What Is a Delaware LLC?

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FORM A DELAWARE LLC NOW

A Delaware LLC is a business vehicle with a legal existence separate and distinct from its owners. The owners and managers of a Delaware LLC are not personally liable for the company's debts and obligations.

A Delaware LLC has the ability to be treated as a pass-through entity for tax purposes. As such, it is considered a hybrid business formation that combines some of the best features of corporations and partnerships. However, it is important to clarify that while LLCs can be treated as legal partnerships, they are not corporations. Owners (or members, as they are called in an LLC structure) can be individuals or any type of entity, from anywhere in the world, and are unlimited in number.

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What Does LLC Mean?

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The abbreviation LLC stands for "limited liability company," which refers to the entity's ability to limit its owners' personal liability in relation to business matters. In other words, if the Delaware limited liability company is sued or is unable to pay its debts, the personal assets of its owner (e.g. house, car, etc.) generally are not at any legal risk.

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Advantages of an LLC

Creating an LLC in Delaware comes with the benefits of a low start-up cost and an affordable Franchise Tax. Setting up a Delaware LLC is so easy, affordable and beneficial that most businesses will create their business in Delaware, but are often doing business elsewhere.

The features of a Delaware limited liability company, when combined with non-U.S. source income, mean non-resident aliens of the United States can avoid U.S. taxation when using an LLC.

The Delaware LLC is a truly unique business entity in that the structure of the company and the rules that govern the members, or owners, of the company are contained in a contract called the operating agreement, which is drafted by the company's members.

The operating agreement can be customized to provide for whatever terms the members and/or founders want subject to law and public policy. The contractual flexibility offered by the state of Delaware is unmatched by any other LLC statute in any other state.

When creating an LLC in Delaware, members will have asset protection against liability and creditors, since a limitation on personal liability means that LLC members cannot be held responsible for a sum higher than hiser initial investment in the LLC, even if a member participates in management (as opposed to protections in a limited partnership).

Therefore, if you are sued and a judgment is levied against you personally, the judgment creditor cannot take the assets owned directly by your Delaware LLC.

The single-member LLC also provides a good way for you to purchase assets without revealing your personal identity. For example, if you create a single-member LLC in Delaware, you can contract to purchase a piece of real estate without revealing your personal identity to the seller.

Then, once you have purchased the property and titled it in the name of your Delaware LLC, no one will be able to search public records in order to connect you with the LLC.The reverse is also true. If someone sues your LLC and a judgment is levied against the LLC, the creditor cannot seek assets that are not owned by the LLC.

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Can a Single Person Form an LLC?

Yes. To form a Delaware LLC only one person is required to form the company. An LLC provides limited liability protection over a sole propreitorship and will also help build a brand with credibility in the public eye. An LLC can add new members (owners) at any time.

Can LLC Have Employees?

Yes. LLCs can hire employees as they see fit for various positions. You will want to refer to your state employment laws and regulations in the state in which you are hiring employees.

Can Another Business Own an LLC?

Yes. Another Business can own an LLC. This is referred to as a subsidiary to the parent company. An LLC subsidiary is typically established by a parent LLC to seperate all business activities, assets, or liabilities from the parent company itself. By doing so, this will seperate all your eggs so they are not in one basket.

Can an LLC Own Another Business?

Yes. As mentioned above an LLC can own Another Business. This is referred to as a subsidiary to the parent company.

How Many LLCs Are There in Delaware?

In 2014, there were approximately 122,000 Delaware limited liability companies formed in Delaware. By 2019, that increased to 166,000, and as of 2021, the number of Delaware LLCs formed had grown to about 247,000.