[ Why Incorporate? | Why Incorporate in
Delaware? | Types of
Incorporations | FAQs | Incorporate Online
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Protection of Personal Assets
The major reason
why individuals choose to incorporate their business is to protect their
personal assets, such as a home, car or family savings. In the event of a
lawsuit or if your business should fail, your personal assets can not generally
be touched. This limited liability feature of corporations is not available in a
sole proprietorship or partnership, where the individual or partners are
personally liable for all business debts.
Tax Advantages
Corporations and LLCs can take advantage of tax
savings options that are not available to sole proprietorships or partnerships.
For example, corporations can establish pension, profit-sharing and stock
ownership plans, which can lower the corporation's taxable income. Medical, life
and disability insurance premiums are also completely tax deductible for
corporations. In addition, a corporation can own shares of stock in another
corporation and receive 80 percent of the dividends tax-free.
Corporations can raise capital by issuing stock,bonds or other securities.
Corporations and LLCs are the most enduring form of business structure. If a
corporation owner dies, their portion of the business can be transferred quickly
without interruption of the corporation's operations.
Estate and family planning is simplified since shares of a corporation can be
easily distributed to family members.
Corporations and LLCs often experience a greater ease in doing business. Many
stores and banks favor corporate accounts and offer discounts.
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Here's why Delaware is
the preferred state for Incorporation
Corporations and LLCs, large and
small, domestic and foreign, choose Delaware for their corporate headquarters,
even though few have any sales or manufacturing facilities located in the state.
Delaware, the second smallest state in the nation, is the home of nearly 60
percent of the companies listed on the New York and American Stock Exchanges and
more than half of the Fortune 500 firms. Many international companies interested
in doing business in the United States and in other jurisdictions worldwide
choose Delaware because of its favorable corporate law structure, stability, and
reputation as the "American Corporate State."
It's easy to form a Delaware corporation or LLC by phone, fax or mail.
American Incorporators can check and reserve your preferred corporate or LLC
name within minutes and form your new Delaware corporation or LLC that same day.
The cost to incorporate in Delaware is less than in any other state. American
Incorporators can incorporate your business in Delaware for as little as $99.
There is no minimum capital investment required to form a corporation or LLC
in Delaware. While other states require an investment of $500 or more, there is
no capital investment required in Delaware.
One individual can hold all the corporate offices, including president,
treasurer and secretary, in a Delaware corporation. Other states may require
different individuals for these offices.
Delaware corporations have a special "director shield" that shelters
directors from personal liability related to their actions as board members.
Delaware statutes also limit hostile or abusive takeover tactics.
Delaware corporations and LLCs can be operated anonymously with the state
never knowing the owner's identity.
The bylaws of Delaware corporations can be formulated or changed at any time
by the directors.
Delaware is the only state with a special court system dedicated to corporate
law. Through the years, the Delaware Chancery Court has built an unsurpassed
body of case law that is often cited as precedent in other state courts. The
court has a history of pro-management decisions, and often the outcome of legal
actions is predictable.
The corporate headquarters and the records of Delaware corporations can be
located in any state or country as long as you maintain a registered agent to
represent you in Delaware. Many owners of Delaware corporations have never set
foot in Delaware.
There is no Delaware sales tax, property tax or state income tax for
corporations and LLCs formed in Delaware that do not transact business within
the state.
Delaware's annual corporation franchise tax is as low as $30 plus a $20
filing fee (for LLCs, the annual tax is a flat $100). These annual state fees
are kept among the lowest in the nation to attract and maintain corporate
business.
There is no Delaware inheritance tax on shares of stock held by nonresidents.
Delaware corporations can pay dividends from profits as well as from surplus.
Properly registered stock of Delaware corporations can be privately owned or
publicly traded on any stock exchange in the world.
Delaware corporations and LLCs do not need to maintain a Delaware bank
account or Delaware business address as long as you are represented by a
registered agent, such as American Incorporators. Currently, over 300,000
companies are registered in Delaware, and few of their officers have ever
visited the state.
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There are several different types of corporate
structures. Although it is not necessary to use a lawyer or an accountant when
incorporating, American Incorporators recommends that you consult with either
your lawyer or tax advisor to determine the value of incorporating your business
and which type of corporation is most appropriate for your business.
Corporation
Although the most formal corporate structure, a general
business corporation is the most widely used by both small and large businesses
and offers the fewest restrictions. A general business corporation may have an
unlimited number of stockholders/owners whose personal assets are generally
protected in the event of a lawsuite against the corporation or if the business
fails. A stockholder's liability is usually limited to the amount of investment
in the business and no more.
Limited Liability Company (LLC)
Limited Liability Companies are a
type of business entity. An LLC is a legal entity separate and distinct from its
owners, who are called "members." The rights, duties and obligations of LLC
members are governed by an "operating agreement." The provisions of the
operating agreement are extremely important as they can have a direct impact on
how both the LLC and its member-owners are taxed for federal income tax
purposes. In addition to tax matters, the operating agreement typically deals
with issues of management of the LLC by either members or non-members, transfer
of interests in an LLC and termination of the LLC.
When properly structured under applicable state statutes, LLC members have
the same limited liability protection which is afforded stockholders in "C" or
"S" corporations. This means that, absent any specific personal guarantees, the
amount at risk for members of an LLC is limited to their investment in the LLC.
Thus, the personal assets of members are generally beyond the reach of the
creditors of the business. This liability protection is enjoyed by all members,
unlike a limited partnership where at least one general partner must remain
liable for partnership debts. And, unlike limited partners, LLC members may be
active in the management of the LLC without risking their limited liability
status.
LLC members may also enjoy the same flow-through tax benefits which are
applicable to partners of a partnership.
An S Corporation also provides limited liability protection to its investors
as well as flow-through tax treatment. Nevertheless, there are distinct
differences. To begin, there is more flexibility in an LLC then in an S
Corporation. For example, members of an LLC may include any number of
individuals, partnerships, corporations, trusts, nonresident aliens, etc. This
is not the case with S Corporations which require that only individuals and
certain trusts and estates own stock and which limit the number of shareholders
to no more than 75. Moreover, S Corporations have "one class of stock"
restrictions. In addition, all distributions and allocations must be the same
for each share. Should an S Corporation violate any of these rules, it causes
the S election to be revoked. LLCs may (and typically do) base distributions and
allocations on the basis of member contributions, rather than on a per capita
basis.
Non-Profit Corporation
A non-profit corporation is designed for
businesses engaged in charitable, religious, educational or scientific
activities that benefit society in general. The net income of non-profit
corporations must be used to further the not-for-profit goals of the
corporation, not to enrich individual officers, members or directors. Most
non-profit corporations have either tax-exempt or 501(c)(3) status, which
exempts them from paying taxes on their income. To get either of these tax
designations, an Application for Recognition must be filed by the client (or his
attorney) with the IRS and be approved. We will prepare the paperwork for
non-profit corporations for only the states of Delaware and New York.
For information and costs to set-up a Non-Profit Corporation in those states
click here.
S Corporation
Many business owners find the S corporation
attractive because all earnings or losses are passed directly through to their
personal income tax return. This avoids the double taxation aspect of a general
business corporation. There are, however, certain requirements that must be met
to qualify for S corporation status. We recommend that you consult with your tax
advisor before choosing this type of business structure. To obtain the S
corporation tax status, all shareholders of the corporation must sign IRS Form
2553, and it must be filed with the IRS within 75 days of the date of
incorporation. American Incorporators can assist you with this filing.
American Incorporators will form your new Delaware corporation for
$99 including all service fees and filing
fees.
Our complete incorporating services, include:
- Checking and reserving your preferred corporate name
- Preparing and filing your Certificate of Incorporation
- Promptly forwarding the filed copy of the Certificate of Incorporation to
you
- Providing the required statutory agent services free for the remainder of
the first calendar year
To form your corporation in any other state,
please see the attached Incorporate Online for only $25 plus state fees. Click here!
for prices.
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If I incorporate in Delaware, can I
do business in other states?
Yes. Your Delaware corporation is known as a
domestic corporation in Delaware. In other states, it is considered a foreign
corporation. Depending on the nature of the business, you may have to register
your Delaware corporation in the state(s) where you plan to maintain offices,
hire employees and transact business. However, many businesses prefer to operate
as a Delaware business in their home state because of Delaware's many corporate
advantages and low annual franchise tax. American Incorporators can register
your business in any state.
How do I form a corporation or LLC in the state of my choice?
The
formation of a corporation or LLC is not a difficult process, and in most cases,
it can be accomplished quickly and efficiently by a professional incorporating
service, such as American Incorporators. As your agent, we will investigate the
availability of your proposed corporate name and reserve it for you. Next, we
prepare a Certificate of Incorporation. All state filing fees are paid through
American Incorporators to the appropriate state agencies.
What information is required to prepare a Certificate of
Incorporation?
In addition to the name of the corporation and the
address, you need to provide the director(s) name(s), the county and state where
the corporation will be located, and the number of shares of stock that you want
authorized. Using this information, American Incorporators can prepare and file
the necessary documents.
Do I need a special ending on my corporation's name?
In most
states, your corporation's name must include an ending, such as company,
corporation, incorporated, limited, association, club, fund, syndicate, union or
the appropriate abbreviations (co., corp., inc., ltd., etc.).
Do I need an attorney to form a corporation or LLC?
No. If you use
a professional incorporating service, such as American Incorporators, it is not
necessary to use an attorney to form a corporation or LLC. However, American
Incorporators is always willing to work with your attorney, if you prefer.
Can American Incorporators provide registered agent services in every
state?
Yes. In addition to forming corporations and LLC's in all 50
states, American Incorporators has a nationwide network of registered agents
that can represent your corporation. Registered agent services for Delaware
corporations and LLCs is based on a calendar year. The first calendar year is
FREE! For subsequent years our registered agent fee for Delaware corporations
and LLCs is $85. For Delaware corporations, this fee is due by March 1 of every
year. For Delaware LLCs, this fee is due by June 1 of every year. For all other
states, our registered agent fee is $125 and becomes due every year on the
anniversary date of incorporation.
What is the difference between "par" and "no par" stock, and how much
stock do I need?
Par value stock has a stated value on its face. No par
value stock has no stated value and its worth depends on what an investor is
willing to pay. Unless we are instructed otherwise, American Incorporators
always requests the minimum amount of authorized shares of no par value stock,
so you qualify for the minimum incorporating fee or minimum annual franchise
tax.
How and when will I know if my corporation or LLC is
formed?
Delaware corporations and LLCs are formed the same day you call
us. You will receive your filed documents within five to seven business days.
Corporations and LLCs can be formed in other states within 48 hours, and you
will receive those filed documents within 7-10 business days.
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