Many companies choose to form a limited liability company (LLC) in Delaware because of favorable tax treatment. What's more, business owners who form an LLC in Delaware can do so with anonymity. LLCs in Delaware are easy to form and receive the benefit of operating under Delaware's established business court system.
An LLC can form in Delaware with a single or unlimited number of members. According to Offshore Tax Havens, Delaware imposes no restrictions on who can own an LLC. For example, a nonresident alien can be the sole owner of an LLC in Delaware. Members of an LLC in Delaware can include other LLCs, corporations, foreign entities, partnerships, limited liability partnerships, trusts, estates and individuals.
According to Delaware law firm Potter Anderson and Corroon, the names and addresses of a Delaware LLC's members need not be listed in the certificate of formation. Further, members of a Delaware LLC need not list their contributions to the LLC in the company's certificate of formation. This is in contrast to other states that require an LLC to list the names and contributions of its members in the articles of organization. Forming an LLC in Delaware allows members to privately participate in the company's ownership.
An LLC in Delaware can advantage of Delaware's experienced business court system. Business cases in Delaware are handled by the Court of Chancery. This allows judges, also known as chancellors, to make final decisions in lieu of juries. According to the business site Companies Incorporated, chancellors in Delaware have a great deal of experience in complicated business issues that can confuse other courts.
Delaware LLCs that do not operate in the state are not required to pay Delaware business taxes. Companies Incorporated says that LLCs in Delaware can opt to "pass through" taxation of business profits and losses, allowing an LLC in Delaware to be taxed as a partnership. Delaware LLC members can pass their share of business profits and losses to their individual or joint tax returns. Further, Delaware does not collect personal, franchise or inventory taxes from an LLC. In addition, Delaware LLC member profits are not subject to self-employment taxes since the profits are not viewed as earned income.
An LLC in Delaware can be formed with a definitive dissolution date. LLCs in Delaware also can continue to operate until the dissolving or merging with another company. LLCs in Delaware are not required to hold annual meetings in the state, or keep company records in the state. According to incorporation site The Delaware Company, Delaware is one of the most inexpensive states to form an LLC. In fact, an LLC formed in Delaware can operate from any location in the world.