Delaware Corporation and LLC Formation
- Why incorporate in Delaware?
- What's the difference between a Corporation and an LLC?
- Can a Non-US person or company own a Delaware Corporation or LLC?
- How will I benefit from having a Delaware company and a US Business Presence?
- Do I need Capital to setup a Delaware Corporation or LLC?
- If I want to close my Delaware Company how do I do that?
- Can I, as a Non-Resident and/or Non-Citizen own, manage, be a director, officer, member, or form a company with EIN?
- I have a Certificate of Incorporation/Formation to file and I want you to be my Registered Agent, how do I do this?
- I am the sole Director of a Corporation - do I have to file yearly Federal Income Tax Returns in the US?
- Do I have to pay Delaware State Taxes?
- Do I have to collect or pay Delaware Sales Tax?
- Can you supply me with a Reseller Permit Number or a Sales Tax ID?
- Do I have to file yearly Federal Income Tax returns in the US if I have a single-member LLC?
- I don't have an EIN for my US company - do I have to file yearly Federal Income Tax Returns in the US?
- Words of Wisdom from a Tax Professional concerning US companies owned by non-US persons
- Can I form a foreign subsidiary of my local company? Can my local company own my new Delaware Corporation?
- Is a Corp or an LLC better for me?
- Can a business open a US bank account?
- Do I need an SSN or ITIN to get a US Corporate Bank Account?
- I am a non-US person - What do I need in order to qualify for a US Corporate bank account?
- What do US banks like to see in Corporate documents?
- I am Canadian - How can I setup a US Corporate bank account?
- What if I don't want my name listed on the face of the Certificate?
- Can I withdraw from my PayPal account to my new US bank account?
- Can you help me setup a US Personal bank account?
- What will your US Business Presence Package (USBPP) qualify me for?
- How long does it take to form my Delaware Company?
- What documents do you need from me?
- Why do your competitors only charge $25 for EIN retrieval?
- Can VALIS help me to get a PayPal account?
- Will my new company qualify for PayPal Website Payments Pro?
- Can I form a Holding company or a Parent company?
- What citizens can you not work with?
- What forms of Payment does VALIS accept?
- In what format do you want my documents?
- Can I fax you my documents instead of uploading them in your secure Upload Area?
- Can I use an expired passport?
- How secure is your Server?
Delaware Corporation and LLC Formation
Why incorporate in Delaware?
Most importantly Delaware has:
- NO SALES TAX
- NO PERSONAL PROPERTY TAX
- NO INTANGIBLE PROPERTY TAX
- and allows for us company formation for non residents
- Delaware state income tax is not levied on corporations which are not doing business in Delaware.
- One person can be the only Officer, Director, and Shareholder.
- Officers and Directors can be indemnified, limiting their personal liability.
- Corporate books and records may be kept anywhere in the world.
- No minimum amount of capital is required.
- Non-resident shareholders pay no Delaware tax on shares.
- Shareholders are protected by takeover statue, which limits abusive hostile takeover tactics.
- Directors need not be shareholders.
- Service from the State of Delaware is fast and efficient.
- Incorporation costs are low.
- Most Delaware corporations can be formed within minutes and documents are available within 24 to 48 hours.
- Delaware corporation law has well-established legal precedent.
- Delaware courts are respected nationwide for their expertise in corporate matters.
- Voting provisions requiring greater-than-majority approval may be enacted.
- Liberal choice of corporate name provisions and ease of reserving corporate name.
- Corporation may pay dividends from profits and surplus.
- Shareholders, directors and/or committee members may act by unanimous written consent in place of formal meetings.
- Directors may be given the power to make and alter by-laws.
- Corporation may hold stocks, bonds or securities of other corporations, real and personal property, within or outside the state, with no limitation as to amount.
- Different kinds of business may be carried on in combination.
- Corporation may fix quorum of board of directors -- not less than one-third of the whole board; two if only two shareholders; one if only one shareholder.
- Voting trusts and voting agreements may be created.
- Generally, stockholder liability is limited to stock held in the corporation.
- Delaware law includes Close Corporation provisions.
- Classes of stock may be issued in series.
- Annual Franchise Tax is only $175 + the Annual Report Filing fee of $50 = $225.
Limited Liability Company (LLC)
- Delaware has maintained a preeminent position with its Limited Liability Company stature.
- Delaware law does not require that the name of any member of the LLC be disclosed in the certificate of formation.
- Some states require the publication of the names of all members.
- Unlike other states, single member LLC's are permitted.
- The creation of your LLC may be your only contact with Delaware.
- Delaware does not require you to have any meetings in the state nor are you ever required to visit Delaware.
- A Delaware operating agreement may contain provisions which deny voting rights to some members and may also exculpate members and managers from personal liability and may permit indemnification.
- Delaware permits maximum flexibility in drafting operating agreements.
- Companies may be managed by its members or by a manager.
- Delaware does not impose any income tax on LLC's which do not transact business in Delaware.
- Additionally, Delaware does not impose either an income tax or inheritance tax upon members who are not Delaware residents.
- Delaware permits terms in the operating agreement which will exculpate managers, members, agent and employees from personal liability for management of the company and permits indemnification of those persons by the company.
- Unlike other states, no minimum capital is required.
- Neither members nor managers need be US citizens.
- Units of ownership may be owned by individuals, corporations or any other business entity existing under either US or foreign law.
- There are no limits on the type of legal business which a company may transact.
- Annual Franchise Tax is $300
What's the difference between a Corporation and an LLC?
We have received many e-mails asking us the difference between a general corporation and a limited liability company (LLC). We will try to answer your questions and provide you with some general information about corporations and LLC's. Please remember that this article is not intended as a substitute for good legal or accounting advice.
The law of corporations date back many years. Most people understand that a corporation is viewed as an entity separate from its owners (shareholders) and the shareholders are not personally liable for the debts of the corporation unless they have agreed to be liable (responsible) or are guilty of fraud. The term "limited liability" refers to the concept that generally the shareholder's liability for the debts or obligations of the corporation is limited to the amount of money already paid to the corporation for the stock.
Limited liability companies are a relatively new creation. LLC's were first created by Wyoming in 1977. Delaware created its Limited Liability Company Act in 1992. In the 1960's and 70's several states including Delaware adopted close corporation acts which were intended to create flexibility in the operation of limited liability entities. These companies never became popular because of the limitations and rigidity contained in the law. Delaware's Act was drafted to avoid that rigidity and to provide the required flexibility. It is important to remember that there is no requirement that either a shareholder of a corporation or the member of an LLC be an US citizen or resident. The same applies to officers, directors and managers.
The IRS has ruled that a company which under its state's law qualifies as an LLC will not be taxed at the entity level but its income and loss will be taxed to its owners who are called in the context to an LLC, members. If an LLC has only one member, the IRS still recognizes it as an LLC, however the entity is disregarded and is, for tax purposes only, treated as a sole proprietorship. A single member LLC has the same limited liability as a single shareholder corporation.
An LLC owned by ONE non-US person or ONE non-US registered company, will be considered a disregarded entity only if the single owner has a US tax ID and files a tax return in the USA, be it a personal tax return in the case of a personally owned LLC or a corporate tax return in the case a single corporate owner. Which makes foreigners and US residents and citizens all equal under US tax law.
An LLC can be viewed as a partnership whose partners have limited liability. It has all of the best features of partnerships and corporations with none of their rigidity. As with a partnership, the relationship between the partners, and the partners with the company, is determined by an agreement. In an LLC that agreement is called an operating agreement. The operating agreement may be either written or oral. If no operating agreement is adopted, the Act is the default operating agreement. We do not think that it is wise to have an oral operating agreement.
The company may be managed by all or just some of its members. If it is managed by less than all of its members it is considered to have centralized management. The person(s) who manage the business is then called the manager. There may be just one manager. The manager need not be a member. We speak about either member managed companies or manager managed companies. Managers are similar to officers and directors. A manager may have a title such as president.
Delaware's Act is considered to be the most modern and most flexible in the nation. Delaware places almost no limitation on the ingenuity of attorneys and business persons in drafting operating agreements.
Unlike a subchapter S corporation an LLC is not subject to rigid tax laws dealing with who may be a shareholder, the nature of the business of the company, the number of shareholders or any tax requirement that a tax election forms to be filed with the IRS. Please remember that an S corporation must pay FICA taxes on wages paid, including wages paid to shareholders, but not on earnings and profits (dividends). Members of an LLC, except those who do not participate in the management of a company with centralized management, must pay self employment taxes on income derived from the LLC.
Delaware requires that corporations report the names and addresses of its officers and directors on an annual basis. There is no filing of any names associated with a LLC. The franchise tax report is not even signed by the LLC.
Can a Non-US person or company own a Delaware Corporation or LLC?
Yes. Delaware does not limit who can own or participate in a Delaware company. We can setup a Delaware LLC for foreigners, Delaware LLC for non-us residents, Delaware Corporation for foreigners and Delaware Corporation for non-us resident, of course, we can for for residents as well.
How will I benefit from having a Delaware company and a US Business Presence?
- A real business tends to get more respect from your customers
- Full separation of operations from the person
- More access to certain services only available to US businesses
- Limited liability
- and many more benefits of forming an LLC in Delaware
Do I need Capital to setup a Delaware Corporation or LLC?
No, Delaware does not require you to declare the Share Capital, nor to have a minimum percentage of it Paid Up.
You can declare the par value and number of shares your Corporation has and that will affect the Franchise Tax you pay to the State of Delaware when forming your company and each year when you file your Annual Report.
LLCs have no shares, and just a flat Franchise Tax.
If I want to close my Delaware Company how do I do that?
If you want to Dissolve your Corporation or Cancel your LLC please contact us so that we can calculate the fees involved and file the documents with Delaware State for you. If you are absolutely certain that you no longer need your company we do advise that you close your company before the end of year so that you don't accrue new State fees by waiting until we're already into the next year. It is necessary to officially dissolve or cancel your company so that you don't have any debts to Delaware State or to your Registered Agent.
Can I, as a Non-Resident and/or Non-Citizen own, manage, be a director, officer, member, or form a company with EIN?
Yes, Non-Residents, and Non-Citizens of the USA can form, own, or manage, etc. a Delaware LLC for foreigners or Delaware Corporation for non us residents. Our USBPP is perfect for you. We can setup Delaware LLC for foreigners, Delaware LLC for non-us residents, Delaware Corp for foreigners and Delaware Corporations for non-us residents, and US residents alike.
I have a Certificate of Incorporation/Formation to file and I want you to be my Registered Agent, how do I do this?
If it is just a filled out download of the Certificate off of the State of Delaware's website, then you may as well take advantage of our free filing package and we'll file one that's lawyer created and reviewed for you for free. See http://www.delaware-llc.valisinternational.com/delaware-corporation-and-... for details.
If it's a certificate with special clauses and written up just the way you like it then we'd also be happy to file it for you for free, just send it to us as a .doc file and we'll add in our Registered Agent information and file it with the State for you as well, under our free filing package, where you will just pay us a pro-rated fee based on the number of months left in the calendar year for our Registered Agent Services.
Finally, if you really just want our info so you can add it to the Cert and file it yourself just contact us in advance and we'll give you the information to put into your certificate, then upload a scan of it to the secure document center in your members area, pay us for the pro-rated Registered Agent fee for the rest of the calendar year, and file it yourself. The State will contact us to make sure we've agreed to do it then they'll file your Certificate and follow the instructions you gave on the cover memo you sent with it.
I am the sole Director of a Corporation - do I have to file yearly Federal Income Tax Returns in the US?
Yes. Whether you are the sole Director of a Corporation, a partner in a Corporation or a partner in, or sole owner of, an LLC, you will have to file yearly Federal Income Tax Returns in the US if you have an EIN.
Do I have to pay Delaware State Taxes?
If you want to keep your Delaware Corporation or LLC in good standing with Delaware State you must pay your yearly State Franchise Tax and your yearly Registered Agent Fees.
- State Taxes and RA fees are due in January of each year for Corporations and are $100/year ($75 in Taxes and $25 for Annual Report Filing)
- State Taxes and RA fees are due in April of each year for LLCs and are $250/year.
Registered Agent Fees are US$100/year or only US$50/year if you renew or purchase our US Business Office Address & Mail Forwarding service.
Do I have to collect or pay Delaware Sales Tax?
No. Delaware has no sales tax. Unlike Nevada and many other states that would require this. Delaware is a very business friendly state for businesses selling goods and services.
Can you supply me with a Reseller Permit Number or a Sales Tax ID?
Since one of the main benefits of setting up your company in Delaware is that there is no State Sales Tax, so a State Sales Tax ID or a Reseller Permit Number which are the same thing as I understand it, don't exist in Delaware and you don't need them (bonus). Just explain to whoever asked for it that your company is setup in Delaware and there is no Sales Tax there so it is impossible to provide them with one, but you can provide them with your Federal Tax ID #, your EIN, which we can get for your company. This has always worked for our clients as far as we know.
Do I have to file yearly Federal Income Tax returns in the US if I have a single-member LLC?
Yes. It has just recently come to our attention that the IRS has now made it clear that a US Tax return must be filed 'up the chain' for any disregarded entity. This means that if you are a non-resident alien and you don't have an ITIN then your LLC cannot be a disregarded entity even if you are the sole owner.
The IRS language states that an individual owner of a disregarded LLC must file a 1040 (that's a personal tax return in the USA), and although it states that a single corporate owner should account for the company in it's tax return as a division, they also say that that corporate owner must have an EIN and file a tax return in the USA, or if it's a single member LLC, then it's owner must file a tax return, etc..
So, no matter what the circumstance a tax return must be filed in the USA, though that doesn't necessarily translate into paying tax in the USA. After all, it's the profit that is taxed, and if no profit is left in the Delaware company, then no tax has to be paid, but a tax return still must be filed. It is common for a parent company to draw off all the potential profit in a subsidiary as management fees, leaving no profit in the subsidiary, and therefore no tax owing for it.
If someone tells you that you can have a disregarded entity anywhere in the USA and not have to file a tax return in the USA they are not up to date, and could get you into trouble. Come to us and we'll help you get setup right.
With this in mind most of our clients are forming Corporations as they are a more straight forward and understood company type around the world, and leave no question as to how they should be taxed. They also have a great paper-trail: tax returns from the US government to show the activities of the business that are acceptable everywhere.
I don't have an EIN for my US company - do I have to file yearly Federal Income Tax Returns in the US?
No, because the IRS doesn't know your company exists. If your US company is an active business you are required to get an EIN, and file the appropriate tax returns of course.
Words of Wisdom from a Tax Professional concerning US companies owned by non-US persons
Click here to read it: Words of Wisdom from a Tax Professional concerning US companies owned by non-US persons
Can I form a foreign subsidiary of my local company? Can my local company own my new Delaware Corporation?
Yes. We can form your Delaware Corporation as a subsidiary of your foreign business. We can list the foreign company as the initial Director also, if that is the case. We can setup your company any way you like.
Is a Corp or an LLC better for me?
For 1 Owner:
If you are a Non-Resident Alien that doesn't file a personal federal Income tax return in the USA (no ITIN or SSN) then an LLC cannot be a disregarded Entity for you to personally own. So, since you would have to elect to be taxed as a Corporation anyway, why not just form a Corporation in the first place?
Double Taxation only exists if you leave the profit in the Delaware Corp. and payout the remaining profit (after tax) in dividends. If The Corp has no profit because it all gets spent as Management Fees then there is no profit in the Delaware company, and therefore no taxes are paid by it, so no double taxation. An LLC does this transfer of management fees naturally, but you can invoice a Corp for Management Fees and accomplish exactly the same situation.
If it were my choice I'd form a Corporation and draw off any potential profit in Management fees rather than form an LLC. In fact, that's exactly what we did (I'm Canadian), and what we do. I think that Delaware LLCs for foreigners are now rendered pointless, except in rare circumstances, see my blog on Tax Free LLCs.
If the single owner of an LLC is a US Corporation, then the Delaware LLC for non-us residents is really a Delaware LLC for US residents as the Corp is a US resident and so the LLC can be a disregarded entity and it can be accounted for in the US Corporation's tax return. So you can have an Umbrella Parent Corp, and many child LLCs under it and only file 1 tax return, for the Parent Corporation.
If you are a US Resident and have a SSN, then your LLC can be a disregarded entity, and you won't have to file a tax return for it, you just have to account for it in your personal tax return.
For Multiple Owners:
If you are a Non-Resident Alien, then the same applies as written above. A corporation makes more sense.
If you are a Resident with a SSN then you can file a Partnership Return for the LLC and Personal Income Tax Returns for the partnership payouts. Or you can elect to be taxed as a Corporation.
Can a business open a US bank account?
Do I need an SSN or ITIN to get a US Corporate Bank Account?
No, but you will need an EIN for your company, which we can get for you. If you are a US citizen or Resident, or you already have an ITIN or SSN the bank will need it, but if you don't they'll do fine with a W-8BEN.
I am a non-US person - What do I need in order to qualify for a US Corporate bank account?
What do US banks like to see in Corporate documents?
This is a good question! We have had to Restate and Amend many clients' Certificates of Incorporation/Formation due to the bank not being happy with the style of document (they chose another Incorporator, not VALIS). We know what kind of documents a bank wants to see.
US banks want to see a Certified Copy of your Certificate of Incorporation/Formation - and they want to see your name & address on the face of the certificate that has been filed with Delaware State. VALIS provides our clients with these excellent documents.
Non US banks want to see a Certified Copy and an Apostille for your Certificate of Incorporation/Formation. Having your name & address on the face of your Certificate of Incorporation/Formation gives the bank more confidence, of course.
I am Canadian - How can I setup a US Corporate bank account?
Email us for tips and guidance on your many options!
What if I don't want my name listed on the face of the Certificate?
We can do that for you for an extra US$50. We'll provide you with a Statement of Incorporator/Organizer, signed by your Registered Agent, (but not filed with Delaware State) that shows that you are the Director/Member of your Delaware Company.
Please note: It is less likely you'll be able to get a bank account without your name on the face of the ceritifcate and in the public record.
Also, if we get an EIN for you, we give your information to the IRS. We setup companies for business, not for secrecy, our reputation and our clients reputations reflect this.
Per the Delaware Director of Corporations:
- All filings with the Delaware Division of Corporations are public record including annual reports listing directors of corporations;
- Delaware legal entities are prohibited from the sale or transfer of shares or ownership interests in bearer form;
- Every Delaware legal entity is required to provide its registered agent with the name of a natural person who acts as the communications contact for the entity;
- Delaware registered agents are required to retain the above communications contact information; and
- Federal and state laws provide legal mechanisms, recourse and due process to enable officers, directors, shareholders and law enforcement to inspect the books and records of an entity.
Can I withdraw from my PayPal account to my new US bank account?
Yes, using the PayPal "Withdraw" feature. It is completely free.
Can you help me setup a US Personal bank account?
Not at this time, sorry.
What will your US Business Presence Package (USBPP) qualify me for?
- A US Business PayPal account
- A US Corporate Bank Account
- Plus many other US services only available to persons with Federal Tax ID Numbers (EINs)
How long does it take to form my Delaware Company?
Once you place your order and your payment is confirmed, we will form your company the same day if it's early enough or by the next business day. If you ordered your Incorporation expedited we will have your filed/stamped State Documents back from Delaware in 2 to 3 business days at which time we will scan and upload them to your Corporate Documents area within your online account with VALIS so you can view and print them any time you like.
What documents do you need from me?
That depends on what you order:
- Delaware Corporation or LLC formation: we don't require any documents from you
- EIN: valid International Passport
- US Office Address & Mail Forwarding account: valid International Passport, Secondary Photo ID & Utility bill
Why do your competitors only charge $25 for EIN retrieval?
Because they only get an EIN for a company who's owner is a US Resident with a SSN. We can get an EIN for a company who's owner is a non-US resident without a SSN. If you are a US resident with a SSN just let us know and we'll help you to get your company's EIN for free.
Can VALIS help me to get a PayPal account?
Yes and No. PayPal will approve you or not based on their own policies, often they will approve you even if you don't live in a pre-approved country, with the stipulation that you first get a US Bank Account in your company name. Contact PayPal for info then come and get a USBPP and a Corporate account from us. The USBPP does qualify you for a US Business PayPal account.
Will my new company qualify for PayPal Website Payments Pro?
PayPal Website Payments Pro is only available to US residents. With our USBPP and a company bank account in the USA you will qualify for a US Business PayPal account to be able to send and receive money through the PayPal system worldwide, but PayPal and their merchant provider partners require that PayPal Website Payments Pro be guaranteed by a US resident owner, so unless you actually, physically, live in the USA, PayPal Website Payments Pro isn't available to you. If you want to be able to accept credit card directly we only know of one company that will take foreign owned US companies as clients, click here for details:
Can I form a Holding company or a Parent company?
Yes. We can form a company for you that can be used to hold other companies, or other assets. In Delaware there is no need to specify that the company is a holding company, though you can write that into the name, ex. XYZ Holding Company LLC. There is also no need to specify that it is a parent company, though, again, you can write it into the name of the company if you wish, ex. XYZ Parent Inc.
What citizens can you not work with?
Currently we are unable to provide services to citizens of these countries: Balkans, Belarus, Burma, Cote d’Ivoire (Ivory Coast), The Congo, Iraq, Iran, Lebanon, Liberia, Libya, North Korea, Russia, Somalia, Sudan (Darfur), Syria, Zimbabwe, and anyone else designated by OFAC.
What forms of Payment does VALIS accept?
VISA, MasterCard, Discover, Wire Transfer, Western Union, and US$ International Money Orders.
In what format do you want my documents?
Please color scan your documents so that they are under 300 Kbs each and are scanned into either jpeg, gif or PDF format - then upload them to our secure server through your Member's Area. It is best to scan them at a high resolution then 'save for web' them at 72 dpi while maintaining their actual dimensions.
Can I fax you my documents instead of uploading them in your secure Upload Area?
Yes, but they have to be readable. Most of the time they aren't. It is better if you color scan and upload them in your secure Upload Area, please.
Can I use an expired passport?
No, only valid International passports can be used.
How secure is your Server?
Your scans are kept on our dedicated secure server, behind a firewall, not available on the webserver, in a major high-security datacenter in the US. We use high security SSL certificates for encrypting all data that passes between you and our server. Our server is also scanned regularly by SecurityMetrics: TESTED FOR OVER 4400 SECURITY WEAKNESSES AND NO SIGNIFICANT SECURITY VULNERABILITIES WERE FOUND .