Starting a Company in Delaware
Studio Panama Italia regularly incorporates companies in Delaware, known as Delaware LLCs , through its offices in the state of the same name. Opening a company in Delaware, such as a Delaware LLC, has historically been a common practice among digital nomads and companies operating in a wide variety of sectors. Opening a company in Delaware allows you to operate with a white-listed US company, while still being offshore and tax-free when it comes to legally evading taxes. Studio Panama Italia, through its American Holding company, Shevat Consulting LLC, operates as an agent and organizer in the United States to open American LLCs, including Delaware LLCs. With a Delaware company, you can open PayPal accounts. Through a Delaware company, you can receive payments via Stripe, Wise, Revolut, and Neteller. Furthermore, a Delaware company allows you to open both online and physical bank accounts. Contact us to open your LLC in Delaware without hassle and in full compliance with legal requirements and international standards.
How to Open an LLC in Delaware
Starting a company in Delaware is therefore one of the many options available to entrepreneurs of today and tomorrow when it comes to having a flexible and easily managed remote business. Delaware is one of the most popular jurisdictions in the world for incorporating a company. Nearly half of publicly traded companies in the United States and over 65 percent of all Fortune 500 companies are incorporated in Delaware. This includes giants like Apple, Coca-Cola, Google, and Walmart.
Starting a Business in Delaware: The Court of Chancery
Delaware is distinguished by its separate Court of Chancery, the oldest business court in the United States, specializing in corporate law. The Court of Chancery uses judges rather than juries and is typically experienced in complex corporate law matters. The Delaware Court maintains the most advanced and up-to-date corporate case law, which allows for predictability and thus reduces liability and litigation among Delaware LLCs. These predictable and clear laws allow companies to better assess the likely outcomes of litigation or the opportunity to settle a case.
The legal and liability protections of Delaware's well-established corporate laws make it one of the most respectable states for businesses. A Delaware LLC requires minimal corporate structure for its management, and there are no requirements for corporate meetings, directors, a secretary, or capital. A Delaware LLC can be formed by a single member (member-managed), who can also be its manager (manager-managed).
Delaware LLC Taxes and Duties
Delaware LLCs can choose to be treated as C-Corps (subject to corporate tax) or be tax-transparent entities. Profits of a Delaware LLC that chooses to be a tax-transparent entity are considered passed through to its members and taxed at the personal level. Members of the Delaware corporation pay personal income taxes on the LLC's profits in proportion to their share of the LLC, whether distributed or not. This means that a Delaware LLC is not considered a separate entity for tax purposes, and therefore, if its members are non-U.S. tax residents, they will be required to pay U.S. taxes only on their U.S.-sourced income. (Territorial Taxation)
However, if their country of residence taxes foreign-source income, members may be subject to paying taxes on all foreign profits in their country of residence, if required by that particular country's legislation.
If its members are tax residents of a tax-exempt country or territorial tax and no income is derived from the United States, they can operate a completely tax-exempt Delaware LLC, benefiting from the reputation of a U.S.-incorporated entity.
It is important to note that some countries do not recognize a U.S. LLC as a Delaware LLC. For example, if the Delaware LLC is considered tax resident in one of those countries, it may be subject to corporate income tax.
Corporations incorporated in Delaware are confidential. Details of members, directors, and officers are not disclosed in the company's charter documents and are not publicly available.
Additionally, it has one of the fastest corporate registration processes and lowest incorporation costs in the United States.
Delaware LLCs are excellent vehicles for international professional services, conducting international trade, e-commerce, Amazon FBA, and gaining access to merchant accounts.
Legal Advice : Ask yourself whether a Delaware company such as a Delaware LLC or a Delaware Corporation is right for you, or consider one of the LLCs offered in other states such as a:
Opening LLC Wyoming | Opening LLC New Mexico | Opening LLC Florida
Zero Tax for Corporations in Delaware
Delaware LLC Taxes
Delaware LLC Tax Residency: A corporation organized or incorporated under the Delaware General Corporation Law is a tax resident of Delaware and the United States.
Delaware LLC Basis: Federal income tax is levied on U.S. effectively connected income (ECI), while Delaware state income tax is levied on Delaware-sourced income.
Delaware LLC Taxation: Delaware limited liability companies can choose to be taxed as a C-Corporation or as a disregarded entity.
Corporations are subject to federal income tax and state income tax.
Alternatively, an LLC may choose to be treated as a transparent entity for the purposes of its member's personal income.
This means that it may not be subject to Federal Corp income tax, and profits and losses may be reported through its members' personal tax returns.
Therefore, if its owners are non-U.S. residents (and not subject to personal income tax) and the LLC does not operate and generate profits from the United States, does not rent or own property in the United States, and has no U.S. employers and no effectively connected income, the offshore income accrued by a Delaware LLC cannot be taxed in the United States.
Delaware Corporate Tax Rate: C corporations are subject to federal income tax at a rate of 21%. Income derived in Delaware is subject to state income tax at 8.7%.
Delaware LLC Capital Gains: Capital gains or losses from assets held for more than 12 months are treated as long-term capital gains or losses, capital gains and losses from assets held for 12 months or less are treated as short-term capital gains or losses.
Net capital gains are the excess of long-term net capital gains over short-term net capital losses. Capital losses can be used to offset capital gains. Excess losses can be carried back three years and carried forward five years to offset capital gains.
Net earnings are subject to tax at applicable federal income tax rates.
Delaware LLC Dividends: Dividends received by a U.S. corporation from another U.S. corporation may be deductible at 70%. The dividend deduction can be increased to 80% if the recipient owns between 20% and 80% of the distributor's stock.
Dividend payments between U.S. companies that are members of the same group may be exempt. Some companies may be subject to accumulated income tax on retained earnings unless the accumulation is justified by business needs. Some holding companies that receive substantial passive income may be subject to personal holding company tax on retained earnings at a rate of 15%.
Dividends received from foreign entities may be considered deductible income.
Interest: Interest is generally included in the tax base.
Royalties: Royalties are generally included in the tax base.
Foreign-Source Income for Delaware LLCs: Corporations are taxed on worldwide income, including earned income from foreign subsidiaries and foreign-sourced dividends received. Double taxation relief can be achieved through tax treaties, tax credits, or by claiming a deduction for foreign taxes paid.
A foreign subsidiary owned more than 50% by U.S. tax residents is considered a controlled foreign corporation (CFC) . Certain undistributed income (subpart F income) retained in a CFC will be subject to tax.
Passive income retained in a foreign investment company (75% or more of the income is passive or at least 50% of the assets held produce passive income) may also be subject to tax.
Foreign-source income is exempt from Delaware state income tax.
If a Delaware LLC elects to be treated as a disregarded entity and its owners are non-U.S. residents (and not subject to personal income tax), and the LLC does not operate and generate profits from the United States, does not lease or own property in the United States, and has no U.S. employers, offshore income accrued by a Delaware LLC may be exempt from income taxes.
Withholding Tax: Dividends, interest, and royalties paid to non-residents are generally subject to withholding tax at a rate of 30%. The withholding tax may be reduced or exempted under a tax treaty.
Losses: Losses from taxable income can be carried forward for 20 years and carried forward for 2 years.
Inventories: Inventories may be valued at the lower of acquisition/production cost or market value. The first-in-first-out (FIFO) and last-in-first-out (LIFO) methods are permitted for determining costs.
Anti-avoidance rules: Transactions between related parties must be conducted at arm's length. If a company fails to comply, the IRS may increase its taxable income and the tax due.
Thin capitalization rules apply to disallow interest payments on excess debt and make these payments as dividends.
A foreign subsidiary owned more than 50% by U.S. tax residents is considered a controlled foreign corporation (CFC). Certain undistributed income (Subpart F income) retained in a CFC will be subject to tax.
Passive income retained in a foreign investment company (75% or more of the income is passive or at least 50% of the assets held produce passive income) may also be subject to tax.
Delaware LLC Taxes and Tax Credits
Employment Taxes: Employers may be subject to a 6.20% Social Security tax on the first $127,200 of wages paid to employees and a 1.45% Medicare tax on any wages, regardless of the amount.
Additionally, employers must pay, under certain conditions, the 6.2% Federal Unemployment Insurance Tax (FUTA) on the first $7,000 of wages paid to employees who meet certain criteria.
Tax credits and incentives: A tax credit or deduction is usually available for foreign taxes paid.
Business and employment credits are also available to provide specific incentives for achieving certain economic goals.
Credits may also be available for qualified research expenditures (QRE) to develop new or improved products, manufacturing processes, or software in the United States.
Interest on eligible private business bonds may be exempt from federal income tax.
Compliance: On average, a business in the United States can require 11 payments and 175 hours per year to prepare, file, and pay corporate income tax, value-added tax, and employment taxes, including payroll taxes and social security contributions.
Personal Income Tax: An individual is considered a U.S. resident for tax purposes if he or she is a citizen or permanent resident or is physically present in the United States for 31 days in a year and a total of 183 equivalent days in the current year and the preceding two years.
US citizens and permanent residents are tax residents, regardless of the days spent in the country during a year.
Tax residents are subject to tax on their worldwide income.
The federal tax rate is progressive, with rates ranging from 0% to 39.6%. Delaware's personal income tax rates are progressive up to 6.6%.
Self-employed workers may be subject to the 15.3% self-employment tax. The rate is made up of two parts: 12.4% for Social Security (old-age, survivors', and disability insurance) and 2.9% for Medicare (hospital insurance).
Capital gains from assets held for more than 12 months are subject to a maximum rate of 20%. Gains from assets held for 12 months or less are taxed at standard rates.
Dividends, interest, royalties, and rental income are subject to individual income tax at the applicable rates.
Additionally, individuals may be subject to net investment income tax (also known as Medicare contribution tax) on investment income received from individuals with modified adjusted gross income above certain amounts.
Other Taxes: There is no value-added tax or sales tax in Delaware.
Real estate ownership and the transfer of assets are subject to local taxes in Delaware.
Real estate inheritances are taxed in the United States.
There is no wealth tax in the United States.
Legal Basis for Incorporating the Company in Delaware
Country code: USA
Legal basis: Common law
Legal Framework: Delaware Limited Liability Company Act (Title 6, Chapter 18, Delaware Code)
Corporate form: Limited Liability Company (LLC)
Liability: Members' liability is limited to the amount of their capital contributions.
Capital – There is no minimum or maximum capital contribution requirement.
Delaware LLC Members: A Delaware LLC can be formed by one or more members, who can be individuals or legal entities, residents or non-residents, without limitation. The identities of the registered members of a Delaware LLC cannot be disclosed publicly.
Delaware LLC Managers: LLC members may act as managers or, alternatively, appoint a manager. Corporate officers are permitted. Details are not publicly available.
Registered Address of a Delaware LLC: Every Delaware LLC must have a registered agent for service of process in the state. This is an individual or entity who agrees to accept legal documents on behalf of the LLC. If the LLC is physically located in Delaware, it can act as its registered agent. A registered agent can be a resident individual or a business entity authorized to do business in Delaware. The registered agent must have a physical address in Delaware.
General Assembly: There is no legal requirement for formal meetings of members.
Electronic signature: Allowed.
Redomiciliation of a Delaware LLC: Foreign entities and other U.S. companies can continue in Delaware.
Compliance: Accounting records must be maintained and must be sufficient to show and explain the company's transactions. The company's books, records, and minutes may be maintained in any location or country of the Manager's choosing.
LLCs are tax transparent; profits and losses can be passed through their members and are subject to personal income tax. Alternatively, you can choose to have a Delaware LLC taxed as a C Corporation by the IRS and subject to federal corporate income tax.
Delaware LLCs may require a federal taxpayer identification number (EIN). Additionally, most banks require an EIN to open a business bank account.
In addition to opening your Delaware LLC, you will probably be interested in creating a life insurance policy on your tax status by taking a second tax residence, in a country with territorial taxation, such as a Residence in Panama or a Residence in Paraguay.
Also consider a company in Panama
Get a Real American Address in Delaware
Many businesses require a physical address in addition to the Resident Agent address (us). There are many reasons for this: insurance companies, credit unions, banks, and/or government agencies, and especially customers, must or may want to have access to your corporate address in the United States. PayPal USA, for example, Wise, and Revolut require a corporate address other than the incorporation address or Resident Agent address. Without you having to travel to the United States, we can offer you a physical address exclusively for you where you can receive emails, packages, parcels, and general mail. This address can be scanned (additional costs per scan) and sent to Italy or wherever you are at an additional cost. The cost for this address, payable annually, is $350 per year with an initial activation fee of $400. The total for the first year is therefore $750 and subsequent years $350.
Obtain real Delaware proof of address through a receipt/utility bill
Having a US address in Delaware if you have an LLC in this state is not necessary in some specific cases. You need real proof that you live or work there. But what if the business is online, or you have opened an LLC remotely and have a US address purchased, perhaps through our or other services? You need to have a real, not fake, utility bill to pay and therefore receive a real paper invoice or bill (PDFs are not used in the US), to give it to those who request it, such as banks, credit unions, and the government. In this case, we offer a real telephone line through our company that installs a real telephone number in the state of your choice (any US state) and sends the paper invoice to your US address on a monthly basis. Contact us to order one.
