Delaware is a tiny state, but it has an outsized importance in the world of corporations. Nearly half of the nation’s publicly traded companies, including giants like Apple, Coca-Cola, Google and Wal-Mart, are incorporated in Delaware.
Delaware has a long history of corporation-friendly laws. In addition, Delaware’s tax laws allow corporations to be taxed at a low rate in Delaware and avoid higher taxes in their home states.
For many years, Delaware has tried to position itself as a welcoming home to corporations.
– Delaware has been called a tax haven. It does not collect corporate taxes from Delaware corporate entities that do not do business in the state. It also does not tax royalty payments or other “intangible assets.” These tax policies lead to substantial savings for some corporations;
– The Delaware LLC is the most flexible type of business entity offered by any state or country in the world. This is the reason why the LLC (Limited Liability Company) has become the entity of choice among many legal, accounting and business professionals;
– LLCs possess many inherent benefits that may come into play in several LLC scenarios, including when a company holds real estate; operates a family-owned business; performs estate planning objectives; owns intellectual property; holds the ownership of assets deemed dangerous, such as apartment buildings or fleet vehicles; forms a joint venture between two companies or individuals; attains government contracts or licenses; and many other uses;
– The structure of the company and the rules that govern the members of the company are contained in a contract called the LLC Operating Agreement, which is drafted by the members of the LLC. This means the terms and rules of each LLC can be tailored to accommodate the specific needs and preferences of an LLC. This is the biggest benefit of an LLC over any other form of business entity;
– Delaware LLCs possess increased asset protection against creditors. This means that if a member of an LLC has a judgment filed against him/her, a creditor cannot attack the LLC nor acquire any portion of the LLC’s assets. This benefit protects everyone in the company. A statutory limitation on the personal liability of the members of an LLC means that members are not held liable for repayment if an LLC fails and leaves behind debt;
– When an LLC is formed, the owners can choose whether they want the LLC to be taxed as a partnership, an S corporation, a C corporation or a sole proprietorship. Single-member LLCs are not recognized by the IRS and therefore pay no taxes at all. Instead, the tax liability is passed through to the member;
– You are not required to disclose any information about the owner of an LLC to the state of Delaware in order to form or maintain an LLC. Not all states protect your identity like this. In Delaware, you are required only to have a designated contact person and a Delaware Registered Agent;