The Delaware Company

Learn the Benefits of Incorporating in Delaware

• Which entity is best for me? Review the following to help make your decision:

• A Delaware corporation is usually appropriate if:

• There is any chance the owners might want to become an S corporation.
• Several individuals or entities will be owners.
• Owners plan to be profitable in the first several years of operation and plan to reinvest profits for growth.
• Owners live in a state with an income tax.

• A Delaware S corporation is usually appropriate if:

• The company will experience start-up losses during the initial years of operation and the owner has ordinary income against which these losses can be deducted.
• The company is a single-owner entity.
• The owner wants to extract most of the profits instead of reinvesting for growth.
• The company does not expect to issue multiple classes of stock or have more than 100 shareholders.

• A Delaware LLC (limited liability company) is usually appropriate if:

• The business is a partnership, or several different entities own the business.
• The company is used primarily to hold real estate or other income-generating assets such as stocks.
• The company has foreign investors.

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• What are state fees? State fees are the filing fees imposed by the State of Delaware for forming an LLC or corporation in Delaware. The state's fee for forming an LLC is $90. The fee for forming a corporation is $89.
  
  The Delaware Company acts as an intermediary by collecting the state fees you owe on behalf of the State of Delaware and submitting them to Delaware on your behalf during the formation process.

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• How much stock do I need? As the owner of a Delaware corporation, you determine the appropriate number of shares for your company. The numbers of shares you select will influence your cost of maintenance. Unless otherwise specified, The Delaware Company forms corporations with 1,500 shares at a zero par value. This amount qualifies you for the minimum annual state fees of $60 per year. If you wish to increase the number of shares or par value later in the corporation's life, you can do so by filing an amendment with the state.

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• Where do I get stock/membership certificates? The Delaware Company's LLC or corporate kit, which is included with your formation, contains 20 custom numbered membership or stock certificates for your company.

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• Do I need a federal tax ID (EIN) number? The IRS requires LLCs or corporations who intend on having employees or opening a bank account to obtain an EIN. To obtain an EIN, you must provide a valid US Social Security Number (SSN) or individual tax identification number (ITIN).

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• How do I open my company bank account? It is typically best to contact the bank(s) with which you would consider opening an account to ask them what type of information they require. Most banks require a certified copy of the certificate of formation (or incorporation) which is available for purchase as an add-on item from The Delaware Company. Some banks will require a certificate of good standing and a tax ID (EIN) number, both of which can be purchased as add-on items when ordering your company or at a later date. Most non-US clients will require a certificate of formation or certificate of incorporation with apostille, which is also available as an add-on item.

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• When do I pay franchise taxes? The franchise tax imposed by the State of Delaware is a tax LLCs and corporations are charged merely for existing in that state. For LLCs, the tax is due by June 1 the year after your LLC is formed. For corporations, the franchise tax is due to Delaware by March 1 the calendar year following your company's formation. You will receive notification and instructions for paying your franchise taxes from your registered agent service provider prior to these dates.

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• Do I need to be registered to "transact business" in my home state? Your Delaware company is a domestic company in the state of Delaware. It is a foreign company in every other state or country. If you plan to staff offices in a state other than Delaware, with employees to conduct business directly with the public, it may be wise to register in this state. Registering in additional states is generally not necessary if you are a consultant; a one- or two-person or home-based business; or sell through independent distributors, manufacturer's representatives, wholesalers, retailers, or through mail order or the Internet. More information on what constitutes "transacting business" can usually be found at the Secretary of State's office in each state. If you decide to register with your home state, be advised that most states will require a certificate of good standing from the State of Delaware. You can either order this certificate as an add-on item when you purchase your formation package, or separately later, if you find that you need it.

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