Advantages

As mentioned on the previous page, your LLC does not pay taxes (aside from a nominal $200 Franchise Tax levied annually by the state) and is totally disregarded for income tax purposes by U.S. tax authorities; the LLC’s income passes through to you personally and you are taxed on an individual basis (if you are a U.S. resident or citizen).

No Income Tax for Non-U.S. Owners

Because of an LLC’s pass-through taxation, the most important fact for foreign owners is this: foreign owners of a Delaware LLC having no U.S. source income, i.e. owners who are neither U.S. citizens nor permanent residents, pay no U.S. income taxes whatsoever.

Key Elements of a Delaware LLC

• Ownership in a Delaware LLC is private and easily transferable. Even the state of Delaware does not record your name. In addition, the transfer of ownership is not required to be filed or recorded anywhere.
• An LLC safeguards your personal assets against creditors and lawsuits.
  • A creditor of the owner of a Delaware LLC cannot seize the assets of the LLC.
  • Without a corporation or LLC, anyone suing your business is really just suing you personally, putting everything you own (house, cars, bank accounts) at risk of being seized in a judgment. Sole proprietors and general partners in a partnership are personally responsible for all the liabilities of the business, such as loans, accounts payable, and potential lawsuits. In a Delaware corporation, however, stockholders, directors and officers typically are not liable for the company’s debts and obligations. You can also use a Delaware corporation or LLC to hold your personal assets like a house, car or boat. If you are ever personally involved in a lawsuit or bankruptcy, these assets cannot be seized.
• A single-member Delaware LLC is automatically disregarded as an entity separate from its owner and includes all of its income and expenses on the owner’s tax return (if the owner were a U.S. resident or citizen).
• A Delaware LLC with two or more members is treated as a partnership.
• There is unmatched contractual flexibility with a Delaware LLC. Delaware law provides rules only on matters on which the members have failed to agree. This is known as “freedom of contract” and nowhere is it stronger than in Delaware.
• Personal liability is limited for owners and managers to the amount of their investment in the company, just like a corporation.

The management of a Delaware LLC is based on an agreement between its owners, who are known as members. A Delaware LLC allows a customized management structure, which dictates the economic relationship among owners.

While Delaware law permits a Delaware LLC to be managed by its members, it does not require members to be managers. The Delaware LLC statute allows parties to define their business relationship in the written agreement however they wish. This is called “freedom of contract”.

Delaware Law provides rules only for those matters on which the parties have failed to agree. The contractual flexibility offered by the Delaware Act is unmatched by any other LLC statute. For example, unlike a corporation, an LLC can distribute profits in any manner described in the LLC agreement, regardless of ownership share.

Some benefits of incorporating your own LLC include:

• Regardless of your personal credit score, you can build a separate credit history for your Delaware corporation or LLC simply by applying for and using corporate credit.
• Your corporation can fully deduct the cost of paying for your health insurance and other fringe benefits.
• Corporations are taxed at a lower rate than individuals. Also, they can own shares in another corporation and receive corporate dividends 80% tax-free.
• There are no limits on the amount of losses a corporation may carry forward to subsequent tax years. A sole proprietorship, on the other hand, cannot claim a capital loss greater than $3,000 unless the owner has offsetting capital gains.
• Leasing your personally owned property (real estate, automobile, or even a domain name) to a corporation may provide tax savings to many individuals.
• A Delaware LLC is capable of continuing indefinitely. Its existence is not affected by the death of shareholders, directors, or officers of the corporation.