Delaware – the US state that welcomes foreign entrepreneurs

Working and setting up a business in the USA can be an arduous business for entrepreneurs who are not US citizens, but the state of Delaware is not only making life easier for international business people, they’re actually welcoming foreign investment with open arms.

Delaware has always been known for its business-friendly laws and corporate environment. The main benefits for a foreign entrepreneur are quick and efficient company formation, tax advantages and legal protection for businesses. Here’s a breakdown of all the benefits:

Structuring: The corporate statutes are very flexible in terms of how you can structure your corporation and board members. For example, shareholders, directors and officers don’t need to be residents of Delaware. Unlike other states, Delaware allows just one person to be the only director, shareholder and officer of a corporation.

Tax Advantages: Businesses that are formed in Delaware but don’t conduct business there do not need to pay state corporate income tax (although there is a small annual franchise tax of between $75 to $250). Also, stock shares owned by people outside Delaware aren’t subject to Delaware taxes.

No Physical Location: Delaware does not require any business activities or offices to be located in Delaware, other than a registered company formation agent. Owners and managers don’t need to be U.S. citizens. Management and investors can vote or take action by written consent electronically from anywhere in the world, without a formal meeting.

Ease of formation: The formation process is quick and straightforward with very little bureaucracy. The use of registered agents makes the process smooth-running.

Business-friendly law: Delaware law provides efficient procedures for business combinations and other transactions, including mergers, transfers, and conversions. Delaware also has its own separate Court of Chancery that hears cases involving corporate law. Chancery judges have a background in corporate law, and can decide cases quickly, without the need for a jury.

The only thing that has changed recently in Delaware is the privacy laws. Previously names and addresses of the officers, directors and shareholders did not need to be disclosed on the formation documents. However, the US government recently brought in the Corporate Transparency Act 2020 to stop individuals who use businesses as “fronts” for illegal or illicit activities.

Therefore, the company must now identify the Beneficial Owner – the person who has substantial ownership over or owns or controls 25% of the company. The information needed includes the full legal name, date of birth, current residential or business address and either a passport number, driver’s licence number or other government-issued identification document.

How to open a company in Delaware

There are two types of company you can open in the state – a Limited Liability Company (LLC) or a Corporation (Inc). Both of these business structures can be formed by registered agents within a very short space of time – only one or two days – which is perfect for entrepreneurs who want to get the ball rolling. The documents needed by the registered agent are a certified copy of each director/shareholders passport (which can be scanned), and two utility bills that are less than three months old. Below are the advantages of each type of structure:

Advantages of a Limited Liability Company (LLC)

  • Protects personal assets from business activities
  • Pass through taxation
  • No Limit on the number of owners
  • Annual meetings and minute books are not required

Advantages of a Corporation (Inc.)

  • Protects personal assets from business activities
  • Can issue shares of stock
  • Preferred by investors and for IPO’s
  • Recognized outside of the United States
  • Corporate income splitting can help lower tax liability

If you need more information about how to open your company in Delaware or elsewhere in the United States, including registered agents, EIN numbers or how to open a business bank account and virtual offices in the USA, please contact us on 0033 (0)1 53 57 49 10 or email us from our contact page and we’ll be happy to help.

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