Benefits of Forming an LLC
By Michael Bell
Tuesday, February 12, 2013
As business formation experts over 30 years, we at Harvard Business Services, Inc. are often asked to explain the benefits of forming an LLC.
If you examine LLCs from a statistical perspective, they have only been in existence for 22 years. On the other hand, the Delaware General Corporation (the gold standard in business entities), will celebrate its 114th anniversary this year. Yet the LLC is by far the most popular type of company formed in Delaware. In 2012, 73 percent of the 7,000 (+) companies that Harvard Business Services, Inc. filed in Delaware were LLCs. The Delaware Division of Corporations reports that over 121,000 LLCs were filed in 2014, and more Delaware LLCs are formed each year than any other entity.
Harvard Business Services, Inc. has compiled an excellent, updated list of the benefits of forming an LLC:
- You can elect to be taxed as a partnership, S Corporation or Sole Proprietorship
- You can have one owner or as many owners (members) as you would like, with different classes of members posessing separate rights and responsibilities
- Both U.S. and Non-U.S. citizens can form and be members of a Delaware LLC
- A Delaware LLC is easy to manage, because many of the corporate formalities, such as meetings and recording meetings, can be minimized
- When taxed as a partnership or an S-corp, the profits and losses are passed through the entity to the owners/members; therefore the company does not pay United States federal income tax on its profits
- The LLC legally exists as a separate entity from the owners/members, which protects the owners from being held responsible for the LLC’s debts and/or liabilities
- All owner/member information in Delaware remains confidential and is not required to be disclosed on the annual Franchise Tax forms. A communications contact is required (it may be a third party)
- The LLC Operating Agreement is a confidential agreement that allows you to manage your company however you see fit; this is called freedom of contract
- If you don’t operate your LLC in Delaware, the state does not require you to file an annaul tax report. You simply pay a flat $300 Franchise Tax every year on June 1, regardless of your LLC's income for that year
- The cost to maintain a Delaware LLC includes a $300 Delaware Franchise Tax and your Registered Agent’s Fee. If you select us as your Registered Agent, you pay only $50 per year for Registered Agent service, which is guaranteed to remain fixed at $50 for the life of your company (as long as it remains in good standing)
If you have more questions or want to speak to one of our knowledgeable specialists about the benefits of forming an LLC, we’re always happy to help. Our experienced business formation experts can answer all your questions regarding Delaware LLCs. Feel free to call us at 800-345-2677 to speak with one of our friendly specialists today, or email your questions to email@example.com.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.