Delaware

LOCATION & LEGAL SYSTEM

Delaware is a small state situate on the East Coast of the United States of America, often referred to as the “Gateway to the United States”. Marked by few regulations and a lack of bureaucracy in arranging its affairs, and with the Delaware Corporation Law being considered throughout the US among the most attractive for organisation purposes, it is a valuable jurisdiction in which to set up new companies.

The policy of Delaware courts has always been to interpret Corporate Law liberally, to interpret any ambiguities or uncertainties in the working of the Statutes so as to reach a reasonable and fair construction.

Corporations not having any business in Delaware pay no Delaware Corporate income tax. Franchise tax compares favourably with other states and is payable on the authorised share capital of a company at a rate of 1%. It should be noted however that Delaware corporations do fall within the Federal Tax System.

LIMITED LIABILITY COMPANY

A Limited Liability Company (LLC) is not a taxable entity. Profits are passed through to members who then pay taxes (be they individuals or companies) wherever they are tax resident. Members who are not residents of the United States are not liable for US income tax for income derived outside of the US or for passive income (interest, dividends, capital gains) derived from within the US.

Delaware is the best known of the United States onshore tax havens. The United States has numerous double taxation treaties and as a major trading nation US companies are seen as being well regulated. More large companies have incorporated in Delaware than in all the other states combined. Delaware is the chartering state for 40% of the companies listed on the New York Stock Exchange.

The state of Delaware permits the setting up a “Limited Liability Company” (LLC). So long as the LLC does not trade in the United States (and that includes Delaware) it will not be subject to US Federal Taxes but will instead pay the State of Delaware an annual “Franchise Fee” each year. The amount of this fee depends on the number of shares authorised. We form companies with authorisation for 1,500 shares (of no par value) enabling the minimum annual fee of US$100 to be paid. This is due on May 1^st each year and there are fines for late payment.

TAXATION/FISCAL REGIME

Delaware has no sales tax. For companies that are incorporated in Delaware, but are located and operated elsewhere, there is no corporate income tax and the law does not permit the imposition of such a tax. Corporations do pay a minimum franchise tax and filing fee together amounting to $100. Delaware companies may be liable to tax in the place where they are controlled and/or where the directors reside and so they are often used as subsidiaries of companies or trusts established in other offshore jurisdictions. Please contact AR Corporate Services for advice on this.

Delaware LLCs must not trade elsewhere in the USA or they will become liable to Federal taxation. There is no requirement to file financial statements, but a company must keep accurate accounting records to reflect its financial affairs.

INCORPORATION TIMESCALE/NAMES

Company names must end with one of the following words, or abbreviations thereof - Association, Company, Corporation, Club, Foundation, Fund, Incorporated, Institute, Society, Union, Syndicate or Limited. The following words, and associated activities, cannot be used bank, trust, university, college or school. Allowing for time differences, names can be checked and reserved instantly and incorporation takes place on the same or the next day. However, even though we use Couriers it can take up to 2 weeks for documents to arrive from Delaware and for this reason we do try to keep a few stock companies.

FEES FOR DELAWARE LLCs

We charge £395 to incorporate a Delaware LLC. This includes the first year’s registered office and registered agent fees and all government fees. Thereafter there is an annual fee (due on 1^st May each year) of US$445 again including registered office, registered agent and government fees.

We can help and advise you in respect of the opening and management of bank accounts and the provision, if required, of company officers or managers.

HOW TO ORDER

Simply call us on 01952 270270 or send an email to:

ymf@arcorporatesecretaries.co.uk

Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, this information does not constitute legal or other professional advice. We do not accept any responsibility, legal or otherwise, for any error or omission. Prices are subject to change.