Formation of a Limited Liability Company in the USA (Delaware LLC)
A Delaware limited liability company (LLC) is a great solution for a startup due to low formation and maintenance costs; no minimum capital requirements; no sales, personal property or corporate income taxes; and limitation of liabilities of members and managers.
It provides a low-cost solution for conducting your international business outside of the United States.
FACTS & INFO
A Delaware LLC is a unique non-taxable offshore corporate structure, frequently used for conducting international business outside of the United States. It is preferred to other US C-corporations, as these corporations must file income tax returns on their worldwide income even if they owe no US taxes, do no business in the US, and are owned by non-US citizens/residents. A Delaware LLC also has better asset protection features than a C-corporation.
In October, 1991, Delaware enacted the legislation which enables the formation of a Delaware Limited Liability Company (LLC). An LLC is a combination of a corporation and a partnership which has become extremely popular in recent years. Like a corporation, an LLC has a legal existence separate from its owners, and the owners and managers are not personally liable for the company’s debts and obligations. Like a partnership or an S-corporation, an LLC is automatically treated as a pass-through entity for tax purposes. Key elements of a Delaware LLC include:
- A creditor of the owner of a Delaware LLC cannot seize the assets of the LLC.
- A single-member Delaware LLC is automatically disregarded as an entity separate from its owner and includes all of its income and expenses on the owner’s 1040 tax return.
- A Delaware LLC with two or more members is treated as a partnership.
- There is unmatched contractual flexibility with a Delaware LLC. Delaware state law provides rules only on matters on which the members have failed to agree. This is known as ’freedom of contract’ and nowhere is it stronger than in Delaware.
- Personal liability is limited for owners and managers to the amount of their investment in the company, just like a corporation.
- Non-US owners of a Delaware LLC with no US source income pay no US taxes whatsoever. A Delaware LLC may be formed by one or more organiser(s) or member(s).
A Delaware LLC may not use a name identical or similar to an existing company within the state of Delaware. The use of the following words is also prohibited: "Bank", "Insurance", or "Reinsurance". The company must have the words "Limited Liability Company" after its name (or an abbreviation thereof i.e. "LLC" or "L.L.C.").
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 may have a minimum of one member (owner). Each member of a Delaware LLC is liable only to the extent of his or her percentage of ownership in the LLC. Members may be individuals or corporate bodies. There is no limit on the number of members allowed in a Delaware LLC.
DIRECTORS AND COMPANY SECRETARY
The management of a Delaware LLC is based on an agreement between its owners, who are known as members. It allows for a customised management structure, which dictates the economic relationship among owners. While Delaware law permits a Delaware LLC to be managed by its members, it does not require members to be managers. The Delaware LLC statute allows parties to define their business relationship in the written agreement however they wish. This is called freedom of contract. Delaware law provides rules only for those matters on which the parties have failed to agree. The contractual flexibility offered by the Delaware Act is unmatched by any other LLC statute. For example, unlike a corporation, an LLC can distribute profits in any manner described in the LLC agreement, regardless of ownership share. The structure of the LLC does not provide for a board of directors.
Delaware law requires for Delaware LLCs to have a registered agent when the company is first formed and throughout the life of the company. The registered agent’s name and address are included in the formation documents. This information is a matter of public record. The registered agent is responsible for receiving important legal and tax documents including: notice of litigation (service of process), franchise tax forms and annual report forms.
There are no statutory requirements concerning meetings of members or record keeping. It is recommended that with two or more members, a 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.
Incorporation usually takes up to 10 working days.
RECURRING MAINTENANCE FEES
As from the second year, there are recurring maintenance fees of $690. These include:
- Provision of registered office and registered address
- Payment of annual tax registration/renewal ($300)
The company must be renewed by May 31, irrespective of the date of incorporation.
A Delaware LLC does not pay US state or federal income tax if: its owners are not US citizens or Green Card holders; its offices are located outside of the US; the LLC does no business in the US. The IRS tax treatment of a Delaware LLC is on a 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 outside of the US. If an LLC derives its income outside of the US, non-resident aliens do not need to file tax returns.
AUDIT AND ACCOUNTING
A Delaware LLC is not required to file state or federal tax returns. Whilst there is no requirement to file audited accounts or annual returns with the authorities, a company is required to keep financial records, which should reflect the financial position of the company. An annual report is required only in cases where there is distribution of profits to US residents.
Our Services and Requirements
OUR SERVICES INCLUDE:
- Name check and approval
- Filling of the incorporation documents with the Delaware Division of Corporations
- Payment of the government fees (renewed by May 31, irrespective of the date of incorporation)
- A standard set of corporate documents
- Provision of registered agent and registered address for one year
- Rubber stamp
Please note: If applying for a corporate bank account you will need to order a full set of apostilled company documents where the account is opened outside of the USA.
Please provide the following documents for all directors, shareholders, beneficial owners, and authorised signatories:
- Notarized copy of valid passport.
- Original or Certified copy of utility bill / bank statement (as verification of residential address, dated within three months).
- Original or certified copy of Banker’s reference letter (dated within three months).
- In cases where shareholders and/or directors are corporate bodies, full apostilled set of corporate documents and certificate of good standing (for companies registered more than one year).
IMPORTANT NOTE: LICENSABLE BUSINESS ACTIVITIES
If you conduct any activity without the required license or authorisation granted by a relevant authority in any jurisdiction, Starting Business will not be able to assist you with the company formation or bank account opening related to such unlicensed activity.
Licensable activities include, but are not limited to: provision of financial services involving trading/brokerage in foreign exchange, financial and commodity-based derivative instruments and other securities; offering investment advice to public; insurance and banking; operation and administration of collective investment schemes and mutual funds; payment processing services; money exchange, money transmission or money brokering; asset management; safe custody services; gaming, gambling and lotteries.
Please contact us if you need assistance in the licensing of your financial, Forex brokerage or gambling company.
Shipping of corporate documents or banking kits to your destination requires an extra charge and will be automatically added to your order during checkout. Shipping costs for international courier services are set automatically depending on geographic zones.