Delaware was the first of the thirteen states, which drafted the Federal Constitution, to ratify it and is thus known as "The First State".
Located midway between New York City and Washington D.C., Delaware which is one from the last in population, sits among one third of the entire population of the US and has excellent access to major domestic and export markets by highway, train, air and sea. The infrastructure is highly developed and has deepwater berths at Port Wilmington on the Delaware River, just 60 miles from the Atlantic Ocean shipping lanes.
In October of 1992, Delaware law recognized Limited Liability Companies (LLC's). The LLC combines the best aspects of the Corporation and the Limited Partnership without many restrictions.
Delaware is well known for the Delaware General Corporation Law which is said to be the friendliest in America. Also the dedicated court called The Chancery Court, which adjudicates on matters of Delaware Company Law, is fast and efficient. The trials are by appointed judges (not a jury), who issue written and well thought-out decisions. All this means is that you know the rules from a stable legal system when you incorporate in Delaware.
Delaware is the home to 50% of corporations listed on the New York Stock Exchange.
Limited Liability Company (LLC)
In October, 1991, Delaware enacted the legislation which enables the formation of a Delaware Limited Liability Company (LLC).
An LLC which was first legislated in the United States in 1977 has now been adopted in varying forms in all 50 states of the USA. Delaware is well known for its General Corporation Law and as an attractive location for company formation. Companies in Delaware known as LLC's, when organized combine the best aspects of a Corporation (a company limited by shares) and the Limited Partnership. This form of organization protects the personal assets of its owners, while affording them "pass-through" taxation, without most of the restriction inherent in the US "S" Corporation. Most importantly for a person or group of persons who wish to own a US company which provides the benefits similar to a traditional Offshore Company (IBC) registered in an offshore Tax Haven, Delaware LLCs some times referred to as "Delaware offshore companies" or "Delaware companies for non-residents", is tax free on business transactions and benefits derived outside the United States and whose members are US non-resident aliens.
To enjoy the US tax free benefit, it is advised that the LLC have two or more members.
Features of a Delaware Limited Liability Company
- A Delaware LLC may be formed by one or more organizer or member. For tax purposes, non-resident legal entities (such as companies or Corporations) who are members of the LLC may cause the IRS to classify the LLC as a branch of a foreign company in the US, and the LLC will be taxed on its worldwide income. It is therefore recommended that the non-resident members of Delaware offshore companies be physical persons.
- An LLC does not issue shares and therefore does not have shareholders. The owners of an LLC are referred to as members.
- A Delaware LLC is a legal entity, registered with the state, and is treated separate from its members.
- The Delaware LLC is recognized anywhere in the world as a legally registered US company.
- Because of the Limited Liability status, the law protects the members (owners) from the debts and other obligations of the LLC.
- After Delaware offshore incorporation, the risk to an owner of a Delaware offshore LLC is to the extent of his investment in the LLC, and all his personal assets are protected.
- A Delaware Limited Liability Company may be fully owned by non-resident aliens.
- An LLC may also be owned by Corporations (companies limited by shares), Partnerships, Trusts, Charitable Organizations and Pension Plans.
- After Delaware company formation, the Limited Liability Company must have these words after the company name or the abbreviation thereof i.e. "Limited Liability Company", "L.L.C.", or "LLC".
- The IRS tax treatment of a Delaware LLC is on the flow-through tax basis. That is the LLC is not taxed on its profits. The income of the LLC is distributed to its members who are taxed on a personal income basis.
- Non-resident aliens are not taxable by the US on income derived out of the US. If an LLC derives its income outside of the US, the non-resident aliens do not file tax returns.
- There is no limit on the number of members allowed in a Delaware LLC.
- The Management of an LLC is usually undertaken by its members. If it is found necessary, an outside manager may be employed and would report directly to the members.
- The structure of the LLC does not provide for a Board of Directors. The flexibility in the law allows the members by agreement, written or oral, to decide on the most appropriate management system and on the distribution of profits.
- The voting authority usually is in direct proportion to member's interest in profits.
- The manager of a Delaware LLC may be a member.
- There are no statutory requirements concerning meetings of members or record keeping. It is recommended that with two or more members, Members' Agreement be entered into.
- If meetings are held by members, this may be done anywhere in the world and in any way convenient to the members.
- An Annual Report is required, which sets out the distribution of profits to US residents.
- A Delaware Limited Liability Company (LLC) is a good vehicle for non-resident aliens to earn tax free income (not derived in the USA), utilizing a US business entity.
- Members of a Delaware LLC are not liable for tax to the United States providing that:
- The members are non-resident aliens.
- The LLC does not employ US residents as permanent staff, or rely on a dedicated place of business within the United States.
- The LLC does not undertake any business activity that is effectively connected with business or trade within the United States.
- The Delaware LLC has a perpetual life and membership is easily transferable. It is advisable to enter into a Members' Agreement if alternative conditions are required.
Delaware is recognized for its General Corporations Law which provides a stable legal platform. There is a Chancery Court which adjudicates on corporate matters. The courts do not use juries, so decisions are issued as written opinions and litigation is not settled by the emotions of a jury, but on stable law.
A registered Agent and office is required, which we will provide, along with Nominee Services. We are ready to provide you Nominee Members.