Delaware Corporation

Should I incorporate my business as a Corporation or form an LLC?  

Descriptions of Corporations Organized in Delaware

As a US citizen, both a Corporation and an LLC (a Limited Liability Company) are excellent choices for business owners looking to minimize their personal liability and build credibility. Each entity offers distinct tax and business advantages. Choosing the right one depends on the specific needs of the business.

If you are a non US citizen although an LLC offers the same asset protection is not suitable for you as an international client, not filing a personal tax return with the IRS. A “C” Corporation would therefore be the better entity to file since if filing an LLC for income tax purposes when filing your year end tax return with the IRS, the LLC would have to be converted to a “C” Corp. An “S”  Corporation is reserved for a US citizen filing a personal tax return. 

General Corporation

The general corporation is the most common corporate structure. This type of corporation is a separate legal entity that is owned by stockholders. A general corporation may have an unlimited number of stockholders that, due to the separate legal nature of the corporation, are protected from the creditors of the business. A stockholder’s personal liability is usually limited to the amount of investment in the corporation and no more.

Advantages

  • Owners’ personal assets are protected from business debt and liability.
  • Corporations have unlimited life extending beyond the illness or death of the owners 
    Tax free benefits such as insurance, travel, and retirement plan deductions.
  • Transfer of ownership facilitated by sale of shares of stock owned by individuals outside the State are not subject to any Delaware taxes.
  • Shares of stock owned by individuals outside the State are not subject to any Delaware taxes.
  • Change of ownership need not affect shares of stock owned by individuals outside the State are not subject to any Delaware taxes. management.
  • Shares of stock owned by individuals outside the State are not subject to any Delaware taxes.
  • Easier to raise capital through sale of stocks and bonds.

When filing for a new Corporation, one of the following corporate endings must be used:

  • Incorporated or Inc.
  • Corporation or Corp.
  • Association
  • Institute
  • Union
  • Limited or Ltd.
  • Club
  • Foundation
  • Fund
  • Society
  • Syndicate

With a sub-chapter “S” corporation you can deduct the profits and losses from your corporation on your personal tax return. You will no longer be considered a “C” Corporation. Prior to March 15 you must file an IRS Form 1120-S. To qualify as a “S” corporation, you must be a US citizen or qualified registered filing a personal tax return with the IRS. A non US citizen is not qualified to convert to an “S” Corporation.

Before deciding which type of corporation best suits your business needs, always consult with your legal or financial advisors. Global Corporate Services, Inc. is a registered agent in the State of Delaware and does not offer legal or tax advice. We are here to help you start your new business as quickly and cost effectively as possible.

For more detailed information, you may address your questions to our Tax and Accounting Services at tax@delawarecorp.net.