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Setting up a Delaware Offshore Company Formation

Table of Contents:

Overview of a Delaware Offshore Company

Since 1965 Delaware has been able to develop advantageous offshore company structures for company formation and has since become an attractive jurisdiction due to its friendly corporate legislation as well as other key advantages that have made it one of the world's most popular state to incorporate a company.

There are two types of offshore companies which can be formed in Delaware: a Delaware Corporation Company and a Delaware Limited Liability Company (LLC). There are some key differences in the structure and operating requirements of these two entities, but the important features and advantages of Delaware as a jurisdiction for offshore company formation generally apply to both. The Delaware LLC is the preferred and more popular of the two types. For simplicity, unless specifically stated otherwise, all information in this article pertains to a Delaware LLC.

The Delaware LLC consists of members. It does not issue shares and therefore has no shareholders or authorized share capital. It instead obtains its funding from member contributions and distributes its profits in the form of distributions to members.

A Delaware offshore LLC offers numerous advantages and uses, such as zero corporate taxation, high levels of financial privacy, fast and affordable incorporation processes, and few reporting requirements. The unique feature of a Delaware LLC is the fact that its structure and rules are defined at the outset in a contract known as an “operating agreement”. There is great freedom whilst drafting this operating agreement, which means one is able to tailor the terms to suit their individual requirements.

Advantages & Top Uses of a Delaware Offshore Company

Advantages 

  • Tax advantages: 0% Corporate Income Tax applied to Delaware offshore LLC’s which do not conduct their business within the state. In addition, an LLC is not liable for US federal income tax if it is owned by non-resident members who do not have any income source from inside the US.
  • High degree of privacy and confidentiality: Information about members is not publicly reported. Company information and accounting records are also not available to the public.
  • Provides good asset protection: Delaware has a history of few litigations and it is difficult for asset claims to be won by creditors.
  • Fast and easy incorporation process: A Delaware LLC can be incorporated in as little as three business days.
  • Flexibility and convenience: The structure of the LLC is highly flexible, with few mandatory provisions in the corporate legislation. As Delaware is a state within the US, it is very convenient in terms of geography, language, and legal system.
  • Only one member is required, who can be of any nationality.
  • No minimum capital requirements
  • No requirement to file accounts and no audit requirements
  • Stable and reputable jurisdiction for company operation
  • Low setup and maintenance fees
  • Sound legal system (US Common Law) with well-drafted and friendly corporate law.

Top Uses

  • International trade
  • Intellectual property
  • Holding company
  • Estate planning purposes
  • E-commerce
  • Asset protection
  • Investment opportunities
  • Tax reduction
  • Financial privacy

Key Corporate Features of a Delaware Company Formation

Delaware LLC Corporate Details
General  
Type of Entity  Limited Liability Company (LLC)
Type of Law Common Law
Governed by Delaware General Corporation Law (DGCL)
Registered Office in USA Required
Shelf company availability Yes
Our time to establish a new company  5-7 days
Minimum government fees (excludes taxation) 90USD
Corporate Taxation

0%

Access to Double Taxation Treaties No
Share capital or equivalent  
Standard currency USD
Minimum paid-up None
Bearer shares allowed No
No par value shares allowed NA
Directors/Members  
Minimum number 1
Local required No
Publicly accessible records No
Location of meetings Anywhere, not mandatory
Corporate directorship allowed No
Company Secretary  
Required Yes
Local or qualified Yes Local
Accounts  
Requirements to prepare Yse
Audit requirements

No

Requirements to file accounts No
Publicly accessible accounts No
Recurring Government Costs  
Minimum Annual Tax  50 USD
Other  
Requirement to file an annual return Yes
Migration of domicile permitted Yes


Delaware Requirements for Incorporation of a Company

To incorporate a Delaware LLC, the member/s will need to provide a certified copy of their passport or US national ID, as well as a proof of address. Thereafter, a certificate of formation must be filed with the Delaware Secretary of State, which contains the following information:

  • The company name,
  • The name and address of the local registered agent,
  • The local registered address of the company,
  • The company’s by-laws (optional).

If all is approved, turnaround time is usually about 3 days, after which the LLC is fully registered.

Taxation of an Offshore Company in Delaware

Many consider Delaware to be one of the few tax havens within the United States. Delaware Offshore LLCs are taxed at a corporate taxation rate of 0%. To qualify for this rate exemption, the company should not carry out their business within the state (hence they are referred to as “offshore companies”). The Delaware State also charges zero taxation on royalty payments and distributions to members.

 

The above tax policies allow for significant tax savings in certain circumstances; however, one should confirm the level of applicability and savings given their own unique situation and tax status.

Corporate Details of a Delaware Company

Anonymity, Confidentiality and Disclosure

Delaware LLC’s offer high levels of privacy. Information about the company and its beneficial owners are not publicly available. There is no auditing or requirements to file accounts. Furthermore, the names of the LLC members are not part of any documents which are filed with the Delaware state, and are only known to the registered agent.

Required Capital

No minimum capital requirements.

Members

A minimum of one member is required who can be a resident or non-resident natural person. Corporate members are not advised. The members are usually in charge of managing the LLC, but it is also permissible for a non-member manager to be employed who then reports directly to the member/s.

Trading Restrictions

Business activities must be conducted outside of Delaware to qualify as an offshore company and thus obtain the associated tax benefits.

Principal Corporate Legislation

Delaware General Corporation Law (DGCL). The DGCL has several advantageous policies for offshore company owners. These include the stipulation of a zero corporate tax rate and the allowance of nominee shareholders/directors for utmost anonymity. The DGCL statutes also allow for high degrees of flexibility in corporate structure. There are very few mandatory provisions which can easily be overwritten by the company managers. This freedom and flexibility are part of what makes Delaware such an attractive jurisdiction for offshore incorporation.

Type of Law

US common law. It is important to note that Delaware’s Court of Chancery operates with judges, not juries. This is an advantage for some, as they feel that the rulings adhere more with the facts of the law as opposed to human sentiment.

Powers of the Company

A Delaware LLC has all the same powers and rights as a natural person. It is regarded as a separate legal entity from its members. Therefore, a member’s liability is limited to their investment in the company alone.

Company Meetings

There are no requirements for meetings.

Local Requirements

A registered local office and local agent are both required.

Company Secretary

Local required.

Language of legislation and Corporate Documents

English.

Official Language

English.

Audit and Annual Reporting Requirements

The company is required to maintain their own accounting records, but there is no requirement to file these detailed records with the state. There are no audit requirements either.

Financial Statements required

The company should maintain annual financial statements which contain the distribution of profits to US citizens. The company need only file their statement of annual return with the Secretary of State.

Exchange Controls

None.

Shelf Companies available

Shelf companies are available for faster incorporation.

Time required to form an offshore company

A Delaware LLC can be incorporated in 3 – 7 days.

Company Name Requirements and Restrictions

The name of the company should end with the words “Limited Liability” or the abbreviation “LLC”. The company name is also allowed to include the following words: Association, Institution, Union, Company, and Foundation.

The name should be unique and should not be deemed inappropriate by the Delaware Secretary of State Office.

Access to Double Tax Treaties

Yes, as a US State, there are tax treaties with the wide range of countries which the US has tax treaty agreements with.

License Fee

There is an initial license/registration fee of about USD 90. Thereafter, there is an annual “franchise tax” of minimum USD 75, which includes the return filing fee of USD 50.

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