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Delaware LLC
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Delaware Llc advantages and disadvantages
Forming a Delaware LLC reflects a business planning process by entrepreneurs which results in your creating a legal presence within the state of Delaware, accordingly attracting both the privileges as well as the responsibilities of llc formation. Delaware is recognized both nationally and internationally as the center for corporate incorporation services, accordingly has developed an extraordinary legal and professional services community to assist you in your Delaware LLC formation needs.A Delaware LLC meets a necessary statutory condition that requires that business developers establish a legal presence in the state by way of your LLC. By meeting this standard, your Delaware LLC qualifies for the legal protections offered by the state of Delaware, which separate out the personal assets of your members from the potential future liabilities of your LLC in respect of its creditors taking litigation steps to prosecute a claim against your Delaware LLC. Your Delaware LLC corporate veil cannot be pierced by outside claims against your members' assets, unless an instance of fraud has been proven. Another major benefit of your Delaware LLC is that you can now treat qualifying costs and expenses as corporate deductibles, along with depreciating or writing off qualifying assets of your Delaware LLC as permitted by state and federal law. Another benefit is that your Delaware LLC is unrestricted in terms of its authority to raise private capital through qualified private placement financing, similar to a C corporation, where an unlimited number of investor members can be brought into your LLC. Similarly, your Delaware LLC can establish credit and banking facilities just like other corporate forms such as C corporation or Subchapter S corporations.
Delaware Corporation:
Advantages and Disadvantages
Advantages of Limited Liability Company
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Disadvantages of Limited Liability Company
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
Delaware’s State/Local Tax Burden Third Lowest in the Nation
Consistently over the past 14 years, Delaware has had one of the nation’s lowest tax burdens. Despite peaking at 8.6% in 1997, the state has kept its figure well below the national average. Declines in the burden continue today. Estimated now at 8.2% of income, Delaware’s state/local tax burden percentage is the third lowest nationally.Delaware’s Individual Income Tax System
Delaware’s personal income tax system consists of six brackets and a top rate of 5.95% kicking in at an income level of $60,000. That top rate ranks 25th highest among states levying an individual income tax. In 2003 individual income tax collections were $871 per person, ranked 9th highest nationally.Delaware’s Corporate Income Collections Per Capita Third Highest Nationally
Delaware’s corporate tax structure consists of a flat tax of 8.7% on all corporate income. Among states levying corporate income taxes, Delaware’s rate ranks 12th highest. In 2003 corporate tax collections were $255 per capita, ranking 4th highest among states that tax corporate income.Home
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