LLC formation, Delaware LLC formation, corporate formation, aonymous llc, member disclosure

What are the benefits to Delaware LLC formation?

Why a Delaware LLC?

The Delaware Limited Liability Company Act of 1992 paved the way for the State of Delaware, already home to many of the nations fortune 500 companies due to its’ low corporate taxes and legal system designed to benefit the corporate structure, to become the home of many new limited liability companies. Even today, as every state has enacted a limited liability company act in some form or fashion, the benefits of formation in Delaware often exceed even those of your home state.

Contractual Freedoms

The first such benefit is one utilized by many a corporation over the years in Delaware, while more recently the organizers and members of Delaware LLC’s have begun to recognize and take advantage of freedom of contract laws in Delaware as well as laws enforcing the rights of the contracting parties. As of 2010, when the State Legislature in Delaware enacted a law extending the benefits and freedom of contract rights already granted to C-corporations to limited liability companies formed and/or domiciled within the state. This occurred after the State Supreme Court ruled that an oral Operating Agreement was void and of no effect under the Statute of Frauds because, under the terms of the oral agreement, it could not be completed within one year. The legislature stepped in and broadened the freedom of contract rules so that, in the future, such oral Operating Agreements would be found valid under the law.

The Freedom of Contract principal goes a step further in allowing the members of an LLC free reign in almost all aspects of the company. Through an Operating Agreement the company can be designed to have various levels of members with differing ownership rights and amounts, and gives extreme flexibility on the day to day management of the company. Unlike many other states, this flexibility even extends to give a company the right to have different levels and classifications of members above and beyond the normal managerial roles, so long as they are defined within the company contract and/or Operating Agreement.

Courts of Chancery

One of the primary reasons so many companies call Delaware home is the legal system the state utilizes, specifically in the Courts of Chancery. The Courts of Chancery, over two hundred years old and known nationwide for their mastery of corporate law, maintain jurisdiction over almost all corporate disputes, including those involving limited liability companies, in the state. LLC members are given the same rights and privileges as corporate shareholders in the Chancery Courts, giving them the right to file derivative actions as well. A derivative action is a lawsuit by one of the members of the LLC or a corporate shareholder to enforce the rights of the corporations against another individual or corporation when it is determined the corporation is not doing enough itself to enforce those rights.

Confidentiality

Limited liability companies formed in Delaware keep much information confidential that, in the majority of other states, is revealed publicly at the time of formation and updated publicly via annual filings. For example, the Articles of Organization in most other states require information such as the name and addresses of the initial members, information pertaining to the organizer(s) and potentially even public disclosure of whom the initial managers of the company will be. Delaware has no requirement that the names and addresses of the managers nor members be disclosed at the time of formation, so long as the organizer (who is often an attorney or other person experienced at filing this type of paperwork) provides his or her own information along with that of the Registered Agent, which will always be public by way of necessity.

Series LLC

Delaware is one of eight states that offer the Series LLC along with the regular LLC. A series LLC is one which has the ability to create separate “series” or “cells” to keep it’s various assets separate so that, if one asset is proving exceptionally profitable while the remaining assets of the LLC are losing money, they can be kept separate and apart from each other from within the same LLC, gaining the members potentially both tax and liability benefits. Contact us today for more details or if you are interested in getting the process started to form your Delaware LLC!

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *