Limited Liability Companies and Corporations in Delaware
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A limited liability company, commonly called an "LLC," is a non-corporate type of business ownership which provides its members with the same limited liability as a stockholder and allows for the pass-through taxation of a partnership. Delaware adopted its first Limited Liability Company Act, the governing law of LLCs, in 1991 and it has been continually amended to make it the “leading and most cutting edge Act in the nation.”
choice of entity can make a big difference to you and your business.
Here are 10 good reasons to create a Delaware LLC:
It provides a stable and safe business platform for the protection of the members’ investments. This investment cannot be disrupted by a member’s creditors. Delaware law provides special protection against creditors by limiting their remedy to a “charging order.” With a charging order, the hostile creditor can only go after the debtor member’s profit distribution from the LLC and not against the LLC itself. Delaware is one of only a few states to provide a charging order.
The IRS treatment, for tax purposes, makes the Limited Liability Company similar to the “S” Corp in the way that taxes are paid not by the company, but rather only by the members.
LLCs do not have the ownership restrictions of “S” Corporations, making them a favored choice for business structures involving investors who are outside of the United States.
The LLC is governed almost entirely by its Operating Agreement (sometimes also referred to as a Limited Liability Company Agreement or LLC Membership Agreement). The Operating Agreement, which is required by Delaware law, is private and therefore not publicly filed or disclosed to the Delaware Division of Corporations. (Templates of this and other commonly drafted corporate documents are available on our Forms CD at a purchase price of $35.00).
LLC Operating Agreements allow a wide degree of contractual flexibility and, in fact, some formalities such as minutes, by-laws, meetings, officers and directors may be eliminated in the LLC agreement.
In Delaware, you may have an LLC with only one member. A Delaware single-member LLC may be registered to do business in other states, even though those states require LLCs formed in that state to have more than one member.
Members are not usually personally liable for the company's debts and obligations.
Management of an LLC may be by the members or by selected managers who may or may not be members themselves.
Delaware LLC's can, if they wish, vary the ownership interest percentage from the profit distribution and vote calculations.
Many people find value in using a corporate entity as an estate planning tool. By putting assets into an LLC and adding family members as members of the LLC, one can have effective and efficient control of assets upon death without triggering the complexities of probate. (This should always be discussed with your estate planning attorney and not attempted alone).
If you want to change your current company's structure or convert from a non-DE to a DE LLC because your attorney or accountant has advised you that a DE LLC would be the best business structure for your needs, or merge two or more together to get the right result for you, Delaware law allows this.
The Delaware Division of Corporations provides general templates for these filings. Our staff would be happy to assist you with the conversion process by forwarding you the documentation to get started, and then filing the completed documents with the Delaware Division of Corporations.
A Series LLC is first, an LLC (Limited Liability Company). As expressed above, LLC's enjoy the good things about both corporations and partnerships, such as flow through taxation like a partnership and a liability shield like a corporation.
The "Series" aspect is that you can create an LLC which is only one company but has many individual and distinguishable parts that act somewhat as if they were different companies. And so, if you have more than one enterprise operating you can separate them, but save money on filing fees and franchise tax with a Series LLC as opposed to having completely different corporate entities for each.
Many persons also use this vehicle to separate personal assets from liabilities that they may have, thus protecting their assets from some lawsuits. Other persons utilize Series LLC's as a way to conveniently organize their land investments.
The Delaware Division of Corporations does not provide a template for this type of filing, and this cannot be ordered online, but we can file your custom- drafted certificate of formation for the LLC and serve as your registered agent.