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Delaware (United States of America) Company Formation Frequently asked questions (FAQs)

1. Case Study - Delaware L.L.C and Corporation?

For better recognition on L.L.C and Corporation, let's take Google and YouTube for example

Google is a Corporation and YouTube is an L.L.C. Why did they choose different entity types?

The L.L.C vs Corporation distinction is clearly defined by this one example that the new generation of entrepreneurs should take full take advantage of.

YouTube actually started as a corporation, filing its Certificate of Incorporation with the Delaware Division of Corporations on October 3, 2005. On November 8, 2006, just 13 months and five days later, it merged its Corporation into an L.L.C, which is one of the key advantages of Delaware companies: they can change from one form of entity to another, whenever they want.

Read more: Advantages of Delaware LLC

YouTube L.L.C, on the other hand, is owned by a few members. Nobody but the insiders know how few, and nobody but the insiders know who the owners are. In addition, nobody but the owners know what the company finances are, because no public disclosure is required. That’s the benefit of a Delaware L.L.C—your members, their ownership percentages and your financial valuation are private matters, of which only the company insiders are aware. There is no public registration, no public disclosure and no federal requirement of any type that necessitates the owners of a Delaware L.L.C to reveal who they are on the public record.

Google chose to be a Delaware Corporation so it could go public and raise money, which they did on August 16, 2004. Once it did so, it quickly became one of the richest companies in history. Google's rise to power created tens of thousands of millionaires and a lot of billionaires. Even though 60% of Google is owned by institutions, there are millions of individual shareholders in the company. The company has current cash reserves of $50 billion.

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2. Why should you choose OffShoreCompanyCorp to register new company in Delaware, USA?

Forming a Delaware corporation is easy with us. You can select which type of corporation you'd like to form, choose whether you'd like to obtain a Federal Tax ID Number and more. We also have a knowledgeable staff available to help over the phone, via email or by live chat.

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3. Delaware Corporation vs LLC

Comparison 2 types of company Corporation vs LLC in Delaware, USA: 

  L.L.C Company Corporation Company
Governance structure
  • All members are bound by an operating agreement.
  • The operating agreement determines all issues in the company.
  • The members may manage the company themselves or they may hire an external manager.

There are 3 tiers of power:

  • Shareholders – own the company
  • Directors – manage the major business actions
  • Officers – carry out day-to-day business activities
Federal taxation
  • IRS considers a single-member LLC to be a disregarded entity and a multi-member LLC to be a partnership.
  • The entity/partnership must fill in  a Federal Tax ID number (also called an employer identification number or EIN).

IRS taxes in 3 different ways:

  • C-corporation – pays taxes on profits each year and may
    choose to distribute dividends to shareholders. If the
    shareholders are a small, tight-knit group, this is often
    referred to as double taxation.
  • S-corporation – the tax liability on the profits and losses
    of the company are passed through to the shareholders.
    They must pay the taxes.
  • Tax exempt – the company must file IRS Form 1023
    and qualify for tax-exempt status by engaging in a
    qualifying charitable, religious or public-service purpose.
  • No annual report required

Annual report must state:

  • the corporation’s physical address
  • all directors’ names and addresses
  • one officer’s name and address

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4. Complete Delaware Company Kit package includes
L.L.C Company Corporation Company
  • Apostille
  • Certified Copy of Certificate of Formation
  • Notarized Statement of Authorized Person
  • Digital Corporate Seal
  • Apostille
  • Certified Copy of Certificate of Incorporation
  • Notarized Statement of Incorporator
  • Articles of Incorporation (BY-LAWS)
  • Digital Corporate Seal

Hard-copy of documents will be delivered to client’s registered / mailing address without courier fee charged.

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5. Why form an LLC in Delaware, USA?

A Delaware LLC (Delaware limited liability company) is a type of business entity that is created by filing the proper certificate of formation with the Delaware Secretary of State.

So why form a Delaware LLC?

  • The Delaware LLC is a truly unique business format in that the structure of the company and the rules that govern its members are contained in a contract called an operating agreement, which is drafted by the company's members (owners).
  • In drafting the operating agreement, you have what lawyers call ‘freedom of contract’, which means that, as the owner, you have the freedom to tailor the terms and rules of your LLC to accommodate your specific business needs.
  • Once signed and agreed to by all parties, the operating agreement is legal and enforceable by all parties.

When you form your Delaware LLC through OffShore Company Corp, our corporate kit, which is included in both the standard and premium packages, will provide you with an operating agreement to customise to your specific business needs.

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6. What is a Delaware limited liability company (LLC)?

Delaware LLC

An LLC is a relatively new type of entity in the United States. If properly structured, it combines the limited liability of a corporation with the pass-through taxation of a partnership. However, it is important to clarify that while LLCs can be treated as partnerships, they are not corporations.

An LLC is a business vehicle with a legal existence separate and distinct from its owners. Owners and managers are not personally liable for the company's debts and obligations. These features, when combined with non-U.S. source income, mean non-resident aliens of the United States can avoid U.S. taxation when using an LLC.

Read more: Delaware LLC formation requirements

LLC Operating Agreement

The operations and management of an LLC are governed by a written agreement, composed by its owners, called an LLC Operating Agreement. The Delaware Limited Liability Company Act allows the parties to define their operations, management and business relationship in the LLC Operating Agreement. This is known as freedom of contract.

An LLC guarantees secure confidentiality as well as the ability to create a customized management structure that establishes the economic relationship among owners. The LLC Operating Agreement can be written in any language and is typically not required to be translated into English.

How to Manage an LLC

While the Delaware LLC law permits a Delaware LLC to be managed by its members, it does not require members to be managers. More importantly, the law also states that no member or manager is personally responsible for any debts, obligations or liabilities of the Delaware LLC solely by being a member or acting as a manager.

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7. Seven major benefits/advantages of Delaware, USA LLC

With minimal start-up requirements, simple maintenance and the ability for members to establish their own company structures and rules, the Delaware LLC is the most flexible type of business entity offered by any state or country in the world

Below are seven of the significant benefits of a standard Delaware LLC:

Advantage # 1: Custom LLC Business Structure and Rules

This means the terms and rules of each LLC can be tailored to accommodate the specific needs and preferences of an LLC. This is the biggest benefit of an LLC over any other form of business entity. This power is called freedom of contract.

Advantage # 2: Asset Protection Against Creditors

Delaware LLCs possess increased asset protection against creditors. This means that if a member of an LLC has a judgment filed against him/her, a creditor cannot attack the LLC nor acquire any portion of the LLC's assets. This benefit protects everyone in the company

Advantage # 3: Statuary Limitation on Member Personal Liability

A statutory limitation on the personal liability of the members of an LLC means that members are not held liable for repayment if an LLC fails and leaves behind debt. They just lose the amount of dollar they invested in the LLC.

Advantage # 4: Delaware LLC tax benefits - Treatment by the IRS

When an LLC is formed, the owners can choose whether they want the LLC to be taxed as a partnership, an S corporation, a C corporation or a sole proprietorship. Single-member LLCs are not recognized by the IRS and therefore pay no taxes at all.

Advantage # 5: Simple Start-Up and Minimal Requirements

Very little information is required to form an LLC in Delaware, and start-up involves only a small filing fee. Additionally, there are no meetings or voting requirements.

Advantage # 6: Low Annual Fees and Simple Maintenance

The cost to maintain a Delaware LLC is simple and inexpensive. Once a year, a simple form and an annual Franchise Tax Fee of $300 must be filed with the Delaware Secretary of State, and a Registered Agent Fee must be paid annually, as all Delaware LLCs are required by law to have a Registered Agent to accept service of process.

Advantage # 7: Delaware LLC Privacy

You are not required to disclose any information about the owner of an LLC to the state of Delaware in order to form or maintain an LLC. In Delaware, you are required only to have a designated contact person and a Delaware Registered Agent.

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8. What is Delaware franchise tax and due date?
Delaware Corporation Company
There are 3 different annual rates for 3 circumstances
5,000 shares or less 5,001 - 10,000 shares over 10,000 shares
225 USD 300 USD 375 USD
(This fee already includes fixed 50 USD annual report fee)
Due date: March 1st of every year**
**Late payment will be imposed 125 USD + 1.5% of monthly interest
Delaware LLC Company
Flat annual rate: 300 USD Due date: June 1st of every year*
*Late payment will be imposed 200 USD + 1.5% of monthly interest

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9. How to open a company in Delaware, USA? S-Corp, C-Corp or LLC

With Delaware LLC which conduct no business/source income in the US are not subject to US federal income tax, not required to file a US income tax return. Delaware LLCs are popular vehicles for conducting international business. In other hand, Delaware Corporation can go public and/or raise capital as needed by selling stock. In general, it is Offshore Company Status.

How to open a company in Delaware, USA?

Step 1 Delaware Offshore Company Formation, initially Our Relationship Managers team will ask you have to provide the detailed information of the Shareholder/member names and information. You can select level of services you need, normal with 2 working days or a working day in urgent case. Furthermore, give the proposal company names so that we can check the eligibility of company name in Delaware’s Corporation Division system.

Read more: Delaware company registry

Step 2 You settle the payment for Our Service fee and official Delaware Government Fee (Franchise tax) required. We accept payment by Credit/Debit Card Visa Visa Discover American , Paypal Paypal or Wire Transfer to our HSBC bank account HSBC bank account (Payment Guidelines).

Step 3 After collecting full information from you, Offshore Company Corp will send you a digital version of Certificate of Formation, Certificate of Member, Delaware First State, Statement of Authorized Person and Apostille via email. Full Delaware Offshore Company kit will courier to your resident address by express (TNT, DHL or UPS etc.)

You can open bank account for your company in European or other jurisdictions supported offshore bank accounts! You are freedom international money transfer under your offshore company.

Your Delaware Company formation completed, ready to do international business!

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10. What is a Delaware general corporation?

A general corporation – often referred to as a stock corporation, open corporation or C corporation – is highly recommended when a company goes public or plans a private offering of stock. General corporations are also typically used when a company wants to attract venture-capital funding.

A general corporation has three tiers of power – shareholders, directors and officers. Each has different rights and responsibilities within the corporation.

Shareholdersprovide the financial resources in the company. They own the company but do not manage its routine. Holders of common stock receive one vote for each share they own, and they have the right to help elect the members of the board of directors, as well as to vote on certain other matters of major significance to the company.

The shareholder who holds a majority of the shares of issued stock also holds the right to control the company. They are sometimes referred to as majority shareholders. They possess a larger amount of responsibility than minority shareholders.

Other shareholders who hold no controlling role are referred to as minor shareholders. Generally, they bear no responsibility to the company. They are able to assign or grant their votes to anyone they choose, and sell their stocks at will.

Shareholders are rewarded in two ways – by dividends paid on their stocks and by the increased value of their stocks as the company grows.

Directors take responsibility for the company’s overall management. They manage all the major Delaware business actions, such as the issuance of stock, the election of officers, the hiring of key management, the establishment of corporate policies and the setting of their own and key officers' salaries and compensation packages.

Directors may make decisions and take action in pre-announced meetings with a quorum present, or without a meeting by unanimous written consent of all directors. Directors cannot give or sell their votes to other directors, nor can they vote by proxy.

Ordinarily, directors may be removed and replaced – with or without cause – by the majority vote of the shareholders. This is the controlling role of majority shareholders.

The officers work for the board of directors and handle the day-to-day business activity. Officers carry out the board's decisions and implement the board's policy. Officers are usually the President, Vice President, Secretary and Treasurer. The board of directors will appoint other officers such as CEO, Sale Manager, Operation Manager etc, to fit the company provision.

Officers do have the right to purchase company-issued stocks at the discretion of the board of directors.

Why choose Offshore Company Corp to form a corporation in Delaware?

Forming a Delaware corporation is easy with us. You can select which type of corporation you'd like to form, choose whether you'd like to obtain a Federal Tax ID Number, and much more. We also have a knowledgeable staff available to help over the phone, via email or by live chat.

Read more: 

11. What is included in Delaware Company Kit?

Complete Delaware Company Kit package includes:

L.L.C Company Corporation Company
L.L.C Company
  • Apostille
  • Certified Copy of Certificate of Formation
  • Notarized Statement of Authorized Person
  • Digital Corporate Seal
  • Apostille
  • Certified Copy of Certificate of Incorporation
  • Notarized Statement of Incorporator
  • Articles of Incorporation (BY-LAWS)
  • Digital Corporate Seal

Hard-copy of documents will be delivered to client’s registered / mailing address without courier fee charged

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12. Compare Delaware business entities
  Limited Liability Company (LLC) in Delaware, USA General Corporation
Formation State filing required State filing required
Liability Typically, members are not personally liable for the debts of the LLC Typically, shareholders are not personally liable for the debts of the corporation
Raising capital Potential to sell interests, contingent upon operating agreement restrictions Shares of stock are usually sold to raise capital
Taxation Not taxed at entity level if properly structured. Profit/loss passed through directly to the members Taxed at the entity level and shareholders receiving dividends are taxed at the individual level
Formalities Less formal meetings and minutes are required; state reporting required Board of directors, formal meetings, minutes and annual state reports required
Management Members have an operating agreement that outlines management responsibilities Shareholders elect board of directors to appoint officers for day-to-day management
Existence Perpetual unless otherwise specified Perpetual unless otherwise specified
Transferability Contingent upon operating agreement restrictions Shares of stock are easily transferred

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13. What are the requirements to set up a Delaware corporation?

There are two kinds of business entities for setting up a Delaware corporation: S-Corp and C-Corp. Moreover, an important step for opening a company is to find a reliable agent to help the business owners understand clearly the formation process as well as all advantages that the owners can benefit from.

To form a Delaware corporation, the businesses send all required documents to the Secretary of Delaware’s office and then additionally pay service fees for the corporate formation process. After the business owner receives the Certificate of Incorporation, the Delaware corporation is ready to operate.

The requirements to set up a Delaware corporation are the same for the US residents and foreigners who want to set up a Delaware company. The following documents below are mandatory for opening a Delaware corporation:

  • Name of the corporation: Delaware company needs a name that must be unique. The business owners can search online to determine whether the name you choose is still available or not. The business owners can reserve the corporation name before the registered process is finished.
  • Director information: Delaware corporations must have at least one director. However, the directors can be of any nationality and are not required to be listed in the public records.

Lots of companies choose to incorporate in Delaware because many advantages are given by the government. One IBC can support and advise the clients about the process as well as other services to open a company in Delaware. Everything becomes easy for the customers in doing business with One IBC.

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14. What are the requirements of the step to register a foreign LLC in Delaware?

Delaware is a popular state among foreign businesses that are planning to do business in the USA. Delaware LLC formation requirements for starting a company in Delaware is similar between foreigners and USA citizens, including:

  1. Hire a Delaware registered agent: A registered agent can be an individual or business entity. The registered agent will help your company in receiving important information such as official government notification, legal documents, tax forms, and others related to lawsuits. It will represent your business’s point of contact with the state without the need of you being present at the company which allows you to operate the company outside the USA.
  2. Name the company: Choose 3 different names and make sure that these names are still available. After that, the business owner submits the business’s names to the Delaware government and it will automatically belong to your business after the state-approved.
  3. File Certificate of Organization: to register an LLC in Delaware, the business owners need to file the Certificate of Organization with the Secretary of State. It can be done online or mail to the Delaware Division of Corporation’s website. (Read: Benefits of Delaware LLC)
  4. Obtain an EIN: The Delaware company requires to obtain Employer Identification Number (EIN) to file taxations and pay taxes later.

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15. What are the benefits to set up Delaware LLCs?
  • Tax: If your operations are in other states, there will be no taxation within Delaware. The Corporate Income Tax is 8.7% (2019) which the business owners need to pay to the Federal. The business owners, in addition, need to pay the Franchise tax for LLC due to June 1 of each year. However, if the owners do not do business in the US, they are exempted from paying this tax. (Read more: Delaware LLC franchise tax)
  • Any person can open a Delaware company and does not need to go to Delaware, as the process can be done online or just with a call to the Delaware government.
  • A director can be a foreigner and live outside the US.
  • The Court of Chancery resolves all business cases as soon as possible.

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16. How to open an offshore company to conduct business in Delaware?

Delaware is one of the best states to open an offshore company to conduct business in the United States. The procedure to open a business in Delaware can be summarised as follows:

  • Step 1: Review your interests, personal abilities, and financial resources to decide what kinds of business you would like to open in Delaware
  • Step 2: Write your business plan containing business goals, the methods on how to achieve these goals, and the time frame within which these goals need to be accomplished.
  • Step 3: Form your business, you can choose to register an LLC or C-Corp or S-Corp for your company in Delaware.
  • Step 4: Open a business bank account to conduct your business and get a business credit card.
  • Step 5: Set up your accounting system to track the performance of your business and simplify annual tax filings.
  • Step 6: Obtain your permits and licenses if your business requires one or more business permits and/or licenses to comply with regulations/laws.
  • Step 7: Get your Business insurance to minimize your risks and focus on the development of your business.
  • Step 8: Create a professional website to promote your products as well as the company to your potential customers.

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17. How to form a Limited Liability Company (LLC) in Delaware to start a business?

Form an LLC in Delaware is not complicated.

  1. Choose a name for your LLC: Choose carefully the name that is not against Delaware naming regulations and help clients easily remember your company.
  2. Nominate a Delaware Registered Agent for your LLC: This is necessary to comply with Delaware requirements and help you to receive important tax forms, legal documents, a notice of lawsuits, and official government correspondence on behalf of your business.
  3. File a Certificate of Formation to the Secretary of State to register the Delaware LLC.

If you want to hire employees, open a business bank account, or file and manage Federal and State Taxes. It is highly recommended that you need to get an Employer Identification Number (EIN) - The number offered by the Internal Revenue Service (IRS) to identify the business for tax purposes.

Contact our advisory team if you want to get further more information to make a decision by clicking the link:

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18. What is Delaware LLC tax rate?

The USA has the best economic development in the world. Most foreign businesses want to open a company here to gain more advantages for their companies’ reputations and others. Delaware is one of the states that attract a large number of foreigners to set up businesses in the USA.

All US companies must pay tax to the state and federal level. However, the tax rate for Delaware companies is typically lower than the tax rate of other states. The method for determining which taxes the companies must pay bases on the type of business entity incorporated in the US.

As mentioned above, Delaware is a very popular state to form a Liability Limited Company (LLC), many advantages of Delaware LLC formation for businesses as listed below:

  • For Delaware LLC, the directors and shareholders can be any nationality and live anywhere in the world.
  • If the business owner is not a resident in Delaware, he/she will not have to pay the personal income tax in this state.
  • The foreign businesses will not pay the state corporate tax on goods and services if the business operates outside of the state.
  • Having an own business court, the Delaware Court of Chancery, to solve all business cases.

The annual tax is paid for Delaware by Liability Limited Company is lower than the other states. In addition, there is no requirement to file an Annual Report. The deadline for annual tax should be payable to the government before June 1st at the latest.

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19. What is the corporate tax rate in Delaware?

In Delaware, there are several different business entities such as LLC and Corporation (S-corp and C-corp). All information such as business entity, certificate of incorporation, and a statement outlining the reason for existence are mandatory requirements for all LLCs and Corporations form in Delaware.

Delaware corporations have to pay both franchise tax and corporate income tax. The corporate tax rate is 8.7% (2019).

For the S-corp, the tax is paid through the individual shareholders. It means the tax payment is dependent on each shareholder of that income. Furthermore, each shareholder of the S-corporation will pay tax to the state based on his/her share from the company’s income.

Overall, the tax rate of each shareholder will depend on all his/her taxable income for the current year.

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20. Why do people choose to incorporate in Delaware for their business?

Delaware is a small state of the United States, in the Mid-Atlantic region. However, more than half of all U.S. publicly traded companies, and 63% corporations of the Fortune 500 (including giants like Apple, Coca-Cola, Google and Walmart...) are incorporated in Delaware.

Delaware has a long history being a tax haven as it offers many methods of reducing taxable income that results in a reduction of tax payments for businesses. By offering appealing tax incentives, Delaware helps businesses to minimize corporate tax and maximize their profits. Therefore, Delaware has been attracting a large number of companies filing in its direction.

21. What are the advantages of incorporating in Delaware?

Delaware has a long history of being a welcoming home and offers many benefits for businesses. Here are some advantages of incorporating in Delaware:

  • Delaware is also called a tax haven, due to its business-friendly laws and light taxation. A Delaware corporation can base its headquarters in any U.S. state, where they are then exempt from state corporate income tax in many cases. The tax laws allow corporations to be taxed at a low rate in Delaware and avoid higher taxes in their home states.
  • Delaware does not require businesses to disclose the names of the corporation’s directors or shareholders. Thus, these informations are completely confidential.
  • As business owners incorporate Delaware companies, they may also enjoy a more favorable legal process. Delaware has a special Court of Chancery that solves cases involving corporate law. Chancery judges have a background in corporate law, and can decide cases relatively quickly, without the need for a jury.
  • A corporation can be established more quickly in Delaware than in any other state. Anyone can incorporate Delaware company without physically being here, the procedure can be done online or by a phone call. The cost to form an LLC (Limited Liability Company) or incorporate a business in Delaware is consistently among the lowest in America.
22. Why is Delaware a tax haven?

Delaware is known as a “tax haven” to incorporate companies because of its light taxation. There is no sales tax in Delaware, it doesn't matter if a company's physical location is in the state or not; no in-state purchases are subject to tax in Delaware. Additionally, there is no state corporate income tax on goods and services provided by Delaware corporations operating outside of Delaware.

The state does not have a corporate tax on interest or other investment income that a Delaware holding company earns. If a holding corporation owns fixed-income investments or equity investments, it isn't taxed on its gains on the state level.

Delaware also does not collect personal property tax. There is a county-level real estate property tax, but it is very low compared to other states in the USA. Corporations can own their own office spaces and reduce the amount of property tax compared to other states.

The state has no value-added taxes (VATs). There is no inheritance tax in Delaware, and there are no capital shares or stock transfer taxes either.

23. How to incorporate business in Delaware?

Step 1: Choose your unique business name

  • Selecting a name that aligns with your Delaware business incorporation services, products and message, including an identifier, such as Inc. or LLC.
  • After that, doing a state name check in case your desired name is already taken in Delaware.

Step 2: Recruit and/or appoint members/managers (LLCs) or directors (corporations)

LLC requirements:

  • Delaware requires LLCs to have one or more members/managers
  • Delaware does not specify age requirements of members/managers
  • Delaware does not specify where members/managers must reside
  • Delaware does not require member/manager names and addresses to be listed in the Certificate of Formation.

Corporation requirements:

  • Delaware requires a corporation to have one or more directors
  • Delaware does not specify age requirements
  • Delaware does not specify where directors must reside
  • Delaware does not require director names and addresses to be listed in the Certificate of Incorporation.

Step 3: Appoint a registered agent

Every Delaware corporation must have an agent in the state for the process of service and receiving legal documents. The registered agent may be (1) an individual Delaware resident, or (2) a business entity authorized to do business in Delaware.

The registered agent must have a physical street address in Delaware. However, if your corporation has a representative office physically located in Delaware, it may act as its own registered agent.

Step 4: Prepare and file the Certificate of Incorporation/Formation

A Certificate of Incorporation for corporations or Certificate of Formation for LLCs needs to be filed with the Department of State. Here’s what the Certificate of Incorporation normally includes:

  • The corporation name
  • The corporation’s mailing address and street address
  • The corporation's Registered Agent and their address
  • The corporation’s capital structure (number of shares to be issued, who owns them, pricing, etc.)
  • The name and address of the incorporator.

Step 5: File annual report and franchise tax

Delaware requires corporations to file an Annual Franchise Tax Report. The due date for corporations is March 1. For LLCs, Delaware requires to file an Annual Franchise Tax Statement by June 1.

Step 6: Obtain required business licenses/permits

Most small businesses, including sole proprietorships, need a combination of licenses and permits from both federal and state agencies to operate legally and meet government standards.

Step 7: Comply with other tax and regulatory requirements

Other tax and regulatory obligations you should consider for your corporation or LLC include obtaining a Federal tax identification number (EIN).

Step 8: Open a bank account for your business

Open a business account when you're ready to start accepting or spending money for your LLC or corporation. You will most likely need an EIN and your incorporation paperwork.

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