Limited Liability Company
Delaware is one of the world’s most popular jurisdictions to incorporate a company. Nearly half of US publicly traded companies and more than 65 percent of all Fortune 500 companies are incorporated in Delaware. Including giants such as Apple, Coca-Cola, Google, and Wal-Mart.
Delaware stands out for its separate Court of Chancery, the oldest business court in the US, specialized corporate law cases. The Court of Chancery use judges instead of juries and are usually expertized in complex corporate law matters.
Delaware Court maintains the most advanced and up-to-date case law, that allows for predictability and therefore decreasing liability and litigation among Delaware companies.
These predictable laws allow corporations to make better assessments of the probable outcomes of litigation or the advisability of settling a case.
The legal and liability protection of established corporate laws in Delaware makes the jurisdiction one of the most reputable business-friendly states.
Delaware LLCs requires minimal corporate structure requirements for its management, nor are there provisions for company meetings, directors, secretary, or capital. A Delaware LLC may be incorporated by only 1 member who can be also its manager.
Delaware LLCs may elect to be treated as a C-Corp (subject to corporate tax) or be fiscal transparent entities. Profits of an LLC that elects to be a fiscally transparent entity, is considered to be transferred to its members and taxed at the personal level. Members pay personal income taxes on LLC profits proportionally to their share of participation in the LLC, whether distributed or not.
This means that a Delaware LLC is not seen as a separate entity for taxation purposes, and therefore if its members are non-US tax residents they will only be required to pay taxes in the US on income sourced from the US.
Although, if their country of residence taxes foreign-source income, the members may be subject to pay taxes on all foreign profits in their home country of residence, if it is required by the legislation of that particular country.
If its members are tax residents in a no tax or territorial tax country and no income is sourced from the US, they may operate with a Delaware LLC fully tax-exempt while benefitting from the reputation of a US incorporated entity.
It is important to note that certain countries do not recognize the pass-through status of an LLC, if the LLC is deemed to be tax resident in one of such countries, it may be subject to corporate income tax.
Companies incorporated in Delaware are confidential. Details of members, managers, and officers are not disclosed in the company formation documents and are not available to the public.
In addition, it has one of the quickest company registration procedures and lowest costs of incorporations in all United States.
Delaware LLCs are excellent vehicles for international professional services, conduct international trade, e-commerce, Amazon FBA and get access to merchant accounts.
Country code – US
Legal Basis – Common law
Legal framework – Delaware Limited Liability Company Act (Title 6, Chapter 18, Delaware Code)
Company form – Limited Liability Company (LLC)
Liability - The liability of members is limited to the extent of their capital contributions.
Capital – There is no need to register a minimum or maximum capital contribution.
Members – A Delaware LLC may be set up by one or more members, who may be natural or legal persons, resident or non-resident, without limitations. The identity of the LLC registered members may not be publicly disclosed.
Manager – LLC members may act as managers, or alternatively, they may appoint a manager. Corporate managers are allowed. Details are not available to the public.
Registered Address – Every Delaware LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on behalf of the LLC. If the LLC is physically located in Delaware, it may act as its own registered agent. A registered agent may be either an individual resident or business entity that is authorized to do business in Delaware. The registered agent must have a physical street address in Delaware.
General Meeting – There is no statutory requirement for any formal meetings of members.
Electronic Signature – Permitted.
Re-domiciliation – Foreign entities and other US companies may be continued in Delaware.
Compliance – Accounting records must be kept and shall be sufficient to show and explain the company’s transactions. The books, records and minutes of the company may be kept in any place or country at the Manager's choice.
LLCs are fiscally transparent; profits and losses may be passed through its members and subject to Personal Income Tax. Alternatively, you may elect to have a Delaware LLC taxed as a C Corporation with the IRS and subject to Federal Corporate Income Tax.
Delaware LLCs may require a Federal tax identification number (EIN). Additionally, most banks require an EIN in order to open a business bank account.
Delaware requires LLCs to file an Annual Franchise Tax Statement by June 1st. The fee is $300. Delaware does not require LLCs to file annual reports.
Foreign-owned LLC that conducts no business in the US and has no US source income, deductions, or credits does not create US federal personal income tax liability and does not create a requirement to file US federal income tax returns.
Foreign members may be required to disclose reportable transactions between them and the entity, filing the IRS Form 5472.
- Members not disclosed
- Managers not disclosed
- Corporate members permitted
- Corporate manager permitted
- Local manager required
- Registered office or agent required
- Annual meeting required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Common law Legal basis
- 1 Minimum members
- - Minimum registered capital
- - Minimum paid up capital
- USD Capital currency
- 100% Foreign-ownership allowed
Tax residency – An LLC that is organized or established in Delaware that elects to be treated as a C-Corp for tax purposes is tax resident in the United States. A Delaware LLC that is treated as a disregarded entity or a partnership for US tax purposes is tax transparent and therefore.
Taxation – Delaware limited liability companies may elect to be taxed as a C-Corporation, S-Corporation (if US-owned), as a partnership, or as a disregarded entity.
C-Corps are subject to federal income tax and state income tax.
Alternatively, an LLC may elect to be treated as a disregarded entity or as a partnership.
This means that may not be subject to Federal Corp Income Tax, and profits and losses may be reported through its members’ tax return.
Therefore, if its owners are Non-US Residents (and not subject to Personal Income Tax) and the LLC does not operate and generate profit from the US, does not lease or own properties within the US and does not have US employees and no effectively connected income to a US trade or business, offshore income accrued by an LLC may not be taxed in the US.
Corporate Tax rate – LLCs treated as C-Corps are subject to federal income tax at a 21% rate.
Income derived from Delaware is subject to State Income Tax at 8.7%.
Capital gains – Gains or losses derived from assets held for more than 12 months are treated as long-term capital gains or losses, gains and losses derived from assets held for 12 months or less are treated as short-term capital gains or losses.
Net gains are the excess of net long-term capital gain over net short-term capital loss. Capital losses may be used to offset capital gains. Excess of losses may be carried back three years and carried forward five years to offset capital gains.
Net gains are subject to tax at applicable federal income tax rates.
Dividends – Dividends received by a US company from a US or foreign corporation may be deductible. There are different tiers of possible deductions, ranging from a 50% deduction of the dividend received up to a 100% deduction.
Dividends payments between US companies that are members of the same Group may be exempted. Certain Corporations may be subject to Accumulated earning tax on undistributed profits if it is not justified that the accumulation is based on business needs. Certain Holding Companies that receive substantial passive income may be subject to Personal Holding Company Tax on undistributed profits at a 15% rate.
Interests – Interests are generally included in the taxable base.
Royalties – Royalties are generally included in the taxable base.
Foreign-source income – Companies are taxed on their worldwide income, including foreign-branch income when earned and foreign-source dividends received. Relief from double taxation may be available by tax treaties, tax credit or claiming a deduction for foreign tax paid.
A Foreign subsidiary owned by more than 50% by United States tax residents, is considered a controlled foreign company (CFC). Certain undistributed income (Subpart F income) or GILTI income retained in a CFC may be subject to taxation.
Passive income retained in a foreign investment company (75% or more of the income is passive or at least 50% of the assets held produce passive income) may be also subject to taxation.
Foreign-source income may be exempt from Delaware state income tax.
Withholding taxes – Dividends, interests, and royalties paid to non-residents are usually subject to withholding tax at a 30% tax rate. Withholding tax may be reduced or exempted under a tax treaty.
Losses – Losses arising from taxable income may be carried forward for 20 years and carryback for 2 years.
Inventory - Inventory may be valued at the lower of acquisition/production costs or market value. To determine costs are allowed First in first out (FIFO) and Last in first out (LIFO) methods.
Anti-avoidance rules – Transactions between related parties must be carried out on arm’s length terms. If a company is not in compliance, the IRS may raise taxable income and tax payable.
Thin capitalization rules apply to disallow interest payments related to excess debt and make these payments as dividends.
A Foreign subsidiary owned by more than 50% by United States tax residents, is considered a controlled foreign company (CFC). Certain undistributed income (Subpart F income, GILTI) retained in a CFC may be subject to taxation.
Passive income retained in a foreign investment company (75% or more of the income is passive or at least 50% of the assets held produce passive income) may be also subject to taxation.
Labor taxes – Employers may be subject to social security contributions tax of 6.20% on the first USD 127,200 of wages paid to employees and 1.45% of Medicare tax on any wages, regardless of amount.
In addition, employers must pay, under certain conditions, federal unemployment insurance tax (FUTA) of 6.2% on the first USD 7,000 of wages paid to employees meeting certain criteria.
Tax credits and incentives – A tax credit or deduction is usually available for foreign tax paid.
Business and employment credits are also available business to provide special incentives for the achievement of certain economic objectives.
Credits may be also available for qualified research expenditures (QREs) to develop new or improved products, manufacturing processes, or software in the United States.
Qualifying private activity bonds interests may be exempt from federal income tax.
Compliance – On average, a company in United States may require 11 payments and 175 hours per year to prepare, file and pay corporate income tax, value added tax, and labor taxes, including payroll taxes and social contributions.
Personal income tax – An individual is deemed to be tax resident in the United States, if he or she is a citizen or permanent resident or he or she is physically present in the US during 31 days in a year and a total of 183 equivalent days during the current year and prior two years.
US citizens and permanent residents are tax residents, no matter the days spent in the country during a year.
Tax residents are subject to tax on their worldwide income.
The federal tax rate is progressive at rates ranging from 0% to 39.6%. Delaware personal income tax rates are progressive up to 6.6%.
Self-employed individuals may be subject to self-employment tax at 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).
Capital gains derived from assets held more than 12 months are subject to a maximum tax rate of 20%. Gains derived from assets held 12 months or less are subject to tax at standard rates.
Dividends, interests, royalties and rental income are subject to individual income tax at applicable rates.
In addition, individuals may be subject to net investment income tax (also known as Medicare contribution tax) on investment income received by individuals with modified adjusted gross income above certain amounts.
Other taxes – There are no value-added tax or sales tax in Delaware.
Real property ownership and transfer of assets are subject to local taxes in Delaware.
Estate inheritances are taxed in the U.S.
There are no wealth taxes in the United States.
- Tax transparent entity
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- - Offshore Income Tax Rate
- - Corporate Tax Rate
- 38% Capital Gains Tax Rate
- 11.4% Dividends Received
- 30% Dividends Withholding Tax Rate
- 30% Interests Withholding Tax Rate
- 30% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- 20 Losses carryforward (years)
- 7.65% Social Security Employee
- 15.3% Social Security Employer
- 46% Personal Income Tax Rate
- 0% VAT Rate
- 84 Tax Treaties
The United States of America (USA) is a North American country constituted in a federal constitutional republic composed of 50 states and a federal district.
It is located between the Pacific and Atlantic Oceans, borders Canada to the north and Mexico to the south. The state of Alaska is in the northwest of the continent, bordering Canada to the east and separated from Russia to the west by the Bering Strait. The state of Hawaii is a Polynesian archipelago in the middle of the Pacific Ocean, and it is the only American state that is not located in the American continent. The country also has several territories in the Caribbean Sea and in the Pacific.
With 9.83 million sq. km, and with more than 324 million inhabitants, the country is the fourth largest in total area and the third in population.
The capital is Washington D.C. However, New York is the trade and financial center and the most populated city, with over 8 million inhabitants, and 22 million within its metropolitan area. Other large urban areas include Los Angeles, Chicago, Dallas, Houston, Philadelphia, Miami, and Atlanta, among others. English is the official language of all states and territories, although some of them have their own co-official language.
As it is one of the world’s most ethnically diverse and multicultural nations, there are more than 20 languages with an important number of speakers, such as Spanish, Chinese, French, German, Tagalog, Vietnamese and Italian, among others.
The United States is a constitutional, democratic and representative republic. In the US federalist system, citizens are generally subject to three levels of government: federal, state, and local; The duties of local government are commonly divided between the county and municipal governments. In almost all cases, executive and legislative officials are elected by direct suffrage of the citizens of the district.
Its official currency is the US Dollar (USD), which is the most traded currency, the world’s primary reserve currency and the currency used in the international markets for commodities such as gold and petroleum.
The USA is the largest economy worldwide in nominal terms and the second, after China, in purchasing power parity terms, home of the largest multinationals and well-known brands worldwide and leader in technological innovation and scientific research.
It has a mixed capitalist economy, characterized by abundant natural resources, like coal, natural gas, oil and uranium, developed infrastructure and high productivity.
Its economy is mostly based on the services sector, but it maintains large and competitive industrial sector, specialized in high technology, where the chemical, military, energy, oil, metallurgical, steelworks, automotive, aeronautics, electronics and IT are the largest.
It is the third largest oil producer in the world, as well as the largest importer. It is also the first world producer of electric power and nuclear power, as well as liquefied natural gas, sulfur, phosphates and salt. Despite primary sector accounts about 1% of its GDP, the country is one of the world’s largest producers of a wide variety of agricultural, livestock and fishing products.
Regarding the services sector, the largest of the USA economy, its most important activities are banking, insurance, education, healthcare, research, transport, trade, and tourism.
The US financial market is the most extensive and the most complex worldwide, and stands out for its influence in any economic decision at an international level. New York is the most important financial center worldwide, the New York Stock Exchange (NYSE) is also the largest world’s capital market and the NASDAQ is the third one. USA is also the second most touristic country worldwide, ranking 2nd, after France and ahead of Spain.
Delaware is one of the fifty states that, together with Washington D., form the United States of America. Its capital is Dover and its most populated city, Wilmington.
It is located in the South region of the country, South Atlantic division, bordering to the north with Pennsylvania, to the northeast with the bay of Delaware that separates it of New Jersey, to the east with the Atlantic Ocean and to the South with Maryland.
With 6447 km² it is the second less extensive state, with around 900,000, the sixth least populated, and with 139,28 hab / km², the sixth most densely populated.
Despite its small size, Delaware is a large financial center. The services sector is the most important, with 79% of GDP. The provision of financial and real estate services is 38% of the state's GDP. More than 200 thousand companies are based in the state. Therefore, this state is also one of the largest banking centers in the United States.
Agriculture and cattle ranching together account for 1% of the state's GDP. Milk and cherries are the main product of Delaware's agricultural industry.
The secondary sector accounts for 20% of Delaware's GDP. The main industrialized products manufactured in the state are chemical products, transport equipment (mainly automobiles), chemicals, processed foods and paper.
Tax treaties Map
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