Delaware company registration

DOING BUSINESS IN DELAWARE

Since 2003, Healy Consultants PLC helps multi-national Clients with Delaware business set up including USA corporate bank account.

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  • The Delaware LLC

    For the majority of our multi-national Clients wanting to establish a USA entity, Healy Consultants PLC recommends a simple Delaware LLC because:

      Delaware business

    1. Usually, a Delaware LLC suffers less tax than any other USA entity. Only USA income tax is payable on annual net profits of a Delaware LLC, regardless of whether dividends are declared. By contrast, a Delaware corporation suffers USA corporation tax on annual net profits; and USA income tax on company distributions to the shareholders;
    2. A Delaware LLC does not suffer a personal holding company tax (click link). By contrast and in addition to annual corporation tax of 30%, a closely held Delaware corporation suffers a tax of 20% of undistributed holding company income;
    3. A Delaware LLC must file a legal annual return (click link), but does not have to file financial statements;
    4. There are no independent statutory audit requirements for a Delaware LLC;
    5. A USA LLC is similar to an Limited Liability Partnership (click link), net profits flow through to shareholders. The latter paying income tax in their country of residence;
    6. A Delaware LLC does not suffer USA corporation tax; only USA income tax;
    7. If our multi-national Clients’ do not have a business presence in the USA, the members are not issued an income tax number by the IRS. Consequently, it is difficult to submit an annual income tax return;
    8. If our Client needs a reputable low tax entity for international trading, we recommend a simple Delaware LLC and a Citibank corporate bank account. The bank signatory does not need to travel to the USA.
  • Why choose a Delaware entity when doing business in the USA?

    1. Of all the USA states, Delaware is the most pro-business friendly state including i) State laws that favour employers more than employees and ii) case law that welcomes entrepreneurs and multi-national companies and iii) General Corporation Law that favors directors over shareholders and iv) Delaware case and State law if consistent, transparent and predictable;
    2. Because of the above, 60% of the Fortune 500 companies are incorporated in Delaware;
    3. Business set up is fast and easy because i) company registration without employees and office premises is common ii) no income tax payable if all business is conducted outside the State;
    4. Delaware tax is lower than most other USA States because:
      • lower personal income tax rates, compared to other USA States;
      • there is no sales tax in Delaware;
      • Delaware does not impose state withholding taxes on dividends or interest or royalties paid to overseas shareholders;
      • Delaware does not tax imports or exports;
      • No personal property or inventory taxes. Corporations can own their own office spaces without suffering property tax;
      • There is no inheritance tax in Delaware, nor withholding taxes on dividends or interest or royalties paid to overseas shareholders, nor capital gains tax on transfer of stock \ equity;
      • Compared to other states, Delaware offers very low franchise taxes including a flat tax of US$ 100 for a C Corp and US$ 250 for an LLC;
      • Property tax relief for new construction and improvements of existing property;
      • The deferment of import taxes at the Port of Wilmington’s foreign trade zone;
      • Public utility tax rebates of 50% on increased consumption for qualifying industries and reduced rate for manufacturers and agricultural processors.

    5. Because the majority of global banks and financial services companies have a large presence in Delaware; it is easier to i) secure debt and equity finance and ii) conduct M&A activity;
    6. The Delaware Small Business LIFT program reduces loan costs for a small business employing between 3 and 50 persons. Under the 7-year loan program, the first two years are repayments free and the remaining five years are principal-only repayments;
    7. There is no public register of shareholders and directors in Delaware. Consequently, our Clients enjoy some confidentiality. By contrast, the majority of USA States have an online public register of shareholders and directors. Instead a one-page document is available to the public, that merely states the name of the Delaware LLC and legal registered office address and the name of the Delaware registered agent;
    8. Delaware trusts are legally tax exempt if the settlor and beneficiary are not resident in the State;
    9. Delaware also supports the Delaware Technology Park, home to more than 57 high-tech companies. This partnership of governmental, academic, and private industry provides a location for start-ups in high-technology fields, specifically biotechnology, information technology, and advanced materials. These science-based companies benefit from facilities already set up for science research, an advanced IT infrastructure, and the close proximity of like-minded companies;
    10. Delaware is positioned first in the nation for industry investment and research and development as well as high-wage service jobs. Mainly because of the proximity of the University of Delaware’s top-notch research centers.
  • Advantages and disadvantages

    Advantages of Delaware company registration

    Benefits for registering new company in Delaware

    1. Delaware is one of the best jurisdictions in the world for company incorporation because:
      • An LLC can be registered in Delaware within a day with 1 director and 1 shareholder, who can be of any nationality. Furthermore, the director and the shareholder can be the same individual. Also, the Client will not have to travel for company incorporation;
      • There is no statutory minimum share capital required to set up a Delaware company. Furthermore, it is not mandatory for the Client to open a corporate bank account for their new company. However, Healy Consultants recommends you to have a US bank account for receiving or remitting payments;
      • Delaware LLCs not operating in the state are exempt from all state business license requirements. Also, such LLCs will not be required to file financial statements or annual income tax reports with the state government;
      • Lastly, a Delaware LLC can be easily converted into a C-Corporation with 1 filing with the state government and 1 filing with the IRS.
    2. Delaware is hailed as a reputable domestic corporate tax haven because:
      • Delaware offers complete privacy to directors and shareholders of the local companies as their names and details are not available for public records. This factor makes Delaware an attractive jurisdiction for company incorporation and contributes towards United States having the 5th highest financial secrecy in the world (Financial Secrecy Index by the Tax Justice Network) ;
      • Non-resident shareholders of a Delaware LLC (US LLCs are treated as pass through entities for tax purposes) will be exempt from paying tax on their corporate income if the LLC conducts no business in the state; Similarly, corporations incorporated in Delaware can also be completely exempt from state corporate taxes if they conduct no business within the state. As a result, majority of US resident business have been incorporated in Delaware;
      • Delaware resident companies also suffer no taxes on income derived from the use of intangible assets including patents, trademarks and royalties. As result, companies operating in other US states (where intangible assets are taxed) can incorporate Delaware companies for holding their intellectual property and pay licensing fees to their Delaware companies for use of this property. This way, the earnings derived from the use of intangible property will be deductible for Delaware corporate tax purposes;
      • Companies owning assets which are expected to earn future income can be state tax exempt by placing the assets in Delaware irrevocable trusts. The Delaware government does not levy tax on distributed income if the beneficiaries of the trusts are not resident in Delaware. Similarly, there will be no tax on accumulated income and capital gains if the remainder beneficiaries are not Delaware residents. Furthermore, unlike companies, trusts are not subject to annual franchise tax;
      • Delaware’s corporate law is more developed as compared to other states in the United States. Hence, companies feel more secure when dealing with Delaware’s Court of Chancery as their judges are experienced with resolving corporate disputes Furthermore, Delaware Supreme Court’s judgements on corporate governance are well respected and routinely followed. As result, the US Chamber Institute for legal reform ranked Delaware as the state with the best legal climate in the US;
      • Being a US state, Delaware runs no risk of being sanctioned or blacklisted as a tax haven. Furthermore, there is low probability of Delaware changing its tax laws in the near future. Hence, it is definitely the best option for company incorporation in the US.
    3. Delaware is hailed as the preferred business hub in the USA for foreign investors because:

    For more information, kindly refer to our page on Advantages of USA company registration.

  • Disadvantages of Delaware company registration

    1. While Delaware businesses can be state corporate tax exempt, they will still suffer some costs including:
      • All Delaware companies must have a registered agent resident in Delaware. If required, Healy Consultants affiliate office will be pleased to offer this service to our Clients;
      • Every Delaware registered entity must pay an annual franchise tax of US$300. This tax must be paid even if the company’s physical office is located in another state. Also, all Delaware based corporations must file an annual report with the Division of Corporations;
      • While Delaware is a great jurisdiction for company incorporation, it is not recommended for setting up a physical office. Hence, most companies choose to establish their physical offices in other states. As a result, the company will be required to i) apply for foreign qualification in the other state ii) pay franchise tax in both states and iii) comply with reporting requirements of both states.
    2. Delaware companies will be subject to annual federal taxes including:
      • All shareholders in a US resident LLC will be required to pay withholding tax. If the shareholder is a foreign corporate entity, the withholding tax will be 35%. If the shareholder is a foreign individual, the withholding tax will be 40%;
      • Income earnt by foreign nationals not connected to the day-to day running of a resident business (Effectively Connected Income) including dividends, interests, annuities, rents and royalties (Fixed, Determinable, Annual and Periodical Income) are subject to a withholding tax of 30%;
      • A C-Corporation in the US will be subject to double taxation. While the income of the corporation is subject to federal tax of up to 35%, the after tax profits distributed to the shareholders are also liable to personal tax of up to 40%.
    3. US federal tax regulations impose an undue burden on foreign entrepreneurs because:
      • All shareholders in an LLC must pay their share of federal tax regardless of whether profits have been actually distributed to them i.e. even if the shareholder decide to re-invest the annual profits of the LLC, they will still have to pay the withholding tax;
      • Non-resident shareholders of a US LLC are obligated to file the annual income tax returns with the IRS (form 1040NR and form W-8BEN). This results in additional expenses as US tax law is very complex and requires assistance of a resident tax consultant;
      • All non-resident shareholders of a US LLC must apply for a personal Tax Identification Number (TIN).
      • It is important our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile, and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your local and international annual tax reporting obligations.

    For more information, kindly refer to our page on Disadvantages of USA company registration.

  • Best uses for a Delaware company

    • Delaware companies are also a good solution for Clients that prioritize privacy, as it is one of the few states in the USA in which the name of the shareholders and directors are not publicly available;
    • Lastly, Delaware companies are optimal solutions to hold intellectual property as resident companies are exempt from paying taxes on income derived from the use of intangible assets.

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Company registration

  • Time to incorporate: One week
  • Cost to set up: US$8,900
  • Minimum capital: US$0
  • Physical office required: No

Required appointments

  • Shareholders: 1
  • Directors: 1
  • Company secretary: Yes
  • Resident director: No

Key facts

  • Corporate tax rate: Tax-transparent
  • Corporate tax base: Worldwide
  • Shelf companies: Unavailable
  • Main company type: LLC

Contact us

For additional information on our company registration services in Delaware, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Mr. Paavan Chhabra, directly:
client relationship officer - Paavan