Despite the change in the conditions for conducting international business and the total deoffshorization, the state of Delaware in the USA does not lose its attractiveness as a promising place for the incorporation of a company by a non-resident. Registering a business here is quick and easy, and the state’s tax system provides room for maneuver. At the same time, respectable corporate traditions guarantee reliable protection of business interests.
Registering a company in Delaware is a start to the universe of opportunities, entry into the American market, as well as a profitable step for solving problems of tax optimization and building a business reputation. If you want to get the most out of this, use the services of Lawrange Lawyers. Our approach is always a combination of a personal search for the best solutions and the availability of reliable partners in the jurisdiction where the client’s company is being established.
Although Delaware is one of the smallest states in the US – only Rhode Island is smaller – according to statistics at the end of 2021, more than 1.8 million legal entities were registered here. Among the demanded areas of entrepreneurship in the state are IT, financial and consulting services, trade (including e-commerce), and tourism. As we recover from the COVID-19 pandemic, the number of new companies continues to grow at an unprecedented rate. In particular, in 2021, the growth of new LLCs was 37%, and the number of new corporations increased by 21%.
Note! Almost 68% of Fortune 500 companies are registered in Delaware. About 93% of all initial public offerings (IPOs) in the United States are carried out by companies incorporated in this state. In particular, this “corporate paradise” has become a “home” for such well-known companies as Amazon, Google, Walmart, Tesla, American Express, Disney.
An inconspicuous two-story office building at 1209 North Orange Street in Wilmington, Delaware, has gained worldwide fame. This building is owned by Corporation Trust Company, a subsidiary of the Dutch company Wolters Kluwer, which provides “registered agent services”. In 2012, it was the registered agent address of at least 285,000 US and foreign companies.
Advantages of opening a company in Delaware
As it has for many decades before, Delaware remains open to foreign investment. Entrepreneurs are offered a full range of business services, confidentiality and reliable legal mechanisms to protect corporate interests.
The main benefit of registering a business in Delaware is a special tax regime for non-residents who do not have property, do not conduct commercial activities and do not make a profit in the state. The income tax rate in such cases is 0%. Among the advantages is also the possibility of registering a company remotely. Business owners do not have to be physically present at the registration of the enterprise, since a registered agent is involved in the procedure. We highlight some of the advantages of jurisdiction separately:
The only name that is required to be disclosed when filing a business in Delaware is the name of the registered agent. We are talking about an official with a physical address in the state, where mail and documents will come. Also, if necessary, the agent communicates with representatives of regulatory authorities.
Note! The names and data on the place of residence of the founders and managers can be indicated in the protocol on the creation of a legal entity. They appear only in the operating agreement, which is private. A registered agent will be forced to disclose this information only in exceptional cases: in legal proceedings or at the request of law enforcement agencies.
- Optional physical presence
Business owners, shareholders, directors and other officers are not required to reside in the state. Business management can be carried out remotely. You can also submit annual reports online.
- Simple registration procedure
To encourage the filing and consideration of the largest possible number of corporate applications, the state authorities have simplified the procedure for registering a business to the utmost. Documentation requirements are minimal.
- Chancery Court
The oldest commercial court in the country, whose authority is based on more than 200 years of case law. It is the leading corporate dispute resolution body in the United States. There are no jurors in the chancellor’s court. Cases are considered by judges, which significantly speeds up the process – decision-making time is reduced The decisions of the chancellor’s court are considered more predictable than the decisions of other state courts considering economic cases.
Note! The Court of Chancery is made up of the Chancellor and four Vice-Chancellors, each handling an average of up to 1,000 civil suits per year, the vast majority of which are disputes between business entities. Today, the Court of Chancery is one of the most important reasons why Delaware is known as the most favorable environment for corporations and LLCs.
Starting a Delaware Company: Types of Businesses
Local entrepreneurs and non-residents in the state are offered a sufficient choice of organizational and legal forms of doing business. At the same time, among legal entities, businessmen give a clear preference to a limited liability company – LLC (Limited Liability Company). For 2021, among registered business entities, the proportion was as follows:
- 73.4% LLCs (247.003);
- 18.6% Corporations – C-corps and S-corps (62.510);
- 7.3% LPs and LLPs are partnerships (24.588);
- 0.7% Statutory Trusts (2.306).
Comparing Delaware LLC and Delaware Corporation, it is necessary to highlight such differences as: a) different management structure; b) different requirements for filing documents; c) the nuances of taxation. At the same time, both OPFs provide reliable legal protection for the personal assets of the owners.
Important! Each form of business has its own advantages and disadvantages. To understand what is best suited in a particular case, you should carefully study the relevant information. Or, as an option, entrust the solution of the problem to experts.
In general, if attracting investors or giving stocks to your employees is a priority, then a corporation is more suitable. At the same time, certain disadvantages include the need to collect a large set of documents during registration and the presence of more serious requirements when doing business. If in the first place is individual control and execution of a minimum of documents, then the best option is LLC. This form is suitable for startups and small businesses.
Registering an LLC in Delaware
The main feature of Delaware LLC is the regulation of the structure, management and activities of the company by a special agreement (contract), which is called the Operating Agreement. Owners and management companies are not personally liable for business debts. Owners (participants) can be both private and legal persons. At the same time, neither the number nor the residency of participants is practically limited.
When creating an LLC, the operating agreement is drawn up by the participants themselves in accordance with the law. Changes may be made to this document as the business evolves. In its own way, an operating agreement is an instruction for owners and managers. Members can entrust the management of the company to executives who are not business owners. Information about this, as well as about the authority of management, is entered into the operating agreement.
Important! Unlike corporations, an LLC does not require mandatory formal meetings to operate. Among the important features of an LLC is the possibility of considering this structure as a through legal entity for tax purposes.
***Note: The term “pass-through taxation” (PTE) refers to legal entities that do not pay taxes at the enterprise level. Instead, the income goes to the business owners, who pay income tax on their share.
The profits and losses of an LLC are transferred to the personal tax returns of the owners. Thus, the LLC itself does not file a tax return, and the owners pay taxes from the business only once. This is one of the biggest benefits of starting an LLC.
Registering a C corporation in Delaware
An entity such as C Corporation (C-Corp) is owned by its shareholders. Unlike an LLC, the management and activities of a corporation are regulated not by an agreement between the owners, but by the Charter. This business legal form allows at least one shareholder and one director (both must be individuals). The maximum number of shareholders has not been set. Shareholders are liable for the obligations of the company only within the framework of the shares.
Among the requirements for this OPF are holding annual meetings of shareholders, filing annual accounts and paying franchise tax. The corporation is treated as a separate taxpayer for tax purposes. That is, at first the profit is taxed at the corporate level, then it is distributed among the owners in the form of dividends, and they are taxed accordingly. The C-corps corporate tax rate is 21%. This feature makes the corporation in some cases an unsuitable form of business organization for small businesses.
Note! With all its features, corporation C is optimally suited if it is necessary to ensure a flexible distribution of profits between owners, to leave income in the business, developing it, to own non movable and so on.
Registering an S Corporation in Delaware
The legal form of S-corp is available only to US citizens. S corporations are usually subject to pass-through taxation. Opening a company in Delaware in the form of an S-corp provides the opportunity to use the tax regime in accordance with subsection S of the IRS code (tax code). Once the IRS approves the relevant application, the corporation will not have to pay US federal income tax.
The application must be submitted within 75 days after the establishment of the company. As a result, the tax liability (or tax credit) will be transferred to individual shareholders in accordance with their ownership interest in the S corporation. Thus, one of the benefits of an S corporation is that it has all the benefits of a Delaware corporation, but with a different tax status.
Requirements for registering a company in Delaware
There are no requirements (special conditions) for the age and place of residence of the founders, as well as for the minimum paid-in capital. In fact, one of the main things to look out for in setting up a business in Delaware is the registered agent. All Delaware non-resident LLCs and corporations are required to have one.
Important! A registered (registration) agent is an individual or legal entity who, on behalf of a non-resident company, undertakes interaction with government agencies (including the tax service) receiving correspondence, as well as being responsible for filing reports. This person must have a physical office in the state and carry out its activities on the basis of a special permit. A list of Delaware Registered Agents can be found on the relevant resources.
State law imposes certain requirements for the business name of a firm. First of all, at the end of the name it is necessary to indicate the legal form of the business (identifier), in full or as an abbreviation. For example – Limited Liability Company or L.L.C. Only unique names are allowed. To make sure that the chosen name is free, you should go through a check on the website of the United States Patent and Trademark Office (PTO or USPTO). Reservations are available on this resource.
Stages of company registration
Consider the main steps that you need to go through to open a company in Delaware and start using it fully:
- Initial consultation with representatives of JSC Lawrange to be resolved (available remotely).
- Selection and reservation of a unique name.
- Solving the issue with the local address of the enterprise.
- Appointment of a registered agent.
- Preparation of an operating agreement for an LLC or articles of association for a corporation.
- Filing of incorporation documents and application for registration of a legal entity with the Delaware Corporation Division.
- Obtaining a certificate of incorporation.
- Obtaining an EIN, also known as an Employer Identification Number, from the IRS.
- If required, obtain licenses and permits.
- Opening a corporate account in a bank or payment system.
Important! Company registration takes:
- in general order – 1-1.5 months;
- expedited procedure – 3-4 working days.
There are no strict deadlines for obtaining an EIN number, it all depends solely on the IRS tax service. On average, this can take 1-2 months.
Note! In order to maintain the life of the company after registration in subsequent years, the service of a registered agent and the registered address of the company in the state, as well as the payment of a state fee (state franchise tax) – $ 300 until June 1 of each year, will be needed further.
Required documents to register a company in Delaware
To prepare for the registration of JSC Lawrange, it is necessary to provide the following documents and information:
- Foreign passport and proof of address in English (bank statement or utility bills will do). We will need such personal data as last name, first name, place of birth and date of birth, address of the place of residence (one or more founders, as well as all directors).
- If the founder is a legal entity, its statutory documents, including the protocol, as well as permission on the basis of a subsidiary, will additionally be required.
- Data on the commercial name of the company, as well as a list of activities that are planned to be carried out.
***Note: Documents and information are provided electronically, sending
originals or certified copies are not required.
Note! Directly in the form for registering a company in the state of Delaware, the following information will be indicated:
- selected and verified unique company name;
- information about the registered agent and the address of the office;
- for a corporation – the number of shares and par value (despite the fact that there are no requirements for the minimum authorized capital);
- the name and postal address of the founder;
- data confirming the payment of state duty.
Opening a bank account
For non-residents, resolving the issue with a company account can be difficult. In particular, many banks require the personal presence of the client at the branch to complete the relevant documents. There may be several solutions. However, the easiest way is to entrust this task to the experts of our lawyer association.
We will help you open an account in the United States without complications, since we have the necessary algorithms for selecting banks that are potentially loyal to non-residents and the skills of productive communication with American bankers. Among the proven options are opening accounts in neobanks FV Bank, Mercury, Wise, Payoneer and others. It is also possible to open an account in classic local banks – Bank of America, Citi Bank, JPMorgan Chase Bank and others. We will help you choose the best option for your activity and requirements.
The United States uses a tiered taxation system in which taxes are levied at the federal, state, and sometimes local levels. Delaware’s tax system is unique in its way.
It is the peculiarities of taxation that are one of the main arguments in favor of a non-resident registering a company in Delaware. If the company has no property and does not operate in the United States, and its beneficiaries do not have US citizenship, the corporate tax rate is 0%, in other cases – 8.7% in the state and 21% at the federal level. To maintain business in the state, you must submit an annual report and pay a state duty (franchise tax – state franchise tax).
The cost of opening a company in Delaware, USA:
Package 1: regular registration (1-1.5 months) without opening an account = 690 USD
Package 2: regular registration (1-1.5 months) with opening an account in the payment system = 1390 USD
Package 3: fast track registration (1-5 days) without opening an account = 1190 USD
Package 4: accelerated registration (1-5 days) with opening an account in the payment system = 1890 USD
* Payoneer, Wise, Multipass and others are available among payment systems, we will help you choose the best option for your activities and needs.
Separately, we will help you open an account in a classic US bank. For details and conditions, please contact our consultant.
Delaware remains one of the most attractive corners of our planet for the incorporation of international business. Despite the fact that the US government is leading the global movement to de-offshorize and fight tax evasion, the country itself is not as strict with taxes as it is commonly believed.
Representatives of JSC Lawrange are ready to register an LLC or a corporation in the state on a turnkey basis. If necessary, we will also help resolve the issue of opening a corporate account. Delaware is not in vain chosen by thousands of entrepreneurs. This is, without a doubt, the preferred solution for a business that has no limits in our time.
Is it possible to open a company in Delaware remotely?
Yes. This option is available. Lawrange specialists are ready to take all the necessary steps for paperwork. Directly in the state, the official representative of your company when dealing with the tax service and other government agencies will be a registered agent.
Can a foreigner register a company in Delaware?
Yes. Foreign investors in the state can establish a business and manage it at their discretion, including remotely.
Terms and cost of registering a company in Delaware
Registering a company in the state of Delaware (LLC or C-corps) generally takes 1-1.5 months. However, you can use the accelerated procedure, and reduce the waiting time for the result to only 3-4 business days. The cost of registering a company in Delaware with the support of JSC Lawrange is from 690 USD.