Delaware Incorporation

Why set up a company in Delaware?

With over half a million businesses established, including around two-thirds of Fortune 500 companies, the US Chamber Institute for Legal Reform has crowned Delaware one of the best legal climates for corporations in the USA for ten years straight, making it the prime location to incorporate if you are looking to kick-start your business in the USA.

Benefits of forming an LLC in Delaware

• Venture capital firms in the USA frequently require startups to be a Delaware corporation before they provide any form of funding.
• Venture capital firms and angel investors are more familiar and comfortable with Delaware corporate law which makes them favour Delaware corporations.
• Delaware has its dedicated court for corporate issues known as the Court of Chancery. These judges have corporate law background which makes cases go much faster as opposed to using inexperienced juries.
• There is no corporate income tax from Delaware if businesses are conducted with another state.
• There is no tax royalty payments or any other form of intangible assets.
• Non-residents are exempt from paying personal taxes.
• No Delaware taxes are applied on stock shares for non-Delaware residents.
• Directors and other officers are not required on formation documents which maintain a level of anonymity that is not experienced in other states.

Delaware company formation requirements

• The first step to incorporation your Delaware company is to find an available name for your company. This is done by completing a search on the Division of Corporation’s website. Once a suitable name is detected, the name will belong to you as soon as Delaware has recorded your company’s LLC or corporation filing.
• It is necessary to hire a Delaware Registered Agent who will act on behalf of the company. They are required to maintain a physical address as well as keep regular business hours in Delaware which would otherwise not be possible for overseas directors and officers.
• Depending on the type of entity you want to incorporate, you will have to file for the correct certificate during the company formation process. Typically, a corporation requires a Certificate of Incorporation and an LLC needed a Certificate of Organisation.
• To file and pay taxes in the USA, your Delaware company will need to obtain an Employer Identification Number (EIN) which can only be applied for once the state sends verification that the appropriate certificate for your company has been processed.

Differences between Delaware Corporation & LLC

Delaware offers two types of entities for incorporation, and it is essential to understand their differences so that you can pick the entity which best suits to your business model.

The Governance Structures: a corporation is structured with three tiers of power: Shareholders, Directors and Officers. This structure is defined by the Delaware Corporation Law and cannot be changed. An LLC is governed by a contract between all its members, called an Operating Agreement. This agreement is binding on all signatories, and all members of the LLC must sign it. The default structure of an LLC consists of members and one manager. The members can choose to manage the company themselves or hire an external manager.

Federal Taxation: a corporation has three options as to how the IRS will tax it. The default classification is the C corporation in which the company with have to pay taxes on its profits each year. If the company has less than 100 shareholders it can be classified as an S corporation in which the company will not have to pay federal tax but instead, the tax liability of the profits or losses are passed onto the shareholders based on their share of the company, and they will have to pay the taxes. A company can also apply for a tax exempt status which turns the company into a non-profit organisation provided they meet specific requirements. The tax classification for an LLC is gained after filing for an Employer Identification Number or Federal Tax ID Number. The IRS considers a single member LLC as a disregarded entity and a multi-member LLC a partnership.

Privacy: A corporation is required to submit an annual report of the company. This report must contain the name and physical addresses of all the directors, the name and physical address of one officer and the physical address of the corporation’s principal location of the business. An LLC doesn’t need to submit an annual report and only requires the Registered Agent to have the name and address of a Communications Contact who can be a member/manager of the LLC or merely a representative of the company like an attorney.

How can More Group can help you?

Setting up a company in Delaware can be a quick process if completed by an expert who understands the process precisely otherwise, it is easy to lose track of the amount of paperwork that one has to go through, and mistakes materialise. Despite being an excellent location for incorporation, there are a few areas that might prove difficult. For example, when filing for a Certificate of Organisation/Corporation, it can only be done via the postal system or fax. There is no possibility of doing this online. This is where engaging More Group for additional post-incorporation services is useful.

More Group has assisted clients worldwide to form an LLC in Delaware and continue to help them manage their business. We can help you to make an informed decision about which entity would best suit your business needs. Our transparent process can save you time and money. We ensure all statutory requirements are fulfilled and so that the only thing you will have to focus on is your business.