In the last post, we discussed some of the essential advantages to forming an LLC in Delaware over other states. According to the National Association of Small Business’s 2015 Economic Report, the majority of small businesses surveyed are S-corporations (42%), followed by LLCs (23%), and many big name LLCs choose Delaware as their designated state of operation. Here are some more Delaware LLC benefits.
- More Confidentiality:
One of the benefits of LLCs in Delaware is that it offers a higher level of confidentiality. It can be a real advantage for business owners who prioritize privacy. When the LLC owners are creating the rules for their specific business, a document must be filed, called the articles of organization, or sometimes referred to as the certificate of formation. And while all states make this document available for the public to view, Delaware has one advantage in that the document does not have to reveal the names and addresses of managers and members.
- Enhanced Court System:
Many business owners choose to start an LLC in Delaware because its court system is well known for being favorable to business owners. the Delaware court system has a specialized type of court that is designated to solving business conflicts, called the Court of Chancery. Legalzoom.com says, “under Delaware’s LLC law, the Court of Chancery’s jurisdiction includes LLC disputes. In fact, members of a Delaware LLC have the same right as shareholders of a corporation to file a derivative action in the Court of Chancery; that is, a lawsuit to enforce an LLC’s claim against another individual or company that is not being adequately pursued by the LLC’s managing members.”
- More Favorable Taxes:
When you start your LLC, one major decision you’ll have to make is whether you want it to be taxed as an S corporation, a C corporation, a sole proprietorship, or a partnership. In Delaware, LLCs with one member are not legally recognized by the IRS, so they don’t have to pay any taxes at all — it’s all passed through to the owner.
Ultimately, understanding how the advantages of forming an LLC vary from state to state is integral to having a successful business structure. For more information about the benefits of an LLC, contact MyUSACorporation.
If you’re forming an LLC or corporation, you may know that one of the biggest decisions you need to make involves where it will be based. Each state has different laws and regulations regarding the operation of LLCs and corporations, but many people choose Delaware when they’re setting up LLCs for a number of different reasons. Here are just a few benefits of an LLC in Delaware.
- Series LLC State:
There are eight different states that offer the status of series LLC, and one of them is Delaware. A series LLC works well for businesses that work with rental properties; it essentially allows an LLC’s assets to be divided into different sectors to eliminate the risk of one particular asset from taking on damages or liabilities if a different asset is lacking in performance. Delaware was actually the first state to allow series LLCs, and they’re a safer and more protective classification in many situations.
- Freedom of Contract:
Delaware is also one of the states that allows the members of the company to dictate the overall structure of the company and tailor it to their specific needs and goals. The contract is called the LLC Operating Agreement, and all members should give their input when drafting it. Experts say this is easily the biggest benefit of starting an LLC over any other business type.
- Lower Annual Fees:
Unlike other states, Delaware has an annual Franchise Tax Fee of just $300 for LLCs. A form must also be filed once a year with the Delaware Secretary of State to update any changes or essential information. Finally, the registered agent must pay a small Registered Agent Fee, since all Delaware LLCs are legally required to designate a Registered Agent to accept legal documents and services.
Ultimately, these are just a few of the many Delaware LLC benefits. When considering to start your LLC in Delaware, it’s important to understand that there are three rules an LLC name needs to follow, including: being different from an existing LLC in the same state, must indicate that it is an LLC, must not include words restricted by the state. Keep an eye out for the next post, where we’ll discuss even more advantages of setting up LLCs in Delaware.