Delaware USA

Company IncorporationDelaware USA Offshore Company Formation

The Principal Corporate Legislation is the Delaware General Corporate Law of 1989. Normally every company has its own by-laws as part of its corporate documentation. The language of legislation and corporate documentation is English. If any other language is used it must be accompanied by a translation in English.

The companies used for trade and investment are Corporations and Limited Liability Companies (LLCs). Delaware introduced the legislation on LLCs in 1992, and later other States and the District of Columbia (except Hawaii, Vermont, Massachusetts and Pennsylvania) officially recognised this type of Company.

Incorporation procedure depends on the type of company:

  • Corporations: The Articles of Incorporation or Certificate of Incorporation are filed with the Secretary of State in the preferred state of incorporation.
  • LLCs: The Articles of Organization or Certificate of Formation are filed with the Secretary of State in the preferred state of formation.

A registered office is required, and it must be maintained in the State of Delaware at the office of a professional registered agent. The data on the incorporated office are indicated in the Certificate of Incorporation. Off-the-shelf Companies are available.

Company names are subject to the following requirements:

  • The name can be in any language, though English translation is recommended.
  • The following restrictions apply:

For Corporations: Any name that is identical or similar to that of an existing company within the state of incorporation. Additionally, the use of the words “bank” or “trust” in the name of a corporation is prohibited in all 50 states unless prior consent is obtained from the banking authorities in the state of incorporation.

For LLCs: Any name that is identical or similar to that of an existing company within the state of formation. Additionally, the use of the words “bank”, “trust”, “insurance” or “reinsurance” in the name of an LLC is generally prohibited in all 50 states. This is because limited liability companies in most states are simply not allowed to engage in the banking or insurance business.

  • The suffixes denoting limited liability are usually as follows:

For Corporations: Incorporated, Corporation, Limited, Company or the abbreviations Inc, Corp, or Ltd. Some states allow other suffixes such as Fund, Association, Foundation, Syndicate, Club, Society or Institute.

For LLCs: Limited Liability Company and Limited Company or the abbreviations LLC or LC.

  • The following words, and associated activities, are not permitted: Bank, Trust, University, College or School.

The following requirements apply to Company Management structure:

Directors/Managers
  • Corporations: The minimum number of directors is one, and this must be a natural person. The director cannot be a corporate body. The director may be of any nationality and need not be a citizen of the United States. The Director can be appointed to several positions: Company President, Vice President, Secretary and Treasurer. The Body of Directors has the right to adopt, amend and change the by-law norms, determine the share capital and issue shares.
  • LLCs: There must be one manager at least, either a natural person or a body corporate of any nationality.
Shareholders/Members
  • Corporations: The minimum number of shareholders is one. A shareholder of a US Corporation may be another corporation (even an international or “offshore” corporation).
  • LLCs: The minimum number of members is one. Members may be an individuals or corporate bodies. There is no limit on the number of members allowed in a Delaware LLC.

There are no requirements as to the minimum amount of authorised share capital. If there is no share capital, it is possible to issue shares without par value. Provided the minimum Franchise Tax is being paid, it is possible to issue 3000 shares without par value. Bearer shares are not permitted.

Annual Taxation and Fees

Taxation in Delaware has the following features.

There is no tax on turnover in Delaware. According to the Delaware State Constitution, the administration of the State cannot require Companies incorporated in Delaware but actually domiciled and conducting business elsewhere to pay income tax. The only mandatory payment is that of the Franchise Tax and Filing Fee, which depends on the share capital (min US$30). Only a corporation whose business is officially conducted on US territory pays the American Federal Tax on Corporations. Non-resident Shareholders are exempted from Withholding Tax on dividends, including tax on inherited shares. There is no need to fill in form SS-4 for the purpose of registration with the IRS (Internal Revenue Service) if the Corporation does not conduct business or open accounts in any US bank. However, these Companies are not exempted from double taxation as there are no corresponding agreements. If the Corporation fills in an SS-4 form, the Federal Corporate tax on income is 24 per cent and upwards.

An LLC structured for partnership tax treatment with non-resident members that conduct no business in Delaware is generally not subject to the state income tax and is not required to file a state income tax return. A US LLC which does not conduct business in the US and does not have a source of income in the USA is not subject to the US federal income tax and is not required to file a US income tax return.

The following requirements apply to financial statements for both Corporations and LLCs:

  • A Franchise Tax report must be completed each year showing details of the officers of the corporation, however there is generally no requirement to file financial statements with the state of formation unless the corporation owns assets within that state or has conducted business there.

Economy and Infrastructure

The economy of Delaware is determined by the fact that the United States ranks first in the world in the total value of its economic output.

The business heart of Delaware is Wilmington, with its highly developed chemical industry. More than 46 per cent of Companies whose shares are quoted on the New York Stock Exchange are incorporated in Delaware.

The official Currency is the US Dollar.