*** DELAWARE LLC FRANCHISE TAXES ARE DUE JUNE 1, 2019 ***

Summary of Delaware Entity Types

Delaware Limited Liability Company (LLC)

  • A “ Limited Liability Company,” or “LLC,” is a Type of Entity (company) which is often described as a hybrid between a Corporation and a Partnership.
  • The LLC features the liability protection of a Corporation, in that the liability of all members is limited to their investments in the LLC (unless they personally guarantee other debt incurred by the LLC), but is more flexible in respect to management structure and is usually considered to offer greater ease of administration.

Delaware Series LLC

  • The Delaware Series LLC provides for independent and separate liability of each asset within each series, without creating a separate limited liability company for each asset.
  • The number of series can be increased without filing a registration; saving on both registration fees and annual entity taxes.
  • Conventional LLCs can also be converted into a Series LLC without the need to form a completely new entity.

Stock (General) Corporation

  • A Stock Corporation is a business entity (type of company) which is registered with a state government and entitled to treatment as an artificial person, by which right it may sue or be sued in a court of law with protection for the shareholders and officers from personal claims, unless they commit fraud.
  • This means that, unless a shareholder personally guarantees a debt of the Corporation, or commits fraud, her risk of loss is limited to the amount of money she invested in the Corporation; her personal assets are protected from liability.
  • Stock Corporations and LLC’s are similar in the liability protection offered to owners and officers.
  • A Stock Corporation which is not a Close Corporation and is not an S-Corporation may be called a Corporation or a Stock (General) Corporation when it is necessary to distinguish it.

Close Corporation

  • A Close Corporation is a Corporation which sets certain limitations on the sale, holding and transfer of its shares of stock.
  • In Delaware, a Close Corporation is limited to thirty shareholders.
  • Two common reasons to form a Close Corporation are to seek and maintain “S-Corporation ” tax status from the IRS and/or to ease administration for a small business, frequently a family business.

Public Benefit Corporation

  • Public benefit corporations differ from traditional C corporations in purpose, accountability, and transparency, but not in taxation.
  • The purpose of a benefit corporation is to create general public benefit, which is defined as a material positive impact on society and the environment, i.e. maximum positive externalities and minimum negative.
  • A benefit corporation’s directors and officers operate the business with the same authority as in a traditional corporation but are required to consider the impact of their decisions not only on shareholders but also on society and the environment.

Non-Profit Corporation (aka Exempt)

  • When we use the term “ Not-for-Profit Corporation” we are typically referring to a Chartered Charitable or Religious Organization.
  • A Not-for-Profit Corporation is not “tax-exempt” until it has been granted Tax Exempt status by the IRS after filing form 1023. To be Tax Exempt, the Corporation must meet specific requirements:
    • Typically, the Corporation does not authorize or issue shares of stock.
    • The Corporation is organized and operated exclusively for Religious, Educational, Charitable, Scientific or Literary purposes, or for Testing for Public Safety, to Foster National or International Amateur Sports Competition, or for the Prevention of Cruelty to Children or Animals
    • No part of the net earnings of a section 501(c)(3) organization may, by practice or custom, benefit a person having a personal and private interest in the activities of the organization, such as the creator of the Corporation or the creator's family.
    • The organization is restricted in how much political and legislative (lobbying) activities they may conduct. Political Organizations usually file under an exemption other than 501(c)3.

Limited Partnership (LP)

  • A limited partnership (LP) is a form of partnership whereby there is at least one General Partner and at least one limited partner.
  • The "general partner" is responsible for the management of the limited partnership. The "general partner" assumes unlimited liability for the company's obligations and debts. A limited partnership permits an unlimited number of "limited partners". A "limited partners" liability is limited to the amount of their investment in the company.  
  • Limited partners have no voting power or any involvement in day-to-day operations. They are sometimes known as "silent partners". Limited partners primarily make financial investments in a company.

 

We hope you found this information beneficial. If you have any questions, please do not hesitate to call us at 1-800-423-2993 or 302-996-5819. Thank you for your interest in Delaware Entity Types.

 




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