LLC IN DELAWARENATALIA SOLOMAKHINA, CHIEF LEGAL OFFICER AT DIGITAL FUTURE

WHY FORM AN LLC

The Delaware LLC is a truly unique business entity: it is a mix of partnership and corporation.

LLCs offer members asset protection against liability and creditors, since a statutory limitation on personal liability means that LLC members cannot be held responsible for a sum higher than his/her initial investment in the LLC.  

The structure of an LLC is more flexible than a corporation, in that the LLC members are free to organize the company in any way they see fit; the members can create all their own terms in order to govern, operate and oversee their LLC.

You can choose the type of taxation of your LLC.

WHY FORM AN LLC

Owners typically choose to form a Delaware LLC if they want to start a company but have no plans to go public or issue shares of stock in their company

A Delaware LLC is an extremely flexible business entity with low start-up costs and an affordable Franchise Tax

Forming an llc may help your business be perceived as a more legitimate business than a sole proprietorship or general partnership.

Delaware LLC formation is easy There is no need to visit the state in order to register a company Minimal information is required to form your LLC in Delaware. It helps to keep your identity and

personal information secure The process can be done online

WHY NOT TO FORM AN LLC

Not all businesses are at a stage when an LLC makes good business sense LLC formation is more expensive than that of a sole proprietorship or

general partnership, both of which are not required to file formation documents with the state 

LLCs have fewer corporate formalities and greater tax flexibility. However, one of the disadvantages is that profits may be subject to self-employment taxes. Oftentimes, this tax is higher than it would be at the corporate level. Individual members will pay for federal items like Medicare and Social Security. 

You plan to raise venture capital or to go public

HOW TO FORM AN LLC

Name your LLC Make name reservation. You can reserve your entity name online at  https://icis.corp.delaware.gov/Ecorp/NameReserv/NameReservation.aspx The fee is $75.00 Choose a registered agent. A registered agent is a person or business nominated by your

company to officially receive and send papers on your behalf including annual state filings.

Who can be a Registered Agent? The registered agent must be a resident of Delaware or a corporation authorized to transact business in Delaware. BizFillings

Consider renting a virtual office. You can use this Delaware address for your websites, mail, business cards, and whatever you need http://www.wtcde.com/Office-Space-/STAT-Office-Solutions-680

File the Certificate of Formation with the state of Delaware

HOW TO FORM AN LLC

The Certificate of Formation filed with the Delaware Secretary of State is required to contain only three items: The name of the LLC The name and address of the registered agent The signature of an authorized individual

HOW TO FORM AN LLC

Create an Operating Agreement. LLC operating agreements are the internal rules of an LLC

Order a Certificate of Status or Certificate of Good Standing at the time of filing your new entity by indicating this request in the comment section of the Document Filing Sheet

Obtain an Employer Identification Number (EIN) Open a business bank account Check whether you need business licenses and permits

HOW MUCH?

LLC formation costs: Delaware LLCs have a $90 filing fee paid to the Division of Corporations. Your LLC will be active in 1 to 3 days (the timing depends on state filing times), however, if

you need the LLC the same day, Delaware charges a $50 expedite fee. Delaware registered agent will charge from $100 to $ 200 for its services LLC maintenance fees in Delaware: Delaware LLCs do not file annual reports; instead, LLCs in Delaware file annual taxes. The

annual franchise tax is a flat $300. The annual Delaware LLC tax is due by June 1 each year. You can file online on the DE

Division of Corporations website. The Division of Corporations charges $200 for nonpayment or late payments. Interest

accrues at 1.5 percent per month on the tax and late fee payment.

WHAT ABOUT TAXES?

Single member LLC: This structure is taxed like a sole proprietorship. Profits or losses from the business are not taxed directly but instead are taxed through the single member’s personal federal tax return. The state’s personal income tax rate varies from 2.2% to 6.75%. You will need a tax number to pay taxes (SSN or ITIN)

Partners in an LLC: Members elect to be treated like a traditional partnership for tax purposes.

LLC filing as a Corporation: The members of the organization may also choose to file as if they were corporation. Delaware corporation income tax is assessed at a flat 8.7% of taxable income derived from Delaware

GAME OVER?

Dissolving an LLC in Delaware requires a few steps but can be relatively easy to achieve. Voting to Dissolve. The first step to dissolve an LLC Delaware is to call a meeting of the

members. Members can vote in person or in writing. The vote should be recorded in the minutes. Once the vote passes, a manager has to be appointed to handle the Delaware LLC dissolution.

Winding Up Company Business. Creditors are paid first: all of the company’s bills must be paid and all of the Delaware LLC members who are creditors must be paid back. Taxes also must be paid. Any lawsuits that are unresolved must be settled. Next, distributions owed to members must be paid. The manager must also create a plan to deal with any claims or lawsuits that may arise against the company in the future. Once all the debts and responsibilities are resolved, members get their capital contributions back. Any remaining assets are then distributed among the members in proportion to their ownership shares.

File Forms. The next step is to file forms and taxes with the Secretary of State.