provides predictability.
  • Delaware regularly updates its laws to remain the leading state for incorporation.
  • Delaware allows the owners and managers of an LLC to remain anonymous.
  • Delaware has no sales tax or intangible personal property tax.
  • No Delaware income tax has to be paid and a business license is not required if the Corporation does not do business in Delaware.
  • A Delaware offshore company is a useful tool for those seeking to protect their assets from creditors, liabilities and excessive taxation.
  • Those who form and own a partnership in Delaware are known as ‘members’ rather than ‘partners’ and the LLC itself is a distinct legal entity, separate from those who establish it. This means that LLC members are able to limit their risk and liability to their initial investment made into the corporation which means that the Delaware offshore incorporation of an LLC allows for far reaching personal asset protection.
  • A Delaware offshore company is not required to report its assets which implements an additional layer of confidentiality protection; making it a less likely target for speculative creditors.

Tax and accounting regulations

Taxation

Delaware has 0% corporate income tax rates for companies not operating within the state, though all Delaware corporations must pay an annual corporate franchise tax. 

What are the annual costs associated with a Delaware LLC?

Annual Report

Limited Liability Companies and Limited Partnerships formed in the State of Delaware are not required to file an Annual Report; however, they are required to pay an annual tax based on a flat rate of $250.00.

Taxes for these entities are to be paid no later than June the 1st of each year.

It is important to remember to pay the tax on time because Delaware will assess a Penalty for non-payment or late payment of $200.00. In addition, Interest accrues on the tax and penalty at the rate of 1.5% per month.

Non-stock for profit

All non-stock, for profit entities that do not comply with the Exempt Corporation requirements will be required to pay a Franchise Tax of $175.00

Authorised shares method

For corporations having no par value stock the authorised shares method will always result in the lesser tax.

  • 5,000 shares or less (minimum tax) $175.00.
  • 5,001 - 10,000 shares - $250.00,
  • Each additional 10,000 shares or portion thereof add $75.00
  • Maximum annual tax is $180,000.00

For example:

A corporation with 10,005 shares authorised pays $325.00($250.00 plus $75.00).

A corporation with 100,000 shares authorised pays $925.00($250.00 plus $675.00[$75.00 x 9]).

Does my Delaware LLC have to request an EIN from the IRS?

An LLC run as a one member LLC can either use the Social Security Number (SSN) of the single owner to conduct business, or it can obtain a separate Employer Identification Number (EIN). An EIN is also required for an LLC if it is a multimember LLC.

We recommend that you obtain an EIN number soon after the formation of your LLC.

If you are not a citizen of the United States or Resident Alien and you form a one member LLC and don’t do any business effectively connected with the United States, which includes not having a U.S. bank account, you will not have to get an Employer Identification Number (EIN) for your Delaware LLC or file any US or State income tax returns. If you have a company that has more than $10,000 total in accounts outside the U.S., you will need to complete the one-page IRS Form TD F 90-22.1 also known as FBAR reporting (Foreign bank and financial accounts).

Procedure of company registration

Delaware is an easy and reliable state in the USA in which to incorporate or form a number of different legal entities, including Corporation-C/ Corporation-S) however setting up a Limited Liability Company (LLC) is the most popular option. An LLC is an entity that is owned by members, operated by managers and run by an operating agreement.

An LLC offers the benefits and flexibility of ownership as a partnership, while at the same time offering the limited liability and asset protection of a corporation. In addition to this limited liability protection, there are alsosubstantial tax benefits to be garnered from the formation of an LLC.

The profits or losses of the business organisation pass directly through to the Member's personal income tax return “pass through taxation”, with no taxation at the LLC level. The net profit of the LLC is not considered to be income earned by the Members and therefore is not subject to self-employment tax.

The summary below provides an overview of the process and the documents required to form a Delaware LLC:

We need the following supporting documents to incorporate a company:

BO(s), Director(s) & Shareholder(s) each must submit:

  1. A scanned copy of the passport (with a current & clear photo).
  2. Identity Document Verification (one more additional document, for example: ID card or driver's license).
  3. Two different types of proof of address: a. Primary proof of address, or a “Consumption bill” (water, electricity, natural gas, internet or fixed telephone landline). b. Second proof of address can be as above, or a credit card or bank statement. (No older than 3 months old).
  4.  Signed Curriculum vitae.

Please note that all KYC documents must be notarised, if utility bill is in a language other than English, then it must be translated. If you have any problems obtaining the notarised documents, we can assist. Contact us here.

Requirements:

  • At least one Director, one Shareholder and one officer is required.
  • Residency for Directors is not required.
  • Directors are not required to be listed in the articles of incorporation.
  • Annual franchise tax.

Timescale:

  • The approximate timescale for company formation is 2 days.
  • An additional 12 – 14 days may be required to receive original corporate documents from US.

Can you help me open a bank account to form an LLC?

Service Pro offers incorporation and formation filing services, registered agent services, qualification services, and many others. However, we do not physically assist with the opening of bank accounts for customers.

If you locate a bank, we can work with you to help you obtain any additional documents required. If you need a referral for a specific bank in Delaware, we can also provide referrals, but you will need to complete the application process. We will not act as an intermediary because of federal “know your customer” banking laws.

Are Delaware LLCs able to do business in other states?

Yes. You are allowed to operate a Delaware LLC for any legal business in every state in the USA. Under the US Constitution, your Delaware LLC is viewed as a “person” and other states cannot discriminate against this person based on where he/she/it was born or incorporated. This is protected under the full faith and credit clauses, equal protection clause, and substantive due process clause. Additionally, if your company has a physical place of business, employees, assets, or licensing pertaining to another state, then the state where you operate and have significant contacts may require you register there with a certificate of authority, letting the headquarters and principal activity states know you are doing significant business there. This registration does not change the incorporation state, it is only a registry of foreign or out-of-state companies, in case someone needs to sue your company in its principal place of business.