Benefits of setting up llc in delaware [Expert Advice]

Last updated : Aug 11, 2022
Written by : Elvera Livesay
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Benefits of setting up llc in delaware

Is there an advantage to forming an LLC in Delaware?

Delaware is often considered one of the best states to form an LLC because it has limited fees and tax obligations. In fact, many businesses choose to form an LLC in Delaware even if they don't intend on doing business in Delaware.

What are the benefits of registering a business in Delaware?

  • Delaware business law offers flexibility.
  • Court of Chancery.
  • Delaware business tax benefits.
  • Corporate statutes are more flexible.
  • Investors prefer Delaware corporations.
  • Foreign qualification costs.
  • Registered agent costs.
  • Franchise taxes.

Do Delaware LLCs pay taxes?

A. Delaware treats a single-member “disregarded entity” as a sole proprietorship for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a return with the State of Delaware.

Why are Delaware LLC so popular?

The most famous reason Delaware has attracted the eye of corporations across the world is the lenient taxes imposed by the state. Corporations registered in Delaware that do not do business in the state do not pay corporate income tax.

What is the Delaware tax loophole?

Companies and wealthy individuals can use Delaware to avoid paying some taxes in other states. So there's a thing called the Delaware Loophole, which essentially enables companies to avoid paying state corporate income tax where they earn the revenue.

What are 3 disadvantages of an LLC?

  • Cost: An LLC usually costs more to form and maintain than a sole proprietorship or general partnership. States charge an initial formation fee.
  • Transferable ownership. Ownership in an LLC is often harder to transfer than with a corporation.

Why is Delaware tax free?

Delaware The state's 8.7% flat corporate income tax rate leads to tax collections that are the fourth highest in the country, and combined with a personal income tax, they help allow Delaware to charge no sales tax.

How much does it cost to open an LLC in Delaware?

To form an LLC in Delaware, you must submit a Certificate of Formation to the Delaware Division of Corporations. The filing fee is $90.

Why do startups choose Delaware?

Angel investors and venture capital firms generally prefer Delaware corporations. The main reason to choose Delaware is for its predictable laws that protect investors. Accordingly, legal professionals and capital investors have always been comfortable with the Delaware laws and procedures governing these entities.

Do you have to renew LLC Every year in Delaware?

Although Limited Partnerships, Limited Liability Companies and General Partnerships formed in the State of Delaware do not file an Annual Report, they are required to pay an annual tax of $300.00. Taxes for these entities are due on or before June 1st of each year. Penalty for non-payment or late payment is $200.00.

How do LLCS avoid taxes?

A general Corporation making a Subchapter “S” Election or an LLC with or without a Subchapter S Election pays no federal tax on its taxable income and no employment taxes on its distributions to stockholders.

Does a Delaware LLC need to file a federal tax return?

An LLC will typically be required to file the same federal tax forms as a partnership or sole proprietorship when it comes time to prepare and file the federal tax returns with the IRS. An LLC may elect to be treated and taxed as an S corporation or a C corporation by the IRS.

Does a Delaware LLC protect personal assets?

Forming a Delaware LLC or corporation for your family business is a common way to protect both your personal assets and your business. Harvard Business Services, Inc. has more than three decades of experience forming Delaware companies for people who want to protect their assets, including members of family businesses.

What are 3 advantages of an LLC?

  • Run Your Own Show. Entrepreneurs are self-starters who prefer to chart their own courses.
  • Limit Your Personal Liability.
  • Avoid Double Taxation and Pass-Through Deduction.
  • Less Administrative Hassles and Paperwork.
  • Flexibility in Sharing Profits.

What happens if you don't pay Delaware LLC tax?

If you don't pay the Delaware Franchise Tax and file the Annual Report for two straight years, the State of Delaware will administratively dissolve the Corporation. If you have any questions about forming your new Delaware LLC, LP, or Corporation, give us a call today.

What taxes do you not pay in Delaware?

Delaware has a 8.70 percent corporate income tax rate and also levies a gross receipts tax. Delaware does not have any state or local sales taxes. Delaware's tax system ranks 16th overall on our 2022 State Business Tax Climate Index.

At what age do you stop paying property taxes in Delaware?

be an owner or part owner of the property; 2. be at least 65 years old before the beginning of the tax year on July 1; 3.

What are the risks of owning an LLC?

  • Loss of Limited Liability. Although an LLC enjoys limited liability, poor practices could result in an LLC losing its liability shield.
  • Difficulty Obtaining Investors.
  • Pass-Through Taxation.

Why is LLC may not beneficial?

Profits subject to social security and medicare taxes. In some circumstances, owners of an LLC may end up paying more taxes than owners of a corporation. Salaries and profits of an LLC are subject to self-employment taxes, currently equal to a combined 15.3%.

What does an LLC not protect you from?

Thus, forming an LLC will not protect you against personal liability for your own negligence, malpractice, or other personal wrongdoing that you commit related to your business.

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Benefits of setting up llc in delaware

Comment by Nicholas Janocha

welcome back to taxes made simple i'm your host carlton dennis and in today's video we're going to discuss why do people establish entities in delaware if you're somebody right now that's thinking about asset protection you're thinking about growing your business then you're going to need to establish your entity in the correct states and a big reason why we go through the process of establishing these entities is for asset protection but there are levels to asset protection and one of those levels to asset protection is making sure that your name and information is being protected one of the biggest benefits to going to states such as delaware nevada and wyoming is for this protection that you can receive over your name so what i want to do is i want to address the five biggest reasons why business owners choose delaware as a state to establish their entity let's dive in all right guys reason number one is anonymity laws and i want to make sure that you guys understand this word correctly because i'll be honest on my journey to becoming a tax strategist this was one of those words you had to keep repeating and repeating over again until you got it but anonymity laws pretty much means that your name is remaining anonymous from being online and this is a big benefit when you're thinking about establishing a business long term there will be a lot of people that could come after you whether it's lawsuits or you doing something that may not be fair in the customer's eyes you could end up with lawsuits as a business owner and it discourages a lot of business owners to grow their businesses because of this matter this is why we look to establish corporations and why we look to establish llcs because corporations and llcs can give us that protection that we're looking for separating ourselves from our business but if we're trying to take it a step further from an asset protection standpoint from a liability standpoint then it might make sense to really establish our entity structures in a state that provides anonymity laws and delaware provides an amenity laws what an amenity laws means is that various different states do not require the managers or the shareholders names to be mentioned online in that particular state so if i establish my entity in the state of delaware i have the choice to determine whether or not i want my public information my first name my last name and the address of my registered agent which could be me online or not if i choose to i am now exposing who i am and where i am to any person that's seeking out the owner of the business if i choose to do the latter and choose not to have my name or my shareholders names on the online report or on the articles of incorporation or the statement of information then i am protecting my business and the members who are underneath my business in the event that there is an audit that could arise or in the event that there's a situation such as a lawsuit that could arise a part of the reason why there's this level of protection is because there's an uphill battle when you're going through a lawsuit the uphill battle when establishing a lawsuit is trying to determine who are the parties that are at fault and if you're somebody that's thinking about suing another party it might be hard to sue a party when you don't know who that person is or where that corporation is established or who the members are underneath that corporation and this is what makes business really complex because there's levels to being a business owner and most business owners might just go online and establish an llc or corporation in the state in which they operate in and find out later that their information is being exposed online so one way in which we can protect ourselves when it comes to establishing an entity is making sure that we've covered the anonymity laws in our state and whether or not we should choose a state that does provide the correct anonymity protection all right let's jump into the second reason why people establish corporations in delaware the number two reason why people go to delaware is because of the fees associated with delaware the incorporation fee for delaware is less than a hundred dollars whereas if you go to a state like california you're paying upwards to eight hundred dollars every single year to have your business incorporated there now one thing that you have to understand is when you apply to be a foreign entity which means that you're established in a state in which you're not currently doing business in that state this means that there's going to be additional filing requirements inside of your tax return but i want you to know something as much as additional filing requirements to file your foreign entity in your state it's also not that big of a deal when you think about it in the long term because if you're somebody that believes in solid asset protection then you would be willing to pay the additional fees every single year to have your corporation in that particular state in order for you to have the liability and asset protection that you see i know with my corporations that a lot of them are established in states that have this level of protection simply for the fact that i do not want my information and my name to be online and for many other business owners they may go through that hurdle like i have to pay additional fees just to make sure that our name and information is protected so if you're somebody that's wondering whether or not it makes sense for you to establish a corporation in delaware you have to be aware of these additional fees that could come up for filing an out-of-state return but there's also a lot lower fees for establishing an llc or corporation in delaware from a state filing requirement perspective so if you're thinking about establishing an entity in delaware make sure that you look at the state filing fees in your state first as well as the state filing fees in the state in which you wish to establish all right guys let's go into the third reason why people establish entity structures in delaware one of the biggest and probably the most coveted reasons will be for the court of chancery that delaware has you see delaware has extensive court cases for business owners and for real estate investors that have cited in the favor of business owners and real estate investors because the state of delaware has a court of chancery instead of electing random people to be on the board and decide your fate they have a system in place that helps out entrepreneurs and helps out real estate investors rather than going to straight a juror of just random people who get to decide your fate so a lot of corporations will establish their entities in delaware for this particular reason only and a lot of entities will establish their their corporation in delaware when they're planning on going public for this reasons as well if you're somebody that's going to become a publicly traded company which means that you have to be regulated by the sec and the federal trade commission you might want to establish your entity in a place that does have a court of chancery t

Thanks for your comment Nicholas Janocha, have a nice day.
- Elvera Livesay, Staff Member

Comment by innenforb

hi this is the business guy with asset protection planners and today we're going to talk about the benefits of establishing a delaware limited liability company that's a delaware llc i've been establishing company since 1991 and when i was doing some research for this video something really popped out to me from the articles that i read almost all of the articles were just people repeating what they had heard other people say and not only that but much of the information was wrong it's like people were playing telephone with the facts and not really doing their research or they talked about federal tax or other benefits that apply to llc's in all 50 states and not just delaware so now we have full-time licensed attorneys on our staff here and as a result we have to hold ourselves to a higher standard so the purpose of this video is to give you the most well-researched and fact-checked information about the delaware llc on the internet i'll throw in some comparisons with other jurisdictions and when you're done watching this video you'll know whether or not forming a delaware llc is right for you and if you do there's a coupon code and a link below for a limited time only the business guy has arranged 25 off an llc in delaware or any other state or country with coupon code bg25 so write that down bg25 and you can also check it out below in the description and by the way this video really took a lot of work to research so if you could help me out by just obliterating the like button below so youtube promotes the video i'd really appreciate it and you can also text a link of this video to others who need it and you can also click the subscribe button so that when more videos come out like this you'll get notified so benefit number one for the delaware llc single member llc charging order protection what does that mean well in our context here a lawsuit can come from one of two places one your personal life or two from your business life now you take yourself wherever you go right so you're a walking liability machine wherever you go you could get distracted for just a second and rear end somebody in your car we have countless clients calling who get sued for way more than their insurance coverage one guy just got out of the emergency room he had nobody to drive him home he had taken a pain pill while he was there got into a wreck on the way home insurance company totally denied coverage because they claimed he was driving under the influence of intoxicants and that was just from a pain pill that they gave him at the hospital the insurance companies love to take your money but they run like cockroaches with the lights on when it's time to pay if they can find a way out of paying they will plus you glance down at your cell phone for half a second hit somebody and get sued for 10 times the limits of your insurance coverage happens every day now the laws of many states have charging order protection that means when somebody sues you in a personal lawsuit not suing your business but you personally such as a car wreck there are provisions in the law such that the lawsuit cannot take your company away from you nor can they take anything inside of that company away from you so let's say you have a fleet of business vehicles or you have cash in a bank account you have a separate llc where you hold your entire stock market portfolio the charging order protection protects your company and anything inside of it from being taken away from you now a charging order means that whatever profit you would distribute to yourself would go to the creditor but your creditor cannot force you to pay yourself from the llc so your profits can pile up inside or you can do other tricks like having the llc hire a third party who in turn pays you for other services so there are little tricks to getting your money out but your opponent cannot force your hand now in 45 states you need to have a two-person llc to enjoy that charging order protection but in section 18-703-d of the delaware code it says and this benefit is offered and i quote whether the limited liability company has one member or more than one member end quote that's what delaware law says specifically again delaware is one of only five states to offer charging order protection for single member llcs now as an aside if you want to buy an llc where the charging order automatically disappears in three years instead of 20 years like charging orders due in the u.s call us and have us set up an offshore llc in the caribbean island of nevis that's in nevis go ahead and call us for details so charging order protection is benefit number one for a delaware llc protection for the llc against personal lawsuits now what about when somebody sues the llc itself benefit number two delaware llcs offer liability protection to members and managers one of the biggest benefits that a properly established delaware llc offers is protection against business lawsuits so when you own a business structured as a delaware llc and it's set up correctly even if someone does get a judgment against your company the lawsuit doesn't jump over into your personal life and take away your personal residence your car your bank account and everything you work so hard for delaware code section 18-303-a clearly indicates that the debts obligations and liabilities of a limited liability company shall be solely that of the limited liability company and no member or manager shall be obligated personally for any such debt obligation or liability solely by reason of being a member or acting as a manager so a delaware llc protects both the members that is the owner or owners and the managers the ones who run the llc from lawsuits against the business and again you enjoy that benefit even if it's a single member llc where you are the only member slash owner and the only manager now keep in mind that we can form an llc in delaware just like mcdonald's is a delaware corporation then we can register it so that it can do business in any of the 49 other states so you can use a delaware llc anywhere you live in the u.s or any other country for that matter we just need to do the proper filings for you benefit number three is privacy now in many states when we form llcs we need to list the manager's names and addresses on the document that we file with the state to form the company so that makes the information public so anybody can look it up online or order documents from the state to find out what you own not delaware delaware doesn't require your name and address to be listed on the formation documents for everybody to see all we need to put on the document is your llc name our company name when we serve as your delaware registered agent and other verbiage that we insert to create your llc on top of that we don't even need to file the name of the manager of your delaware llc with the annual renewal like we have to do in so many other states so privacy number four updated laws according to the delaware division of corporations over 1 million businesses including 66 of the fortune 500 that is fortune magazine's list of the 500 largest u.s corporations by to

Thanks innenforb your participation is very much appreciated
- Elvera Livesay

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