Incorporation in Delaware

The following words are expressly prohibited: “Bank”, “Trust”, “University”, “College” or any other word implying association with any licensed professionals or individuals, unless you have a license. There is also a prohibition for words implying an affiliation with a federal or state or organisation and words which are suggesting a purpose that is illegal.

The company name must not be very similar to names of existing companies causing confusion and it must not contain improper or offensive words. The company name must end with the abbreviation “LLC” that stands for Limited Liability Company. The name of the LLC Company can have foreign words, but they must be accompanied by an accurate translation in English.

It should be noted that the Secretary of State has the power to object the registration of any name that in their discretion is considered undesirable.

Every corporation is required to have a registered office address in Delaware for where any legal documents may be served. Corporations that do not have a physical address in Delaware, are required to have a registered office address in Delaware, which is provided by an authorised registered agent within the state.

Regarding the directors, the legislation imposes no requirement for them to be locals and there is no requirement regarding the place and frequency of board meetings. The director and shareholder can be the same person. Corporate entities cannot become directors. The directors’ details are not registered on the public record and cannot be accessed by the public.

One shareholder is the minimum required, there is no requirement for them to be locals and corporate entities can be appointed as shareholders. The shareholder and the director can be the same person. It is mandatory that the corporations hold an Annual General Meeting, but there is no requirement regarding the place of meetings which can be held through electronic communication.

The beneficial owners’ details are not registered on any public record and cannot be accessed by the public.

The owners of a corporation must determine the amount of authorised capital at incorporation and it can be de-nominated in any currency, though the US Dollar is mostly preferred and the amount of USD 50,000 is suggested. The authorised capital is the maximum amount of capital that the corporation is authorised by its constitutional documents to draw from its shareholders in exchange of shares issued, or stocks as they are referred in Delaware.

A corporation must have only registered stocks and the par value of those stocks must be stated at incorporation, however, a corporation may have stocks without par value.  Additionally, it must be stated at incorporation whether the corporation will have other classes of stocks.

No requirement is imposed on minimum paid up capital at incorporation; this means that the owners of a corporation are not required to set a deadline as to when such capital must be paid up by the stockholders.

A corporation in Delaware can be incorporated within 5-7 days. Delaware is considered to have a very efficient company registrar, which is the Secretary State’s Division of Incorporations. The option for incorporation in less time is offered, but the government fee is higher.

Ready-made but unused corporations are available in Delaware, in case you are in need of a quicker incorporation process.

There are no substance requirements, on the contrary, a Delaware corporation’s profits and losses will qualify for an exemption from Federal and State taxes if its operations and income generating activity is not conducted from within the US and it does not rent premises or own real estate in the US and its income is not effectively connected with the US.

The Delaware corporation is not required to file to the public record accounting records nor is required to do auditing. However, there is a requirement to keep records for the day-to-day running of its business, containing inter alias the stock ledger, accounting books and minutes of meetings. The records may be kept anywhere in the world.

Also, the corporations must file franchise tax reports on an annual basis by the 1^st of March and annual franchise tax is payable based on the corporations authorised share capital. Also, resident corporations which are not treated as S-corporations for tax purposes and conduct economic activities in the state of Delaware, are required to file Federal Income tax returns.

There is the option in the jurisdiction of Delaware for corporations to choose to be taxed as S corporations whose profits or losses are passed to its shareholders, therefore the individual shareholders prorated share in the corporation is included in the respective income tax return of the shareholder and taxed at personal or corporate rates. In this regard there is an exemption from federal taxation on a personal level when an individual is not tax resident in the US, in this regard US citizens and individuals with permanent residence in the US are considered as tax residents in any case.

Whereas the choice to be treated as S-corporation for tax purposes, by default the corporation will be treated as C-corporation for tax purposes for which corporate income tax applies at the rate of 21% on all income whether it comes from source within the US or abroad, also tax is imposed on capital gains, incoming dividends, interests and royalties. Due to the US extended network of Double Taxation Treaties there are certain deductible taxes for income deriving from a foreign source.