A limited liability company or LLC is one of the most commonly used business structures in the US. LLC allows the company to enjoy a number of benefits usually afforded to different legal entities; for example, the simplicity of the operations of sole proprietorship and pass-through taxation granted to limited liability partnerships. In this article, we will talk about LLC, its benefits, the process and requirements to establish it, and particularly, how to form a Delaware LLC.
Any entity or individual can be considered a member of an LLC. An entity or a person is an LLC member, no matter if they own 100 percent or less than 1 percent of the company. Even foreign nationals can be LLC members as the US does not impose citizenship or residency requirements when forming an LLC. (Please take note that when a foreign person forms a Delaware LLC with at least $10,000 connected to the company, they must register with the US FBAR; in some cases, they may also be required to submit government compliance documents from their home country). Financial institutions like banks or companies cannot be LLC members.
When you choose to form an LLC in Delaware, keep in mind that the state charges an annual fee of $300 for the company.
Benefits of an LLC
The regulations in terms of LLC formation vary from state to state, but in general, here are the advantages when you form an LLC:
- You can form an LLC even with just an individual member. This LLC can be used to perform solo transactions, such as in real estate. In addition, an LLC does not require the appointment of a Board of Directors, but the members can do so if they choose to.
- Like in LLP, the personal assets of the LLC members are protected from debts or lawsuits should the LLC be involved in such incidents.
- Members can choose from among the many LLC taxation options which they think suit them best. One is the pass-through taxation via partnership; two, c-corp entity transaction; three, s-corp pass-through taxation; four, single-member disregarded entity.
- Because an LLC is not required to have a board of directors, an LLC is not limited to administrative requirements. As such, it can operate in a way members see fit. Plus, the members can decide among themselves how to share or distribute profits. The IRS has a set of profit-sharing rules for small businesses to guide LLCs and other SMBs on their profit-sharing plan.
How to form an LLC in Delaware
- Choose a name to form an LLC in Delaware. You can reserve your preferred business name for up to 120 days or check the availability of your desired business name through this link.
- Choose a registered agent to assist you in forming your LLC. It is ideal that you work with incorporation agents, accountants, or lawyers who reside or are knowledgeable of Delaware laws.
- File the Certificate of Formation with the Delaware Secretary of State. The filing fee is $90. If you need a certified copy, you will need to add $50. The certificate includes the LLC name, registered office, registered agent, and the signature of authorized persons. An expedited service is also available, although if you’re already working with an incorporation agent like Bolder Launch, the formation process of your Delaware LLC will be simpler and easier.
- Create an operating agreement for the Delaware LLC you want to form. The operating agreement will formalize the terms that govern the management, interests, and activities of the LLC, as well as the rights of the LLC members. This needs to be notarized. When you form an LLC in Delaware, your operating agreement can either be single-member, multi-member, or multi-class. Please contact us to discuss the differences and the advantages of each of these.
- Get an Employee Identification Number (EIN) from the IRS. This acts like the business’s social security number and is needed for tax purposes, to open a bank account, and hire employees. Foreign nationals who form an LLC in Delaware, who are non-citizens or don’t have an SSN, can still obtain an EIN through this IRS page.
If you are looking to enter the US market by forming an LLC in Delaware, you have come to the right place. With a team of tax experts, accountants, and lawyers who are knowledgeable in the laws of Delaware, Bolder Launch can assist you to form your own LLC in Delaware in a timely manner.
This guide is part of Company Formation in our Launch Guide.
