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Return To Incorporation Article Archive   Search the Article Archives Free Information and FAQs you Need to Know to Form an LLC or Incorporate in Delaware By Chris Einkauf 1. Why should I incorporate / form an L.L.C. in Delaware? When forming a corporation or LLC, you should choose the state of incorporation carefully. This is your opportunity to forum shop for the law you wish to govern the internal affairs of the entity. Most states laws are much less friendly toward business owners than Delaware. Once you form an entity in Delaware, you can use it in any state in the United States and many countries worldwide. Delaware Corporate law that will govern the company has been tested and is very predictable and business friendly. It offers a better 'liability shield' than entities filed elsewhere. Delaware continues to update its laws, causing it to remain the leading State for incorporating. Delaware also has a separate Court of Chancery to handle corporate law cases. Delaware has been rated #1 overall of all 50 states in every category judged by the U.S. Chamber of Commerce for five years running. Having the best law govern your company comes at a small price. Delaware's minimum annual franchise tax for corporations is $35 and the filing fee is $25. The Delaware L.L.C. annual fee is $200, regardless of capitalization. Delaware permits the members and managers of an L.L.C. to remain confidential. 2. Can a single person be both a director and an officer? Yes, in Delaware one natural person can be the President, Secretary, Treasurer and Director of a corporation, without disclosing the name in the Certificate of Incorporation. If provided for in the Certificate of Incorporation, the director(s) are allowed to change the bylaws of the Corporation. For an LLC, one person can be the owner and managing member. Minor children may be members of an LLC. Companies and trusts may be members of an LLC. The exclusive remedy to a creditor of a member of the LLC is the charging order, which generally precludes a liquidation of the assets in the LLC and only gives the creditor a non-voting interest which does not impact the management control of the company. 3. Are there minimum capital requirements? No, there are no minimum capital requirements in Delaware to incorporate or form an L.L.C. This keeps the cost of forming a company low and enables dividends to be issued to owners even when the company is not well funded. 4. What tax savings will I receive by choosing to incorporate in Delaware? Delaware has neither sales tax nor intangible personal property tax. No Delaware income tax is required and a business license is not required if the corporation does not choose to do business in Delaware. The entity is entitled to make the federal tax elections for S-Corporation status, if all of the owners are US Citizens or permanent legal residents. 5. Whats the difference between a Corporation and an LLC (Limited Liability Company)? An L.L.C. offers limited liability to the L.L.C. owners, but it is taxed like a partnership or a sole proprietorship. This then passes all the income and losses through to the owners unless the company elects to be taxed like a corporation. The L.L.C. has the advantage over a C-Corporation which makes an S Corporation tax election because the S Corporation can only have 100 stockholders and these stockholders cannot be corporations or individuals without a social security number. 6. Am I required to maintain an office in Delaware? No, an office does not have to be maintained in Delaware. An annual fee (example: $90) is paid to the registered agent so as to receive and forward copies of legal actions filed against the company. Annual meetings can be held any place and corporate minutes can be signed by consent, without a corporate meeting. 7. Can a Delaware Corporation or LLC do business in other states? A Delaware Corporation or LLC can qualify to do business in any or all of the 50 states as well as foreign countries. About the Author: Chris Einkauf works for Agents and Corporations, Inc. in Wilmington, DE. Agents and Corporations deals primarily with Registering Companies in Delaware but also offers Florida Incorporation and Nevada corporation / LLC formation. Business Incorporation Services

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