FAQ's

The reason most people incorporate when they are starting a new business is to protect their personal assets so that all of their business and personal belongings remain separate and apart.

The State of Delaware is a leading domicile for U.S. and international corporations. More than 850,000 business entities have made Delaware their legal home. More than 50% of all publicly-traded companies in the United States including 63% of the Fortune 500 have chosen Delaware as their state for incorporation.

Businesses choose Delaware for many reasons. The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation. The Delaware Court of Chancery is a unique 215 year old business court that has written most of the modern U.S. corporation case law

• One person can hold all the offices of President, Treasurer and Secretary and be the sole director. Most states require a minimum of three people to hold offices in a corporation.
• There is no minimum amount of money required in a company bank account.
• The States corporation and trust laws are known for their unparalleled flexibility regarding freedom of contract.
• The annual franchise tax is very favorable and can be as little as $100 per year including all filing fees.
• There is no inheritance tax on stock held by non-residents of Delaware.
• There is no estate tax on shares of stock held by non-residents.
• There is no State income tax for Delaware corporations who do not operate within the State.
• There is an established body of laws which protect the Corporations in Delaware. Shares of stock owned by individuals outside the State are not subject to any Delaware taxes.
• The director has the power to make or alter by-laws.
• Directors may fix any price on shares of stock they wish to sell.
• Recent legislation limits abusive takeover tactics.
• Corporations can become Sub-chapter “S” if all qualifications are met.
• Shares of stock owned by individuals outside the State are not subject to any Delaware taxes.

The State of Delaware is a leading domicile for U.S. and international corporations. More than 850,000 business entities have made Delaware their legal home. More than 50% of all publicly-traded companies in the United States including 63% of the Fortune 500 have chosen Delaware as their state for incorporation.

Businesses choose Delaware for many reasons. The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation.

The Delaware Court of Chancery is a unique 215 year old business court that has written most of the modern U.S. corporation case law. In addition:

• No minimum capital is required to form a Delaware corporation
• Corporate records can be kept anywhere in the worldIt is only necessary for one person to act an officer, director and/or share-holder of a corporation or member of a limited liability
• No formal meetings are required and shareholders need not be U.S. citizens
• Any legal business may be conducted in Delaware
• Delaware is recognized as having a favorable tax climate
• No Sales tax
• No Personal property tax
• No Intangible property tax
• No Stock transfer tax
• Ownership of a Delaware corporation or limited liability company is strictly confidential

NOTE: Delaware companies do not have to file an annual corporate income tax with the state of Delaware “unless they have a physical presence in the state.” However, all Delaware based companies must be an annual franchise tax or annual report to the Secretary of State of Delaware. Regardless of the tax consequences, all US based corporations are required to file annual Federal Income Tax returns with the IRS, even if they are “informational purposes only”.[/bt_spoiler]

[bt_spoiler title=”What is the Difference Between a Delaware Corporation and a Delaware LLC?”]Both corporate entities are excellent choices for business owners looking to minimize their personal liability and build greater credibility. Each entity offers distinct tax and business advantages. Choosing the right one depends on the specific needs of the business. Corporations offer

• Personal liability
• Tax savings
• Increased opportunities for raising capital

Corporations are also required to perform certain formalities such as holding annual meetings and keeping detailed corporate records (minutes), however, corporate meetings and records can be held and kept anywhere in the world.

“C” Corporation

• Personal liability protection for owners
• Taxed at corporate and individual level
• Formal meetings and corporate minutes
• Annual state reports
• No membership restrictions

“S” Corporation

• Personal liability protection for owners
• Income/loss passed directly to shareholders
• Formal meetings and corporate minutes
• Annual state reports
• Membership restricted to 100 shareholders

Limited Liability Companies (LLC)

Offer the same personal liability protection as a corporation, but with fewer of the corporate formalities. The LLC typically are not

• Required to hold formal meetings or keep detailed corporate minutes
• Offer great tax flexibility
• Income/loss passed directly to members
• Can option to be taxed as either a traditional corporation “C” or “S” or as a “pass-through” entity and file a partnership return if they have two or more members
• Personal liability protection for owners
• No membership restrictions

Note: In the state of Delaware the maintenance on a corporation with authorized stock of 1500 shares at no par value is only $125.00 as opposed to an LLC which is $250.00 per year.

If you are the only member of the LLC, by IRS standards you are considered a Single-Member Limited Liability Company and cannot file a partnership tax return with the IRS.

Unless you file the LLC with the IRS as either a “C” Corporation or an “S” Corporation, you will initially be classified as a disregarded entity for the purposes of filing a federal tax return and must file a Schedule C on your personal tax return.

Before deciding which type of corporation best suits your business needs, always consult with your legal or financial advisors. Global Corporate Services, Inc. is a registered agent in the State of Delaware and does not offer legal or tax advice. We are here to help you start your new business as quickly and cost effectively as possible.

For more detailed information, please be sure to speak with a qualified legal and/or financial adviser. You may address your questions to our Tax and Accounting Services at tax@global-inter.net.

General “C” Corporation

The general corporation is the most common corporate structure. This type of corporation is a separate legal entity that is owned by stockholders. A general corporation may have an unlimited number of stockholders that, due to the separate legal nature of the corporation, are protected from the creditors of the business. A stockholder”s personal liability is usually limited to the amount of investment in the corporation and no more.

Sub-Chapter “S” Corporation

With a sub-chapter “S” corporation you can deduct the profits and losses from your corporation on your personal tax return. You will no longer be considered a “C” Corporation. Prior to March 15 you must file an IRS Form 1120-S. To qualify as a “S” corporation, you must be a US citizen or qualified resident filing a personal tax return with the IRS.

Close Corporation

There are a few minor, but significant, differences between general corporations and close corporations. In most states where they are recognized, close corporations are limited to 30 to 50 stockholders. In addition, many close corporation statutes require that the directors of a close corporation must first offer the shares to existing stockholders before selling to new shareholders.

This type of corporation is particularly well suited for a group of individuals who will own the corporation with some members actively involved in the management and other members only involved on a limited or indirect level.

The registered agent is responsible for receiving important legal and tax documents on behalf of the business. Service of Process (sometimes called notice of litigation), which is the document that initiates a lawsuit, is served to the registered agent for a business. Proper handling of and timely response to this document are vital, as not doing so can result in significant adverse consequences to the business. Additionally, the registered agent often receives mail and tax documents from the state and government on behalf of business. Timely handling of these documents is also important as states typical impose deadlines for annual report and franchise tax payments.

The EIN is issued by the IRS to operate your business. It is similar to a SSN for an individual. Only one EIN is ever issued to a Corporation or an LLC. An EIN is necessary for a Corporation or LLC to open a bank account and file income tax.

You can either apply for the EIN directly to the IRS using the application Form SS4 or hire us to get one for you. If you do not have a SSN you can hire a Professional Director who will apply to the IRS on your behalf.

Each year in January you will receive a bill for the $90 registered agent fee, if non US a $35 air mail deposit for mail forwarding fee and either the state of Delaware Franchise Tax or Annual Report if an LLC.

if you run a business which has city, state or county requirements for licensing and collecting sales taxes you will be required to file in your own state with either a Certificate of Authority or Certificate of Status. If this is necessary, since we file corporations and LLC”s in all 50 states, we can do this as well.

Expanding your business to another state? Many states require that you file a Foreign Qualification or Certificate of Authority to do business in their state. We can qualify and file your corporation or LLC in all 50 states. Call for a free consultation.

The answer will depend on the type of business you are operating. Call us for a free consultation.

Expanding your business to another state?

Many states require that you file a Foreign Qualification or Certificate of Authority to do business in their state.

We can qualify and file your corporation or LLC in all 50 states. Call for a free consultation.

Single Member LLC

A Single Member LLC is termed by the IRS as a “disregarded entity. This phrase does not mean that an LLC does not have to file an income tax return with the IRS. What it means is that the IRS considers it a “pass-through entity” and is considered for IRS purposes a sole proprietor and files a Schedule C on their personal tax return.

If a US citizen, a Single Member LLC can opt to be taxed as either a traditional “C” corporation, by filing an IRS Form 8832 or an “S” corporation filing an IRS Form 2553. A non-citizen Corporation can only elect “C” status since “S” status is reserved for individuals filing a personal tax return.

A non-citizen who wants to file a personal tax return can opt to apply for an ITIN number through our accounting partner who is an Acceptance Agent qualified with the IRS for this purpose.

Multi Member LLC

A Multi Member LLC can file a partnership return if they have two or more members for personal liability protection for owners. A partnership return will provide each member with a K1 to file on their personal tax return.However, again this only works if all partners are US citizens filing personal tax returns with the IRS.

The Multi Member LLC can opt to be taxed as either a traditional “C” corporation, by filing an IRS Form 8832 or an “S” corporation filing an IRS Form 2553 (reserved only for US Citizens).

All Corporations and Limited Liability Companies filed in the US must file a federal income tax return even if they have had “No Activity”. If you do not have a principal place of business in the state of Delaware you do not have to file on the state level.

Please check out our accounting page for information on how to file your annual income tax.