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What Is a Delaware LLC?

what is a Delaware LLC?

A Delaware LLC is a business vehicle with a legal existence separate and distinct from its owners. Owners and managers are not personally liable for the company's debts and obligations. 

A Delaware LLC has the ability to be treated as a pass-through entity for tax purposes. As such, it is considered a hybrid business formation that combines some of the best features of corporations and partnerships.

Form a Delaware LLC

An LLC is a relatively new type of entity in the United States. If properly structured, it combines the limited liability of a corporation with the pass-through taxation of a partnership. However, it is important to clarify that while LLCs can be treated as legal partnerships, they are not corporations. Owners—or members, as they are called in an LLC structure—can be individuals or any type of entity, from anywhere in the world, and are unlimited in number.

The features of a Delaware limited liability company, when combined with non-U.S. source income, mean non-resident aliens of the United States can avoid U.S. taxation when using an LLC.

Read more on the benefits of filing a Delaware LLC for clients outside of the U.S.

The Franchise Tax for a Delaware LLC or Delaware limited partnership (LP) is a flat annual rate of $300.


LLC Operating Agreement

The operations and management of an LLC are governed by a written agreement, composed by its owners, called an LLC Operating Agreement. The Delaware Limited Liability Company Act allows the parties to define their operations, management and business relationship in the LLC Operating Agreement. This is a legal condition known as freedom of contract. The stated policy of the Delaware Limited Liability Company law is to allow for maximum effect on the principle of freedom of contract and thus only intervene when LLC members request legal mediation.

An LLC's Operating Agreement is not required to be publicly filed nor disclosed to the Delaware Secretary of State. As a result, a Delaware LLC guarantees privacy and confidentiality as well as the ability to create a customized management structure that establishes the economic relationship among owners. The LLC Operating Agreement can be written in any language and is typically not required to be translated into English.


How to Manage an LLC

While the Delaware LLC law permits a Delaware LLC to be managed by its members, it does not require members to be managers. More importantly, the Limited Liability Company Law also states that no member or manager is personally responsible for any debts, obligations or liabilities of the Delaware LLC solely by being a member or acting as a manager. This limitation on personal liability compares favorably with the limitation on personal liability enjoyed by shareholders of a Delaware corporation.

The contractual flexibility offered by the state of Delaware is unmatched by any other LLC statute in any other state.


Harvard Busines Services, Inc. provides an array of informative articles on all aspects of the Delaware LLC: 

What is an LLC Operating Agreement?

Preserve Ownership with an LLC Operating Agreement

Delaware LLC Agreements—Get It in Writing!

Who Can Be a Member of an LLC?

Form a Delaware LLC Without Names on the Public Record

Estate Planning with a Delaware LLC

LLC and Partnership

By checking the appropriate box when applying for an Employer Identification Number (EIN), a Delaware LLC can be treated as a partnership for federal income tax purposes. This means the LLC will not be subject to United States federal income tax. This option is an attractive advantage for non-resident aliens of the U.S.


Key Elements of an llc: Back To The TopTop
  • Not taxed by the IRS at the entity level if partnership tax treatment is selected on the SS-4 Employer Identification Number form
  • A creditor of an LLC member cannot seize control of the assets of the LLC or another member's voting rights
  • Unmatched contractual flexibility
  • Corporate formalities such as minutes, bylaws, meetings, officers and directors can be eliminated in the LLC Operating Agreement
  • Personal liability is limited for owners and managers to the amount of their investment in the company
  • Provides greater tax flexibility in areas of distributions and can be used as a valuable tool for estate planning and wealth transfers
  • Non-resident aliens of the U.S. can typically avoid all U.S. federal taxes for their non-U.S. business activities
  • Increased protection against judgment creditors
LLcs are Frequently Used For: Back To The TopTop
  • Holding assets (real estate, boats, airplanes, etc.)
  • Single-owner ventures
  • Family businesses and partnerships
  • Joint ventures
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