5 Minute Incorporation Tutorial

7/31/2019 5 Minute Incorporation Tutorial

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The primary reason business

owners choose to incorporate or

form an LLC is to limit the liability

they would face in the event of a

lawsuit or bankruptcy.

DBI 5 M in u t e I n co r po r at i on Tu t o r ia l

I n co rp o ra t i o n v s So le Pro p r i e t o r s h ip


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So unless you put them up as

collateral, your house, personal

savings account, personal

retirement accounts and other

assets would not be seized to paya debt of the company or a

judgment against the company.




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The second most common reason

to Incorporate or form an LLC is to

raise capital by selling shares to

investors.




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Have you been wondering why more

than half of the Fortune 500 have

chosen to incorporate in Delaware?


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There are so many reasons to

incorporate in Delaware an entire section

of our website is devoted to this topic.

We'll review just a few.


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Privacy

Delaware Corporations and LLCs

can be formed without including the

names oftheinitial members,

directors orshareholders (owners)

on the Certificate of Incorporation.


Reasons to I ncorpo r a te i n Delaw are


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Director Shield Law

A Delaware director shield law

permits Delaware Corporations to

shelter their directors from

personal liability.




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Favorable Tax Climate

No State Sales Tax




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No Delaware Corporate Income

Tax for companies operating

outside of Delaware




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No Delaware Corporate Income

Tax on companies whose sole

activities in Delaware are related to

intangible investments.




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Pro-Business Legislation

Delaware remains unique in the

degree of latitude it affords

Corporations and Limited Liability

Companies in organizing andoperating their business.




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I bet youre wondering, How can I

form a Delaware company if I dont

have an office in Delaware?



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Delaware law only requires you to

have a Registered Agent in Delaware

to form a Delaware Corporation or

LLC. DBI will be your Delaware

Registered Agent.


Delaw are Reg ist e red Agen t


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A Delaware Corporation or LLC has

the constitutional right to transact

Interstate Business. Interstate

means involving parties in two or

more states.


Delaw are , The US, and Abr oad


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A Delaware Corporation or LLC can

also be used to transact business

outside the US, whether or not you

have a base of operations inside the

US.




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Your Delaware Corporation or LLC

can also be registered to transact

Intrastate Business in additional

states; without the need of

incorporating in each state.




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Ok, let's talk about Corporations

and Limited Liability Companies.

We'll start by comparing the two.



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Similarities

Limited Liability Companies and

Corporations have much in common.

Both provide similar limited liability to

the owners/investors.


LLC o r I n c ?


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Similarities

Similar tax treatment options,

including the Pass Through option

and the C-Corporation option, are

available to both Corporations andLLCs.


LLC o r I n c ?


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Differences

Two significant differences between a

Delaware Corporation and a

Delaware LLC:


LLC o r I n c ?


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Differences

Corporations issue stock

certificates which can be traded

privately or on a public stock

exchange.


LLC o r I n c ?


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Differences

LLCs can raise money from

investors by privately selling

investment shares, but LLCs cannot

be publically traded on a stockexchange.


LLC o r I n c ?


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Differences

Both Delaware Corporations and

Delaware LLCs can be formed

without including the names of the

shareholders/owners, directors orofficerson the Certificate of

Incorporation...


LLC o r I n c ?


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Differences

But, Delaware Corporations are

required to file an annual report

naming one officer and all directors.

Note: a Delaware corporation is notrequired to name owners

(shareholders) on the annual report.


LLC o r I n c ?


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Differences

Delaware LLCs are not required to

file an Annual Report.


LLC o r I n c ?


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Entity Tax

Delaware Corporations authorizing

5,000 shares or less will pay a

minimum Franchise Tax of $125

when they file their annual report.


LLC o r I n c ?


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Entity Tax

Delaware LLCs will pay a flat LLC

Tax of $250 each year.


LLC o r I n c ?


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INC LLC

Limits Liability Yes Yes

Annual Reports Required Not Required

Annual Shareholder Meeting Required Not Required

Taxed at corporate income tax rates Possible Possible

Taxed at personal income tax rates Possible Possible

Raise capital from investors Possible Possible

Publicly traded on Stock Exchange Possible Not Possible

No Names in Public Record Not Possible Possible

Annual Entity Tax $125 (min.) $250 (flat)

LLC o r I n c ?

Lets Review:


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We're almost done with the tour; I

just want to show you what a

Corporate Kit is before you go.


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At a minimum a Corporate Kit or Operating Agreement kit

should contain model By-Laws and Minutes or a modelOperating Agreement.


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These are the documents which define the rules for profit

distributions, resignation or expulsion of members ordirectors, shareholder rights and other important matters


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Matters which could be essential in resolving disputes

between principals or defending tax status in an IRSinquiry.


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The state of Delaware never registers the names of

the owners of a Corporation or LLC.


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Our Corporate kits and Operating Agreement kits include

share certificates and transfer ledgers to ensure that your

ownership of the company is properly documented.


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Well, that's the end of the tutorial;

thank you for joining me.

If youre ready to learn more

please visit our Learning Center

Or browse our New Company

Registration Packages.

www.DelawareBusinessIncorporators.com/Learning-Center

www.DelawareBusinessIncorporators.com/Pricing

Documents

5 Minute Incorporation Tutorial