Process of Company Incorporation in Delaware
Delaware is one of the states of the United States, in the Mid-Atlantic or North-Eastern region. Delaware is one of the popular types of a hub for corporate because of its modern and flexible corporate laws and efficient judiciary and legal community along with business-friendly government and customer oriented staff.
Market Opportunities
Delaware’s business law is considered to be one of the most flexible ones as it solely focuses on business law only. For the Corporations, there is no corporate income tax levied for the Companies. Also, the taxable requirements are favorable to the companies. There lies no personal income tax for the non-residents. The shareholders, officers, directors of the corporations or members or LLC don’t require compulsory residential status.
Types of Companies
Delaware offers a variety of corporations such as general, close and nonprofit. There are many options for everyone when it comes to choosing the best one for business. The major types of corporations are:
• General Corporation: This type of Delaware Corporation is typically one of the most popular types of corporation. The business owners are often attracted by the ability to go to the public and raise capital by selling shares in the Company. This type is used by the companies that wish to attract the venture capital funding. The main characteristics of General Corporation are that directors run the company and are solely responsible for overall management; shareholders can own the company through shares etc.
• Close corporation: This type of organization is designed for the close-knit group as it cannot have more than 30 shareholders in total. There is a restriction on the transfer of stock as compared to General Corporation.
• Public Benefit Corporation: This type of corporation is helpful to make them act morally, ethically and responsibly in regard to society, environment, the natural world and the world at large. This type of organization can be formed in the manner of Delaware Corporation by filing a certificate with the Delaware Division of Corporations. The certificate of incorporation for a Delaware Public Benefit Corporation must clearly be marked to demonstrate the entity as Benefit Corporation.
• Limited Liability Company: This is a recent and most flexible business structure that is available in Delaware. It is formed by filing the certificate of formation with the Delaware Secretary of state. The main characteristics of this type of Company is a separate legal entity having the power of conducting the business, acquiring, holding the property and sue or be sued in its own name. There is a limited liability company agreement in writing which serves as the relationships among members and the management structure. The main attributes of LLC include: that any member or the manager may bind the LLC, no member is personally liable for the debts or obligations of an LLC, and it has a perpetual existence
• Joint Venture: A Joint Venture is simply a general type of partnership formed to pursue a single business venture that is limited to its scope and duration. The term of Joint Venture is commonly used to describe the business undertaken by two or more of existing businesses seeking the combination of the resource.
What are the Advantages of Company Formation in Delaware?
Following are the advantages of company formation in Delaware-
• Flexibility: The Delaware Corporate structure is considered to be very flexible in terms of its structure, shareholders, directors, and officers. The shareholders, directors, and officers need not be the residents of Delaware. This allows just one person to be the Director, shareholder, and officer of the Corporation. Some states have a need of a minimum of three people to hold the officer or director positions.
• Privacy: Delaware Corporations provides a high level of privacy since in these types of Corporations there is no requirement of disclosure of officer or Director Names on the formation documents. Thus it provides an extra level of privacy.
• Investor friendly: Delaware corporations are above all other states as considered to other business structures. In case of venture funding or going public, Delaware serves as a smart option.
• Tax Benefits: Delaware has business-friendly tax laws. Businesses formed in Delaware conduct business there do not pay taxes in corporate income tax. Thus, shares owned by people outside Delaware are not subject to Delaware Taxes.
What is the Incorporation process?
The requirement of incorporating a business entity in Delaware differs in respect to the type of business entity location and the fact that whether it has employees or not.
Step 1: The first and foremost step in the process of incorporation is to determine the type of business entity. That is a general partnership Corporation, limited partnership or Limited Liability Company.
Step 2: After the selection of the type of business entity, registration with the Secretary of the state Division of Corporations needs to be done.
Step 3: Obtaining of federal identification number needs to be done. A complete form relating to this is available on the official website of Delaware.
Step 4: The next step is to determine whether the proposed company has employees or not. If yes than registration needs to be done to the Delaware Department of labor. If there are no employees, in that case, the corporation shall register with the department of finance, a division of revenue register is to be filed online and thereafter the operations can be started after getting the license. After obtaining the license the organization needs to contact the other state agencies.
Documents Requirements
After the name reservation there needs to be a certificate of incorporation/formation forms that need to be filed. The entity forms are available on PDF fallible and are then needs to be mailed or faxed to the prescribed office. There contains a cover sheet with the name or entity name, registered office, and phone number.
The cover memo needs to be filed which contains the following blocks:
• Submitter’s information
• Certification request Information
• Type of certificate request
• Method of return information
• Credit card information
This information needs to be filed in a form and posted to the official address of Delaware Division of Corporations.
Taxation Aspect
The taxation in Delaware has a long history of Corporation friendly laws. In addition to this, the tax laws allow the corporations to be taxed at a low rate in Delaware and to avoid higher taxes in their own states. It is considered to be a tax-friendly place and does not collect taxes from its own corporations that do not do business in Delaware itself. There is no tax royalty payment as well. In consideration, the tax policies lead to substantial savings done by the corporation. Although it is advisable to consult a tax professional at the time of incorporation so that tax benefits can be availed by the business organization.
Conclusion
Corporations can be more quickly formed in Delaware as compared to other states since Delaware does not require to publically disclose the names of the directors or shareholders of Corporation keeping the confidentiality which is an add-on for the investors. Apart from the confidentiality factor, the laws are generally favorable to the businesses and unlike the states, it separates the cases involving the corporate law for the disputes if any. Thus Delaware serves as an unusually well developed and predictable body of corporate law.
