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. This is one of the many reasons why the 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.
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.
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.
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.
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.
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.
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.
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.
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.Form a Delaware LLC Now
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