Delaware is Good for Small Business With An LLC

Did you ever wonder why so many businesses are based in Delaware? Delaware is friendly to large corporations and just as friendly to a small start up. Establishment of an LLC , or limited liability company offers a small business many advantages. You don’t even have to live in Delaware or do business in Delaware to benefit from this business friendly location.

A local attorney can act as your registered agent in
Delaware and you and any other members of your LLC can remain anonymous. The names of LLC members are not recorded and owners names are not required for transfer of ownership. The cost of filing for LLC status is only about $250, and about $150 yearly. There is no minimum capital requirement to file for LLC, your new business could have as little as a couple of hundred dollars in assets. Your personal credit history doesn’t matter, your company, as LLC can establish a separate credit history.

A family business owner might want to be aware that there is no state inheritance tax on stock held by non Delaware residents.
An LLC can offer tax benefits while protecting members personal assets. There is no corporate income tax on companies that don’t operate in Delaware. There is no sales tax, income tax or tax on intangible personal property. Because of the structure of the LLC double taxation can be avoided. Profits and losses pass through the members personal income tax returns, because income is a net profit and not income earned, a self employment tax is not charged.

The company itself, is not taxed. Members of an LLC can be compensated by using the distribution of profits by just writing themselves a check or by a guaranteed payment. Both methods of payment qualify as ‘fringe benefits’ which earn a lower tax rate. Members can loan money to the LLC and be paid back by the LLC with interest.

The LLC structure allows for the special allocation of profits. This means that members can receive profits and write off losses disproportionate to the percentage of ownership.
An operating agreement is necessary for an effectively functioning LLC, however the complexity of this agreement doesn’t even come close to what is required of corporations. Laws in Delaware fully support the operating agreement and the Delaware court system is especially adept at handling corporate and LLC matters.