AN OFFSHORE TAX HAVEN
FOR NON US RESIDENTS
AN INTRODUCTION TO STATE OF DELAWARE
Delaware is centered on the eastern seaboard of the United States, approximately midway between New York City to the north and Washington D.C., to the south. Lying in the heart of the eastern megalopolis, the State is bordered on the north by Pennsylvania and on the west and south by Maryland. To the east, Delaware is separated from New Jersey by the Delaware Bay and enjoys a scenic Atlantic Ocean coast. This location provides unusually good market access.
With a land area of only 1,982 square miles (5,133 sq. km), State of Delaware ranks 49th in land area among the 50 states. Delaware is the fourth least populated state with 706,000 residents. Two-thirds of the State's population resides in New Castle County, the northernmost of the State's three counties. Kent County and Sussex County each has a population of approximately 110,000 residents. All of the cities and towns in the State are independent, incorporated municipalities. There are three major cities in the State: Wilmington, with a population of 72,000; Dover, the State capital, with a population of 28,000; and Newark, the site of the University of Delaware, with 25,000 residents.
Delaware's central location affords rapid access to the major metropolitan areas of the northeast and Mid-Atlantic United States. Nearly one-third of the population of the United States lives within this eastern megalopolis. Interstate and other major highways and frequent passenger rail service provide easy transportation between Wilmington and New York (1 hour, 50 minutes), Washington D.C. (1 hour, 15 minutes), Philadelphia (30 minutes) and Baltimore (45 minutes). Within a 350-mile (550-km) radius of central Delaware lies every major population center from Boston in the north to Raleigh, North Carolina in the south and Cleveland, Ohio in the west.
Delaware is also well served by air transportation. Delaware's network of public and private airports can readily accommodate commercial and corporate aircraft.
Philadelphia International Airport, a major international passenger airport, is 30 minutes from downtown Wilmington. Baltimore and Washington International Airport is approximately an hour away by rail. Marine freight transport is served by the Port of Wilmington. As the first inland port on the Delaware River, Wilmington's containerized port is only 65 miles (100 km) from Atlantic shipping lanes. Its deep-water port facilities include modern, economic off-loading and storage facilities. The Port currently handles 4.5 million tons of waterborne cargo annually, including bananas, import and export vehicles, frozen meat and seafood, frozen juice concentrates, fresh fruits, lumber, steel, Kraft linerboard, gypsum, salt, urea, petrolcoke, various bulk ores and minerals and liquid bulk such as petroleum products.
The Port of Wilmington offers potential savings over neighbouring ports because of reduced vessel transit time to and from the Atlantic Ocean, high labour productivity and economical handling rates. The Port has ready access to Interstate 495, connecting it to major east-west and north-south interstate arteries. Rail access to the Port is available by Conrail and the Chessie System, with railcar loading docks located next to every terminal warehouse.
Delaware is also served by the mainlines of the Conrail and CSX railroads. Conrail's north-south route through Delaware facilitates fast through service to the vital northeast corridor and connections with CSX. Most of Delaware's plant sites are adjacent to rail lines or have rail sidings at the plant location. Rail sidings are easily obtainable in Delaware, as compared to other states in the region, due to the lack of rail congestion. In addition to major carriers, Delaware is also served by a number of short-line railroads.
Led by the chemical and automotive industries, manufacturing is the largest source of State income, closely followed by financial services that, with other elements of our service economy, are increasingly important. These industries figure most prominently in the industrialized and commercial northern third of the State. In the southern two-thirds of the State, agriculture is a more vital part of the economy. The poultry industry, corn, soybeans and diary products contribute significantly to farm income. One-half of the State's land acreage is used for farming.
Delaware actively seeks and encourages enterprise and investment. To this end, Delaware has evolved the most modern and flexible business organization laws in the United States, has adopted modern banking and consumer credit laws and has reduced personal income taxes and established a nationwide reputation for innovative tax structure.
ADVANTAGES AND DISADVANTAGES
OF FORMING A DELAWARE COMPANY
WHY INCORPORATE IN DELAWARE?
Foreign businesses seeking to enter or expand in the American marketplace can use their location in Delaware to accomplish their objectives. Delaware's strategic location permits easy access to the United States marketplace, the largest in the world. International business can easily incorporate in the state through the Department of State, Division of Corporations. Citizens and residents of other countries may incorporate in the United States through the standard incorporation procedures set forth by each state. The main benefit of incorporation is that your personal assets are protected from civil liability for acts of the corporation. Your company must have a physical place of business and agent for service in the state in which you incorporate. If you do not wish to open an actual office for your business, you can often use Our Firm as your Registered Agent and Registered Office provider.
One of the best reasons for incorporating, or forming a limited liability company, is to separate your personal assets from your company’s assets. If you conduct business without using a corporation, or limited liability company, you place your assets at risk. Separating your personal property from your business property, and using a legal form such as a corporation, can help protect your personal property.
Incorporation or formation of a limited liability company also allows you to take advantage of the statutory and judicial laws of Delaware, to help you plan how your business runs. Delaware is known as a business-friendly state and is a good choice if you intend to "go public". Delaware has many advantages, including very low incorporation and LLC formation fees, low annual franchise taxes, and no state corporate income tax for companies that operate outside Delaware. Delaware maintains a separate "Chancery Court" specifically for business disputes, known for its well-established record of decisions and speed. Delaware's court system helps business owners spend more time running the business and less time in court. Delaware companies may need to qualify or register to do business in their local jurisdiction, requiring an additional fee to the state where the business is operated.
One person or corporate entity can form an LLC in Delaware. One person or corporate entity can be the President, Secretary, and Treasurer and sole Director of a Delaware corporation, without disclosing the name or names in the Certificate of Incorporation. The director or directors are allowed to amend the By-Laws of the corporation. One person or corporate entity can be the owner and managing member of an LLC. Delaware has no minimum capital requirement to incorporate or form an LLC. Delaware Corporations and LLC’s can qualify to do business in all 50 states and foreign countries.
More than half a million business entities have their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 58% of the Fortune 500. The State of Delaware has adopted a clear, bipartisan policy to attract new business and encourage the expansion of existing operations. Key tax features, which now make Delaware more competitive, include: no State or local general sales tax. No personal property or inventory taxes. Real property taxes are among the lowest in the country. Corporate income tax credits and reduction of gross receipts taxes for new and expanded businesses. Additional tax credits on corporate income and reduction of gross receipt taxes for new and expanding businesses locating in 30 targeted census tracts. Property tax relief for new construction and improvements of existing property. The exemption of certain investment and holding companies from corporate income tax. The adherence of the State tax structure to the federal definition of corporate net income so that companies may take full advantage of any federal tax law change, such as more rapid depreciation of newly purchased assets. Two approved foreign trade zones will allow the deferment of import taxes. Public Utility Tax rebates of 50% on increased consumption for qualifying industries, and reduced rate for manufacturers and agricultural processors. Accelerated experience ratings for new employers.
START OR RUN A BUSINESS IN DELAWARE
One of the best reasons for registering a corporation, or forming a limited liability company (LLC), is to separate your personal assets from your company's assets. Whether you are beginning a brand new business, expanding an existing enterprise or simply planning to create a sideline business to supplement earnings from your salaried job, you need to consider how best to legally organize your undertaking. These days you have a number of choices, including organizing as a sole proprietorship, partnership, limited liability company or corporation. If you conduct business without using a Delaware corporation, or limited liability company, you place your assets at risk. Separating your personal property from your business property, and using a legal form such as a corporation, can help protect your personal property.
MAIN TOP 10 ADVANTAGES
1. Delaware is considered the most attractive state in the nation for organizing.
2. Delaware courts have a reputation of reaching reasonable and fair conclusions when construing the corporation laws.
3. Only one incorporator is required. A corporation may be the incorporator.
4. There is no minimum capital requirement.
5. The franchise tax compares favourably with that of other states.
6. For companies doing business outside of Delaware, there is no corporation income tax.
7. Delaware has no sales tax, personal property tax or intangible property tax on corporations.
8. No taxation upon shares of stock held by non-residents and no inheritance tax upon non-resident holders.
9. A corporation may keep all of its books and records outside of Delaware.
10. You may have a principal place of business/address outside of the State of Delaware as well.
Delaware incorporation or formation of an LLC also allows you to take advantage of the statutory and judicial laws of Delaware, to help you plan how your business runs. An example: Delaware Law allows for a version of the Limited Liability Company often called a Serial LLC. An LLC is normally very simple to create. The major difference between an LLC and a sole proprietorship or a partnership is the limitation of liability an LLC brings to you. But say that you wanted to conduct more than one type of business, and you didn't want to create a separate corporation or Limited Liability Company for each.
The Serial LLC allows different lines of business to be treated separately from each other from a liability standpoint. So, for example, an LLC that owns several apartment buildings may insulate the LLC from liability for each individual building, if the operating agreement allows for it, and the operating agreement is followed. For more information take a look at the Limited Liability Company Act of the Delaware Code (especially, Title 6, Section 18-215; Series of members, managers or Limited Liability Company interests).
We can incorporate or register a Delaware Limited Liability Company - LLC - as well as a Limited Partnership (LP) or Limited Liability Partnership (LLP).
FORMING AN LLC – LIMITED LIABILITY COMPANY
The Limited Liability Company or LLC is not a partnership or a corporation. An LLC is a distinct type of business that offers an alternative to partnerships and corporations, by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation. Limited liability companies, or LLC’s, are becoming more and more popular, and it's easy to see why. They combine the personal liability protection of a corporation with the tax benefits and simplicity of a partnership. Similar to the corporation, an LLC is recognized as a separate legal entity from its "members." Thus, an LLC can own property, commit itself to contractual obligations, and even commit crimes. In addition, they're more flexible and require less on-going paperwork than corporations. The management of an LLC can be by members, in which case the management is much like that of a partnership. If the management of an LLC is by managers, then the management structure closely resembles a corporation.
RELEVANT INFORMATION FOR AN LLC IN DELAWARE
State Law Reference - Delaware Code Annotated, Section 18-101
Title Of Filing: Certificate of Formation.
Delaware Company Name Requirements: The official name must contain the words "Limited Liability Company" or the abbreviation "LLC." Organizer Requirements: a Limited Liability Company may be organized by one person. The organizer need not be a natural person, nor a member. Certificate Of Formation Requirements: Certificates of Formation must contain the following: (1) name of company, (2) duration of company, if less than perpetual, (3) registered agent name and registered office address, and (4) any additional matters. Past and future contributions and the Limited Liability Company's power to avoid dissolution need not be stated.
Annual Report Requirement
Yes, to Department of State. Publication Requirement: No. Effective Date Of Limited Liability Company Organization: On the date of official approval of Certificate of Formation, the company becomes a legal entity and the members are shielded from personal liability. Membership Requirements: Minimum number of members required is one. The member may be a natural person or a business entity.
Transferability Of Interest
Unless provided otherwise in the Limited Liability Company Agreement, there is no free transferability of a member's Limited Liability Company interests. Transfers of interests must be approved by unanimous vote of all members. (Section 18-702(a)). Continuity Of Company: Unless provided otherwise in the Certificate of Formation or Limited Liability Company Agreement, a member's withdrawal has no effect on the continuity of the Limited Liability Company.
Unless provided otherwise in the Certificate of Formation or Limited Liability Company Agreement, a Limited Liability Company is managed by its members. Operating Agreement Requirements: Delaware law refers to Operating Agreements as "Limited Liability Company Agreements" and they govern the rights, duties, and obligations of the members. They must be in writing.
The Limited Liability Company must maintain copies of the following records at the company's registered office: (1) Certificate of Formation, (2) any amendments, (3) a current list of all members and managers (if any) and their addresses, (4) Limited Liability Company Agreement, (5) financial statements, and (6) federal, state, and local tax returns.
The members and managers of the Limited Liability Company are expressly shielded from liability for debts, obligations and liability of the company by the statute. Default Rules: The following are default rules which are in effect, unless otherwise provided for in the Limited Liability Company Certificate of Formation or Limited Liability Company Agreement: (1) voting rights of members are based on the percentage of profit interest of the member, (2) operating distributions are based on adjusted contributions of the members, and (3) profits and losses are based on contributions of members.
Limited Liability Companies are classified in the same manner as they are for federal income tax purposes. State level taxation is based on the federal taxation entity classification. State Franchise Taxation: There is a US$200.00 annual franchise fee for all limited liability companies at the state level.
Multiple member limited liability companies are treated as partnerships for federal tax purposes. Single member limited liability companies are reported on the owner's federal tax return as a disregarded entity, in effect treated as a sole proprietorship. (Federal Internal Revenue Code Section 701).
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