Delaware’s advantageous state business laws and regulations, which are familiar and popular among investors, make it a choice location when deciding to form a company in the US. Delaware is also unique due to its special court, the Court of Chancery, which is dedicated to quickly settling business disputes with expert judges.
Should I become a Delaware LLC or C-CORP?
A Delaware Limited Liability Company (Delaware LLC) is a great option if you are looking for a simple, inexpensive and flexible way to start a company in the US.
The owner of the Delaware LLC drafts an LLC Operating Agreement, adapting the terms and rules to suit the business needs of the company. In this agreement the members have complete freedom when deciding how to structure and organise their company.
A Delaware LLC can further be tailored to suit the needs of the company in terms of taxes. Members of the LLC can decide if they want their company to be taxed as an S corporation, C corporation, sole proprietorship or partnership.
Another advantage of a Delaware LLC is that it is inexpensive and simple to start. After a small filing fee when setting up a company, there are typically two annual fees a Delaware LLC is required to pay; these include the Delaware Franchise Tax (a flat rate of$300 due on 1 June every year) and a Delaware Registered Agent Fee (a Registered Agent is a requirement of all Delaware LLCs and corporations).
A Delaware LLC also provides protection for both its members and the company itself. Any members’ personal assets are kept separate from the LLC’s assets, giving members protection against creditors of the company and vice versa.
A particular benefit of forming an LLC in Delaware rather than another state is the privacy granted to the members of Delaware LLCs. The members of a Delaware LLC are not legally required to disclose any information concerning themselves to the state of Delaware, unlike many other states.
Another option to consider when starting a company in the US is to incorporate as a C Corporation. Although C-Corps can be more expensive to run, with greater start up costs than a Delaware LLC and the possibility of double taxation (annual profits are taxed, due annually on 15 April, and any profits which are then distributed to shareholders as dividends are also taxed), C-Corps have greater potential for high-growth through the sale of stocks to investors.
However, a C corporation lacks the flexibility in structure of an LLC. A C- Corp is legally required to be made up of three tiers of power: shareholders, directors and officers. Delaware law also dictates the role each person plays within the corporation.
There are additional legal requirements of a C- Corp, which include shareholder and Board of Directors meetings, the maintenance of corporate records and annual reports and fees, all of which are optional within a Delaware LLC. Additionally, a C corporation must provide the name and physical address of all the Directors and one of the officers on the annual report, as well as corporation’s main business address.