Company registration in Delaware

Delaware has some of the most flexible incorporation requirements and taxation laws in the world, making it an attractive corporate jurisdiction for many companies. Almost two-thirds of the Fortune 500 companies and most publicly traded corporations listed on the U.S. stock exchange are incorporated in Delaware, despite its small population. The state of Delaware is an attractive jurisdiction for international and large U.S. based business as it does not charge income tax on corporations that do not operate in the state, has no public registry of officials, audit or paid-up capital requirements, and currency regulations or exchange controls such as FATCA or CRS are generally nonexistent in the United States. Moreover, Delaware is famous for its polished legal system and The Delaware Court of Chancery – a separate strictly corporate court specifically designed to facilitate smooth operation of business entities and promptly settle complex corporate disputes.

WHY DELAWARE?

WHY NOT?

No state income taxes imposed to corporations registered in Delaware which conduct their business outside the state
No stock inheritance tax for non-resident shareholders
No sales tax on intangible property
No withholding tax on dividends, royalties and interest paid to non-resident shareholders
No tax on trademarks, copyrights and leases
No tax on social security benefits
No wealth or personal property tax
All entities registered in Delaware can obtain a federal tax identification number (EIN)
The USA is not a part of Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS)
Delaware companies enjoy more legal and liability protection because of very established corporate laws. There is a consensus in the state to keep the corporate laws straight-forward, modern and up to date. This gives company owners more confidence that adverse changes cannot affect their business model
Companies are not required to have a physical place of business in Delaware in order to be registered there and there are no particular substance requirements
The incorporation process is friendly and takes no longer than 3 working days
The officers, shareholders and company directors are not legally required to be residents of Delaware
The corporate structure requirements allow one person to be the officer, director and shareholder, making it very flexible for small businesses
Delaware companies can have bank accounts anywhere in the world

All foreign shareholders must register for a personal Tax Identification Number (TIN) and file annual tax returns with the IRS. This significantly increases the risk of being considered a U.S. tax resident and being liable to pay very steep taxes on profits under the U.S. tax regime. It is also worth noting that if the company or its beneficial owner falls under the radar of the U.S. tax authorities once, they will continue to be monitored by the IRS even if they establish a tax residency in another jurisdiction and thus may still be liable to submit U.S. tax returns.
All shareholders of a US resident companies are required to pay their share of the federal/withholding tax on both distributed and undistributed profits which stands at 40% for individuals and 35% for corporate entities
C-corporations may be subject to double taxation
Foreign nationals are liable to pay a 30% tax on any investment or passive income derived from U.S. sources
Limited infrastructure for companies who wish to base their offices in Delaware, however setting up an office in another U.S. state would entail obtaining special foreign qualification certificates, complying with reporting requirements and paying franchise tax in both states
No electronic filling of tax returns and company accounts

Company Formation in Delaware

The incorporation process in Delaware is fairly easy and can be done on the same day, with final approval and documentation taking no more than three working days. Though there are no particular restrictions on the type of entity that can be registered in Delaware, the most popular are Limited Liability Companies (LLC) and General Corporations. These legal entities are very similar and both can be excellent financial instruments for a number of business models. An LLC can be described as a hybrid between a corporation and a partnership, it enjoys flexible administration and management structures and the liability of its members is limited to the sum of their investment in the company. It can be managed and controlled by a single director who can also be the sole member of the company and any terms, obligations, duties, rights, powers as well as member classes and financial procedures can be prescribed in a written limited liability company agreement. A General Corporation on the other hand has a very defined corporate governance structure by Law, it is separate and distinct from its shareholders in both rights and liability and are often, though not necessarily, incorporated as stock corporations for public listing.

For tax purposes General Corporations can choose a C-Corporation and S-Corporation status. C-Corporation is the default status upon incorporation, under which a company is liable to pay taxes on its profits and may choose to distribute dividends to its shareholders, who then have to pay an individual dividend tax which may sometimes result in double taxation. S-Corporations, on the other hand, enjoy a special tax status that allows them to pass on taxation, profits and losses directly to its shareholders, eliminating the possibility of double taxation.

Our corporate team, will gladly advise you if the Delaware jurisdiction can benefit your business and can advise you on the right type of entity for your business model. If Delaware is not the right jurisdiction for you, please feel free to browse our Company Registration section for more jurisdictions or contact our consultants for a tailor-made solution for your business needs. Our professional lawyers can assist you with company formation in your jurisdiction of choice as well as the management and administration of your company, document preparation and account opening procedures. Our firm also specializes in the formation and management of public companies and our knowledgeable experts can help you with the listing of your company on the stock exchange.

Corporate Features of a Delaware LLC and General Corporation

GENERAL	LLC	GENERAL CORPORATION
Incorporation Time	1 – 3 Business Days	1 – 3 Business Days
Local Registered Agent Required	Yes	Yes
Local Registered Address Required	Yes	Yes
Migration of Domicile Permitted	Yes	Yes
SHARE CAPITAL		Only one class stock allowed
Minimum Share Capital	No Minimum	No Minimum
Minimum Paid Up	No Minimum	No Minimum
Maximum Share Capital	No Maximum	No Maximum
Bearer Shares Allowed	No	No
SHAREHOLDERS
Minimum number	One	One
Maximum number	No Maximum	No Maximum for C-Corporations Maximum 100 for S-Corporations
Publicly accessible records	No	No
Corporate shareholder allowed	Yes	Yes
Annual General Meeting Required	Yes	Yes
DIRECTORS
Minimum Number	One	One
Maximum Number	No Maximum	No Maximum
Local required	No	No
Publicly accessible records	No	No
Corporate directorship allowed	Yes	No
COMPANY OFFICIALS
Secretary Required	No	No, but highly recommended
Local Secretary Required	No	No
Other Officials Required	No	No, but President is highly recommended
COMPANY ACCOUNTS
Requirement to Prepare	Yes	Yes
Requirements to File Accounts	No	No
Audit Required	No	No
OTHER ANNUAL REQUIREMENTS
Government Renewal Fee	USD 300 Franchise Tax	Franchise Tax of USD 175 – USD 250,000 (depending on size of share capital and/or total gross assets)
Annual Return/Report	No	Yes
Tax Return	No	Yes
Submission of Economic Substance Report	No	No

Contact our corporate team for further information on the Delaware jurisdiction, or request a consultation and our knowledgeable advisors will help you decide on the right jurisdiction for your business.

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