State of Delaware Advantages ☞ Benefits of Incorporating or Forming an LLC in the State of Delaware. Advantages of Registering Company in Delaware, Tax Advantages, Delaware LLC

name and registered office address, and (4) any additional matters. Past and future contributions and the Limited Liability Company's power to avoid dissolution need not be stated.

Annual Report Requirement: Yes, to Department of State. Publication Requirement: No. Effective Date Of Limited Liability Company Organization: On the date of official approval of Certificate of Formation, the company becomes a legal entity and the members are shielded from personal liability. Membership Requirements: Minimum number of members required is one. The member may be a natural person or a business entity.

Transferability Of Interest: Unless provided otherwise in the Limited Liability Company Agreement, there is no free transferability of a member's Limited Liability Company interests. Transfers of interests must be approved by unanimous vote of all members. (Section 18-702(a)). Continuity Of Company: Unless provided otherwise in the Certificate of Formation or Limited Liability Company Agreement, a member's withdrawal has no effect on the continuity of the Limited Liability Company.

Management Requirements: Unless provided otherwise in the Certificate of Formation or Limited Liability Company Agreement, a Limited Liability Company is managed by its members. Operating Agreement Requirements: Delaware law refers to Operating Agreements as "Limited Liability Company Agreements" and they govern the rights, duties, and obligations of the members. They must be in writing.

Records Requirements: The Limited Liability Company must maintain copies of the following records at the company's registered office: (1) Certificate of Formation, (2) any amendments, (3) a current list of all members and managers (if any) and their addresses, (4) Limited Liability Company Agreement, (5) financial statements, and (6) federal, state, and local tax returns.

Liability Shield: The members and managers of the Limited Liability Company are expressly shielded from liability for debts, obligations and liability of the company by the statute. Default Rules: The following are default rules which are in effect, unless otherwise provided for in the Limited Liability Company Certificate of Formation or Limited Liability Company Agreement: (1) voting rights of members are based on the percentage of profit interest of the member, (2) operating distributions are based on adjusted contributions of the members, and (3) profits and losses are based on contributions of members.

State Classification: Limited Liability Companies are classified in the same manner as they are for federal income tax purposes. State level taxation is based on the federal taxation entity classification. State Franchise Taxation: There is a US$200.00 annual franchise fee for all limited liability companies at the state level.

Federal Taxation: Multiple member limited liability companies are treated as partnerships for federal tax purposes. Single member limited liability companies are reported on the owner's federal tax return as a disregarded entity, in effect treated as a sole proprietorship. (Federal Internal Revenue Code Section 701).

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RELEVANT INFORMATION FOR INCORPORATING IN DELAWARE

Delaware Corporate Name Endings. The corporate name ending must contain the word "Association," "Company," Corporation," "Club," "Foundation," "Fund," "Incorporated," "Institute," "Society," "Union," "Syndicate," "Limited," or the abbreviation "Co.," "Corp.," "Inc.," "Ltd.," or words or abbreviations of like import in other languages. The name must be distinguishable from the names of other corporations organized, reserved or registered as a foreign corporation under the laws of Delaware. Use of word "Trust" is prohibited except for corporations under supervision of the Bank Commissioner.

Delaware Corporation Requirements. Director Information. Minimum Number - One or more. Residence Requirements - No provision. Age Requirements - None. Directors are not required to be listed in the articles of incorporation. Officer Information. Officers are not required to be listed in the articles of incorporation. Stock Information. An increase in shares or par value does affect initial filing fees. Delaware Corporate Records: A stock ledger and basic corporate records must be kept at the principal office of the corporation.

Delaware Taxes and Fees. Annual Statements. The annual statements for corporations are sent out to the registered agent in December and January. The payment is due by March 1st. The franchise tax is based on the number of shares and the par value, and if the number of shares is above 3000 the annual fee may increase. The annual statements for LLCs are sent out to the registered agent in March and April. Income Tax. The income tax rate for corporations actually located in Delaware is: 8.7%. S Corporation. S Corporation status is recognized by the State of Delaware. A separate state election from the federal election is not required.

License Requirements. Delaware requires some businesses to obtain a license and pay a fee if you are operating in the state. Please check with the state to make sure your business is complying with the license requirements for your particular profession.

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AN INTRODUCTION TO STATE OF DELAWARE

Delaware is centered on the eastern seaboard of the United States, approximately midway between New York City to the north and Washington D.C., to the south. Lying in the heart of the eastern megalopolis, the State is bordered on the north by Pennsylvania and on the west and south by Maryland. To the east, Delaware is separated from New Jersey by the Delaware Bay and enjoys a scenic Atlantic Ocean coast. This location provides unusually good market access.

With a land area of only 1,982 square miles (5,133 sq. km), State of Delaware ranks 49th in land area among the 50 states. Delaware is the fourth least populated state with 706,000 residents. Two-thirds of the State's population resides in New Castle County, the northernmost of the State's three counties. Kent County and Sussex County each has a population of approximately 110,000 residents. All of the cities and towns in the State are independent, incorporated municipalities. There are three major cities in the State: Wilmington, with a population of 72,000; Dover, the State capital, with a population of 28,000; and Newark, the site of the University of Delaware, with 25,000 residents.

Delaware's central location affords rapid access to the major metropolitan areas of the northeast and Mid-Atlantic United States. Nearly one-third of the population of the United States lives within this eastern megalopolis. Interstate and other major highways and frequent passenger rail service provide easy transportation between Wilmington and New York (1 hour, 50 minutes), Washington D.C. (1 hour, 15 minutes), Philadelphia (30 minutes) and Baltimore (45 minutes). Within a 350-mile (550-km) radius of central Delaware lies every major population center from Boston in the north to Raleigh, North Carolina in the south and Cleveland, Ohio in the west.

Delaware is also well served by air transportation. Delaware's network of public and private airports can readily accommodate commercial and corporate aircraft. Philadelphia International Airport, a major international passenger airport, is 30 minutes from downtown Wilmington. Baltimore and Washington International Airport is approximately an hour away by rail. Marine freight transport is served by the Port of Wilmington. As the first inland port on the Delaware River, Wilmington's containerized port is only 65 miles (100 km) from Atlantic shipping lanes. Its deep-water port facilities include modern, economic off-loading and storage facilities. The Port currently handles 4.5 million tons of waterborne cargo annually, including bananas, import and export vehicles, frozen meat and seafood, frozen juice concentrates, fresh fruits, lumber, steel, Kraft linerboard, gypsum, salt, urea, petrolcoke, various bulk ores and minerals and liquid bulk such as petroleum products.

The Port of Wilmington offers potential savings over neighboring ports because of reduced vessel transit time to and from the Atlantic Ocean, high labor productivity and economical handling rates. The Port has ready access to Interstate 495, connecting it to major east-west and north-south interstate arteries. Rail access to the Port is available by Conrail and the Chessie System, with railcar loading docks located next to every terminal warehouse.

Delaware is also served by the mainlines of the Conrail and CSX railroads. Conrail's north-south route through Delaware facilitates fast through service to the vital northeast corridor and connections with CSX. Most of Delaware's plant sites are adjacent to rail lines or have rail sidings at the plant location. Rail sidings are easily obtainable in Delaware, as compared to other states in the region, due to the lack of rail congestion. In addition to major carriers, Delaware is also served by a number of short-line railroads.

Led by the chemical and automotive industries, manufacturing is the largest source of State income, closely followed by financial services that, with other elements of our service economy, are increasingly important. These industries figure most prominently in the industrialized and commercial northern third of the State. In the southern two-thirds of the State, agriculture is a more vital part of the economy. The poultry industry, corn, soybeans and diary products contribute significantly to farm income. One-half of the State's land acreage is used for farming.

INVESTMENT CLIMATE

Delaware actively seeks and encourages enterprise and investment. To this end, Delaware has evolved the most modern and flexible business organization laws in the United States, has adopted modern banking and consumer credit laws and has reduced personal income taxes and established a nationwide reputation for innovative tax structure.

DELAWARE DEVELOPMENT CORPORATION LOANS

Through the Delaware Development Corporation, Delaware became the second state to obtain certification under the U. S. Small Business Administration's Section 504 loan program. This program offers long-term, fixed-asset financing at fixed rates to the growing small firm. In addition to land, building and equipment, many of the costs associated with construction, such as interim financing costs and architectural drawings, that are usually considered "out-of- pocket" expenses may be included in a Section 504 loan package.

To be eligible, a small business must be a for-profit enterprise with a net worth of less than $6 million and average net profits of less than $2 million for the past two years. In addition, the project must create one new job for approximately every $35,000 of Small Business Administration funding.

The Section 504 program can provide long-term financing for projects totalling $120,000 to $2,500,000 for the acquisition of land and buildings, the construction, expansion or renovation of facilities, including leasehold improvements, and the purchase of machinery and equipment Funds are not available for working capital, inventory, debt consolidation or debt repayments. The applicant must be the user of the facilities.

A Section 504 fixed-asset financing involves a mixture of funding from the small business, a private sector lender (e.g. bank, savings and loan association or insurance company), and the Delaware Development Corporation. A typical project would involve 50% funding from the private lender, 40% from the Delaware Development Corporation up to a maximum of $750,000 in urban areas and $1,000,000 in rural areas, and 10% from the small business. For a start-up small business, the business may need to contribute 20% to 25% in equity to the project.

DELAWARE VENTURE PARTNERS

Delaware has one of the highest concentrations of patents and of scientists and engineers in the United States. High-risk equity seed capital is often necessary to enable start-up companies to commercialize new technologies and create jobs. Recognizing this, Delaware is a limited partner in a venture capital fund known as Delaware Venture Partners. Due to a unique, cooperative alliance of two fund managers to oversee the program, Delaware Venture Partners has the ability to fund seed-stage, early-stage and later-stage companies. The investment focus will typically be in the following areas: computer-related, high technology, biotechnology, medical, and communication, environmental and manufacturing. Investments can range from $100,000 for seed-stage companies up to $2,000,000 for later-stage companies.

DELAWARE INNOVATION FUND

The Delaware Innovation Fund seeks to provide limited early-stage funding for technology or high-growth potential enterprises such as biotechnology, advanced materials, software and telecommunications. The Fund offers demonstration funding of $10,000 to $25,000 to establish patents and proof of concept, and $25,000 to $150,000 for commercialization. The Fund also acts as a resource for assistance with business and strategic plans for eligible enterprises.

DELAWARE ACCESS PROGRAM

The Delaware Access Program is designed to give banks a flexible and non-bureaucratic tool to make business loans that are somewhat riskier than conventional bank loans, in a manner consistent with safety and soundness. The program is designed to use a small amount of public resources to generate a large amount of private bank financing, thus providing access to bank financing for many Delaware businesses that otherwise might not be able to obtain such access.

The Delaware Access Program, based on a risk-pooling concept, is fundamentally different from a traditional insurance or guarantee program, such as the federal Small Business Administration Section 7 (a) program, which guarantees a percentage of a loan on a loan-by-loan basis. When a bank makes a loan under the Delaware Access Program, the borrower pays a one-time premium charge, which is matched by a bank premium payment. The Delaware Economic Development Authority then matches the combined total of the borrower's payment and the bank's payment. The borrower's premium payment is one of the terms of the loan to be worked out as part of the private transaction between the bank and the borrower. The program sets minimum and maximum limits for the borrower's payment. At a minimum, it must be at least 1 1/2% of the loan amount. The maximum is 3 1/2%. The premium payment, and other up-front expenses, may be financed as part of the loan.

THE SMALL BUSINESS ADMINISTRATION

The Delaware Economic Development Office also assists small businesses in seeking loans guaranteed by the U. S. Small Business Administration under the Section 7 (a) business loan program. The Small Business Administration generally guarantees 90% of the loan from a local financial institution with a maximum guarantee of $750,000. Guaranteed loans are utilized by firms with loan needs that exceed the usual banking criteria.

Financing can be obtained for both working capital and fixed assets. The Small Business Administration may require one-third equity when evaluating loan applications from new companies. Equity requirements for ongoing businesses vary. Financial institutions tend to restrict the financing to projects exceeding $50,000, and the interest rate and term are negotiated between the borrower and the lender within limits prescribed by the Small Business Administration.

The Small Business Administration also operates several other special programs. Builders operating under contract may apply for the Small Business Administration's guaranty program for lines of credit and surety bond guarantees. Companies with highly seasonal sales may obtain seasonal lines of credit. The Small Business Administration also offers loan guarantees for pollution control financing and loans for support of export trade.

ECONOMIC DEVELOPMENT LOAN PROGRAM

The Economic Development Loan Program assists Delaware small businesses with no more than 500 employees to finance projects when 100% financing cannot be obtained through a bank. Financing can be provided for fixed assets as well as working capital. Funds are not available for debt consolidation or debt repayments.

The program requires 70% bank financing. The remaining 30% is financed through the program up to a maximum of $450,000. In most cases the interest rate loaned through the Economic Development Loan Program is 60% of the prime lending interest rate.

DELAWARE TECHNICAL INNOVATION PROGRAM

The Delaware Technical Innovation Program encourages Delaware businesses to participate in the federal Small Business Innovation Research (SBIR) grant program. The SBIR program requires that 1.25% of all federal research dollars be made available to small businesses.

Under the SBIR program, during Phase I, small businesses submit detailed research and development proposals to participating federal agencies. The federal agencies evaluate technical merit and feasibility. Phase I awardees are granted up to $100,000 by the federal government. A Phase I awardees located in Delaware or relocating to Delaware is eligible for a grant under the Delaware Technical Innovation Program up to $50,000 so long as the company has submitted a proposal to the federal agency in order to qualify for a Phase II award (i.e. pursuit of development of the Phase I concept) and can demonstrate that the research to be conducted will benefit the Delaware economy. The Delaware grant can also be used to expand on the results of, and to pursue further, the development of the

EXPORT-IMPORT BANK FINANCING

Delaware is a part of the Mid-Atlantic Regional Trade Council that is composed of the states of Delaware, Pennsylvania, Maryland and Virginia. The Council, along with certain banks, can assist exporters to submit applications for export working-capital financing through the Export-Import Bank of the United States. These organizations can also help facilitate processing of applications for other Export-Import Bank programs, such as direct and intermediary loans and loan guarantees.

ADVANTAGES AND DISADVANTAGES OF FORMING A DELAWARE COMPANY. HOW TO INCORPORATE AND START A BUSINESS IN DELAWARE. WHY INCORPORATE IN DELAWARE?