Why should someone start an llc in delaware? This is actually a fair question to asks when looking to begin an LLC, particularly if one has already heard a lot of good praise for setting up an LLC. But this praise is justified, as those who set up an LLC will discover that they benefit a lot in the areas of asset protection, privacy, and taxes...

 

There are basically two types of LLCs - the 'sole proprietorship' or 'sole proprietorship' type, and the 'for profit' type. A sole proprietorship is by definition an LLC, and when set up, will only be taxed on the individuals salaries (as that would be the sole income of the business). On the other hand, for profit sole proprietorships are taxed on both the individuals' salaries, plus any direct income from the business itself. This makes the double taxation system that much more attractive to many people, and it's why an llc in delaware is so popular.

 

In addition to the advantages of having two tax brackets, another benefit of incorporating an LLC is that it allows individuals to shield their identity. In the case of sole proprietor LLCs, all income generated by the business is reported individually to the IRS. The individual may have to pay both Federal and State income tax. For a for-profit entity, such as an LLC, it's very common for the business to report its income tax to its own owners, rather than the government, which results in either a lower tax rate or no tax at all. This results in a net income (after expenses) much larger than that of a sole proprietor. An LLC is also very easy to register, allowing it to handle most state and local tax issues on its own.

Creating an LLC In Delaware

 

While both types of business can be characterized as "sole proprietorships" in terms of who owns them, they differ when it comes to their tax treatment. With a for-profit LLC, income is only taxed once, making it simpler and more manageable. On the other hand, for-profit llcs are treated more like partnerships. This means that the partnership's profits are shared among its members. The state taxes on these profits, but not the individual member's income tax. This means that any profits that an individual member earns as a result of his work will be taxed as income by the LLC, although the LLC itself may not be.

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Another difference between the two forms of business law is that the Delaware statute does not recognize LLCs. Many business owners, unhappy with the lack of recognition in their home state, have chosen to incorporate in Delaware rather than run their businesses from home. In doing so, they become liable to pay Delaware income taxes on their LLC income, but they do not have to pay federal or Maryland income taxes on their personal incomes. This makes the state an attractive option for many business owners looking to save money. The lack of corporate taxation has caused the number of LLCs to increase in recent years, which is good news for Delaware residents as well.

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The advantages of incorporating an LLC include the ability to shield personal property from the reach of the state's corporate tax laws. In many ways, this is true. LLCs do not have to separate personal property from the business property that they own and, therefore, do not face the double taxation many businesses do. In addition, unlike sole proprietorships, business owners can choose which debts they face and that they are personally liable for. For instance, if they invest in expensive real estate, they are not personally liable for the entire cost, but they are liable for a portion of it.

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Forming an LLC involves filing a form with the Delaware secretary of state. If you choose to incorporate an LLC on your own, you will have to get a legal opinion from an accountant or other qualified professional. However, since the forms are very simple, nearly any individual can prepare them. In some cases, you can receive the forms and instruction booklet free of charge, though you may have to pay for the other materials you need to complete the formation process. There is no legal fee for incorporating an LLC and no penalty for the filing of the Articles of Organization unless it includes a provision that requires the payment of a penalty. An owner may be penalized by the state for failing to register the LLC timely, but usually the penalties do not exceed one-hundred dollars per month.

 

Most people incorporate an LLC because they are afraid that the IRS will ask them for an owner's personal information or for proof that the LLC is a valid business. In fact, the IRS does not look at a person's personal or private information when determining whether an individual or LLC is valid. The only information the IRS asks for is the name and address of the registered agent and the proprietor (who are also referred to as the LLC's owner). To learn more about incorporating an LLC or for additional help with your LLC, contact a local attorney who specializes in limited liability.

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