Most states have similar requirements for qualification, such as having a name that is distinguishable from other entities in the state, and providing formation and Good Standing documents from the state of incorporation. Incnow® can provide these documents for Delaware companies.

Other states often have substantial penalties for doing business in their state without qualifying to do business there. This can be avoided by researching the state in question’s definition of business and making sure that your corporation or LLC qualifies if it needs to do so. Because these penalties can be higher than the cost of qualifying to do business, it is wise to qualify in states even if you are unsure that your activities qualify as “business.”

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When incorporating in Delaware, a corporation must designate the amount of common stock (shares) that the corporation is authorized to issue and the par value for each (share of or type of) stock. “Par value” is the minimum value that the stock will have, and multiplying par value by the number of shares will give you the value of capital, although it is possible to issue no-par value shares.

Unlike a corporation, LLCs do not have stock. Rather, members contribute capital to the LLC, both when it is formed and at later dates (if needed). Typically, these original contributions are reflected in the Operating Agreement.

MORE: Can I Form a Non-Profit Corporation or LLC?

The post Are There any Minimum Capital Requirements to Form a Delaware Corporation or LLC? appeared first on IncNow.

Also, one person (U.S. or foreign) can be the member and manager of an LLC.

The post Can the Same Person be Shareholder, Officer, and Director of a Corporation? appeared first on IncNow.

Difference Between LLC and Corporation: Annual Fees

All Delaware LLCs formed or registered in Delaware are required to pay an annual franchise tax of $300. This is a flat fee that is not adjusted based on business revenue. There is no requirement to file an Annual Report.

The franchise tax for a minimum stock Delaware corporation is $175, using the Authorized Shares Method. Alternatively, a corporation with a high number of authorized shares can recalculate Delaware Franchise Tax using the Assumed Par Value Capital Method.

Both an LLC and corporate will also have to pay an annual fee to its Delaware Registered Agent if it does not have an office in Delaware. This varies depending on what the Registered Agent charges.

Difference Between LLC and Corporation: Formalities

LLCs have far fewer formalities compared to corporations. An LLC should follow established accounting practices and keep accurate books, but an LLC has the ability to structure its Operating Agreement to require as many, or as few, formalities as its members want. An LLC typically is not required to hold an annual meeting, elect a Board of Directors, etc.

A corporation, to maintain its corporate protections for owners and managers, must elect a Board of Directors and appoint officers. It must hold an annual meeting and must file a Delaware Annual Report. Failure to follow these corporate formalities can a result in the corporate charter being revoked and the directors being exposed to liabilities for mismanagement and breach of fiduciary duties.

Difference Between LLC and Corporation: Structure

Like a corporation, an LLC offers limited liability to its owners. Unlike a corporation the Delaware LLC members have protection from creditors of the business, and also from future personal creditors of other members to keep those hostile creditors from taking over and liquidation the business. Unlike a corporation, Delaware LLCs are “creatures of contract”; they are constructed however you want, depending on how the LLC Agreement is written.

An LLC has an operating agreement that functions like a prenuptial agreement with other members to help resolve disputes before membership disagreements arise. In a corporation, there is no “built-in mechanism” or agreement between shareholders to resolve disputes.

Difference Between LLC and Corporation: Owners

An LLC is owned by members. Members are identified in the company’s internal Operating Agreement. In addition to their ownership interest, members can agree to also participate in managing the LLC’s day-to-day operations. Their only duties to the LLC are agreed upon and detailed in the Operating Agreement.

Corporations on the other hand are owned by shareholders. Shareholders are issued corporate stock in the company.

Difference Between LLC and Corporation: Flexibility

The maximum contractual flexibility afforded by the Delaware LLC is not available to corporations. Corporations have strict rules and formalities that must be followed, like “dance steps”, that make them administratively burdensome to operate. The Delaware LLC is the preferred form of business for its flexibility, predictability, and protection.

The Delaware LLC is recommended and should be selected if you are in doubt of what type of entity to form. You can always convert to a corporation later, if needed. LLCs also have the tax flexibility of a corporation, if elected, as well as the preferred method of partnership/sole-proprietorship election not available to corporations. Therefore, unless investors are requiring the corporation and its strict formalities and strict fiduciary duties, the LLC should be selected. The LLC is also the most popular entity filed in the U.S. and selected more than any other business entity.

Difference Between LLC and Corporation: Taxes

By default, an LLC has a federal tax status of a partnership for a multi-member LLC or the tax status of a sole proprietorship for a single member LLC. These are “pass-through” entities for tax purposes. All of the profits and losses pass-through the business to its members (owners) or sole member. These owners then pay taxes on the profits, or deduct the losses, on their individual 1040 personal income tax returns. Therefore, the business entity does not pay taxes directly. Instead a multi-member LLC only files an informational partnership tax return referred to as an IRS Form 1065. Then its members receive a K-1 for their share of the profits or loses. By agreement, this amount can be distributed disproportionate to ownership percentage.

The post What is the Difference Between a Corporation and a Limited Liability Company (LLC)? appeared first on IncNow.

If a foreign person plans on using their Delaware business in their home country, he may need an Apostille or document legalization for transactions or government compliance in their home country. Which certification you will need depends on whether the country signed the Hague Convention (Apostille) or has not signed the Hague Convention (legalization). Incnow® is able to provide both of these services.

You may also need to show your connection to the company on a document to be filed with countries where you are doing business. If this is the case, please note on your order that you wish to list members/mangers or officers/directors/stockholders on the filing document, otherwise your name will not be listed on the initial filing, because it is not required. Additionally, we cannot assist people from prohibited countries listed with the U.S. Office of Foreign Asset Control.

The post Can a Foreign Person or Corporation Form a Delaware Corporation or LLC? appeared first on IncNow.

This protection is referred to as the “corporate veil,” which guards the assets of individuals from claims against their company. “Piercing the corporate veil,” means breaking through this protection by having a court disregard this shield. While this judicial remedy is common in many states with their domestic companies, it is nearly impossible to do in Delaware.

It is particularly hard to hold a Delaware owner personally liable:

1. In the absence in fraud,
2. When the owner is not personally providing services,
3. When the owner is following basic corporate formalities,
4. When the owner is not comingling funds corporate assets with personal assets, and
5. When the owner does not sign contracts that provide for personal liability, such as personal guarantee.

Delaware’s corporate veil is the thickest corporate veil of the 50 states, which makes it like a thicker “bulletproof jacket” to give you comfort while the corporation or LLC assumes business risks.

The post How Does a Delaware Corporation or LLC Limit My Liability? appeared first on IncNow.