DELAWARE
Clear & consistent legal system in North America
Clear & consistent legal system in North America
It takes less than a day to incorporate a company in Delaware. The office of its secretary of state stays open until midnight Monday through Thursday and until 10:30 p.m. on Friday.
Virtually half of all public corporations in the United States are incorporated in Delaware, since it provides the anonymity to an extent that, you do not need any documentation to incorporate a company, which is otherwise in all other jurisdictions.
Statistics in the year 2012 showed that, Delaware had more corporate entities, public and private, than people — 945,326 to 897,934. Shell companies are very much sought for in Delaware.
It is a great place to reduce tax bills. Delaware tops the charts of domestic and foreign tax havens with a phenomenon termed by tax circles as “the Delaware loophole”; it allows companies to lower their taxes in another state in which they actually do business or have their headquarters, by shifting royalties and similar revenues to holding companies in Delaware, where they are not taxed. Over the last decade, the Delaware loophole has enabled corporations to reduce the taxes paid to other states by an estimated $9.5 billion. An outlier by nature, Delaware offers an opportunity to game the system and do it legally.
It's approximately 2,200 miles long, stretching from central New Jersey, south to Mexico's Yucatan Peninsula.
Fiscal Advantages
Regulatory Advantages
Limitations
Limited Liability Company
The Limited Liability Company is considered to be popular and adaptable for incorporation in Delaware. It has the best of both a partnership and corporations. It allows you to avoid double taxation of income at both levels i.e. personal & corporate.
Benefits of LLC are – “Pass through entities” – meaning all profits and loss of the company are passed through and reported on the personal income tax returns of members; no taxation at the corporate level; unlimited numbers of members; flexible organisation; Shareholders or directors do not need to be US citizens or residents; easy and simple corporate formalities;
General Corporation (C Corporation)
The most prevalent and legitimate form of corporation implemented by medium & large businesses in the United States. This corporation can consist of one person, and over the age of majority. There are no restrictions. C corporations offer more flexibility in making ownership arrangements. Companies that prefer to go public usually opt for C corporation, wherein the shareholder –employees not only obtain tax free benefits but also the benefit of accumulating earnings for future expansion at a lower tax cost compared to other entities.
C Corporation can issue different classes of stock, including convertible preferred stock that is crucial to attract venture capitals and other potential institutional investors.
Time to incorporate a company takes approximately 48hours, although it takes about a week to deliver the documents. No need of accounting or a secretary. Only a shareholder and a director have to be nominated.
S Corporation
S corporations may have up to 100 shareholders, all of who are residents of the United States. Unlike C corporations who can have variable shareholders, S corporations can have only one type of shareholder resulting in minimised flexibility. Shareholders are not responsible for debts or liabilities in business.
Corporate structure breaks down to:
The corporation's name must contain the word "Association," "Company," Corporation," "Club," "Foundation," "Fund," "Incorporated," "Institute," "Society," "Union," "Syndicate," "Limited" or the abbreviation "Co.," "Corp.," "Inc.," "Ltd." or words or abbreviations of like import in other languages. The name must be distinguishable from those of other corporations organised, reserved or registered as a foreign corporation under the laws of Delaware. Usage of words "Bank," "Banc," "Banque" and "Trust" need approval from the Department of Banking.
Delaware is popular for the number of Foundations it houses catering to the aid of various sectors across the world. Foundations are Individual, Corporate or Community based. Sectors being education, health care, public affairs, human services, art & culture.
Difference between C Corp & S Corp:
If a company’s first priority is flexibility for owners and managers, an LLC might be the way to go. Founders who are more focused on attracting and securing investments might prefer to form a C Corp. If the priority is favourable tax treatment for dividends, an S Corp might be optimal
| Description | C Corporations | S Corporations |
| Tax Payment | It is taxed as a separate entity under the United States federal income tax law | S corps is pass-through tax entity. It is not taxed separately, it elects to be taxed similar to a partnership |
| Shareholders | A corporation may qualify as a C corporation without regard to any limit on the number of shareholders, foreign or domestic | An S corporation is not itself subject to income tax; rather, shareholders of the S corporation are subject to tax on their pro-rata shares of income based on their shareholdings |
| Corporate Tax | In a C corporation, corporate income is taxed twice; once at the corporate level, and again at the shareholder level when the corporate income is received by the shareholder as a dividend | The income, losses, tax credits, and other tax items of the corporation flow through the corporation to the shareholders. Thus, income is only taxed once, at the shareholder level |
| No.of Shareholders | C Corporations may have any number of shareholders, making it easier to expand, sell shares etc. | S corporations may only have up to 100 shareholders. Only one type of shareholder |
| Ownership | No restrictions on ownership | Restrictions on ownership |
| Stock | Can have multiple classes of stock | Can have only one class of stock |
| Flexibility | Provides more flexibility in terms of growing your business, expanding ownership or selling your corporation | Not flexible. Cannot be owned by C corps, other S corps, LLCs, partnerships or trusts |
If a company’s first priority is flexibility for owners and managers, an LLC might be the way to go. Founders who are more focused on attracting and securing investments might prefer to form a C Corp. If the priority is favourable tax treatment for dividends, an S Corp might be optimal.
The minimum tax of $175.00 made effective from July 1st, 2014, with a maximum tax of $180,000. All active domestic corporation annual reports and franchise taxes are due annually on or before March 1st.
All Limited Partnerships, Limited Liability Companies and General Partnerships formed or registered in Delaware are required to pay a tax of $300.00 made effective from July 1st, 2014.
It is financially transparent. Delaware corporation income tax is evaluated at a flat 8.7% of taxable income derived from Delaware.
The Delaware General Corporation Law is the foundation for the jurisdictions corporate law. It is also known for its judicial system and the expert and impartial judges that decide its corporate cases, known as the Delaware Court of Chancery. It is a specialised court, sort’s corporate dispute with specific jurisdictions.
Delaware not only has corporation income tax & franchise tax, but also a tax on limited liability companies, limited partnerships and general partnerships. The legal structure of your company decides if you have to pay one or more taxes.
Delaware does not require work permits or residency permits separately from US federal law.
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