Delaware LLC Benefits

It seems like business owners are always talking about the benefits of opening an LLC in Delaware. As you start a new business, you may ask yourself, "Why form a Delaware LLC?" With minimal startup requirements, simple maintenance and the ability for members to establish their own company structures and rules, there are many advantages to forming a Delaware LLC.

The Delaware LLC is the most flexible type of business entity offered by any state or country in the world. State statutes such as the Delaware General Corporation Law and the Limited Liability Company Act are extremely beneficial to businesses in Delaware, more so than any other state. This is one of the many reasons why the Delaware LLC (Limited Liability Company) has become the entity of choice among many legal, accounting and business professionals.

LLCs possess a large variety of inherent benefits that may come into play in several LLC scenarios. LLCs are especially reliant 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.

Below are seven of the most significant advantages of a standard Delaware LLC.

Advantage #1: Custom LLC Business Structure and Rules

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 power, called the freedom of contract, is the biggest benefit of an LLC over any other form of business entity.

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Delaware LLC Operating Agreements

The Structure of the LLC Company

Advantage #2: Asset Protection Against Creditors

Another benefit of a Delaware LLC is that they 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.

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How To Protect Your Assets With a Delaware LLC

What Does "Limited Liability" in the Delaware LLC Mean?

Advantage #3: Statutory Limitation on Member Personal Liability

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. The most money a member of an LLC can lose by virtue of the LLC's failure is the dollar amount the member had invested in the LLC.

Advantage #4: Beneficial Tax Treatment by the IRS

Another benefit of a Delaware LLC is their tax flexibility. 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. This tax treatment is part of the reason why Delaware LLC costs are quite reasonable.

Learn more:

When Is an LLC Better Than an S Corporation?

How To Convert C-Corp Into LLC

What is a Delaware S Corporation?

Advantage #5: Simple Startup and Minimal Requirements

Very little information is required to form an LLC in Delaware, and start-up involves only a small filing fee. Additionally, there are no meetings or voting requirements.

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Delaware LLC Formation Requirements

Annual Delaware LLC Fees

Advantage #6: Low Annual Fees and Simple Maintenance

One of the advantages of a Delaware LLC (that attracts many aspiring business owners) is that costs are simple and inexpensive. Once a year, a simple form and an annual Franchise Tax Fee of $300 must be filed with the Delaware Secretary of State. Additionally, a Registered Agent Fee must be paid annually, as all Delaware LLCs are required by law to have a Registered Agent to accept service of process.

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Annual Delaware LLC Fees

Advantage #7: Delaware LLC Privacy

Another advantage of Delaware LLCs is that you are not required to disclose any information about the owner of an LLC to the state of Delaware or Harvard Business Services, Inc. in order to form or maintain an LLC. Not all states protect your identity like this, so this is a frequent reason why to form an LLC in Delaware. Unlike many other states, you are required only to have a designated contact person and a Delaware Registered Agent.

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Form a Delaware LLC Without Names on the Public Record

Delaware LLC Privacy: What's on the Public Record?

Advantage #8: Perpetual Existence

When referring to an LLC, perpetual existence is a concept that suggests an entity will last indefinitely, even it there are changes in ownership. Entities, like partnerships and sole proprietorships may dissolve after the departure of an owner, where an LLC can continue their operations without interruption.

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Ensuring an LLC Will Have Perpetual Existence

Advantage #9: Flexibility in Ownership & Management

Compared to other types of entities, LLCs have a great deal of flexibility in their management and ownership structures. LLCs have two options for management; member-managed LLC or manager-managed LLC. This means that either the business can be managed by the owners or appointed managers that may not be owners themselves. As far as ownership goes, LLCs don't a restriction on the number of possible members (as long as there's at least one owner). LLCs can even have multiple types of members at the same time.

Advantage #10: Credibility

One of the benefits of operating as an LLC or corporation is the credibility it gives your business. Most people feel more comfortable going through with a transaction when they’re doing business with a real company, and not just some person on the internet. Simply put, operating as an LLC or corporation can make your business seem more professional. Signaling to customers, suppliers, and partners that the business is a legally recognized entity with limited liability protection can go a long way.

Enjoy the Benefits of a Delaware LLC Today

Start a Delaware LLC online today with Harvard Business Services, Inc. or call 800-345-2677. Our friendly, helpful representatives will be happy to help you.