When you decide to start a business, you have to be ready to face challenges and take on the responsibilities of being a company owner. Aside from that, you need to consider various factors to ensure that your venture will not fail as soon as it starts.
Things To Consider To Start A Business
One of the most important things you need to think about before starting a business is the location. You have to choose a state that offers advantages to your company. While most people go for the place where they live, it is not a requirement. You can choose an area that best serves your interest.
Delaware has a business-friendly environment that makes it an attractive location for startups. Many entrepreneurs also choose to organize their companies in this state because of its favorable tax structure.
Another crucial factor is the structure of your business entity. Do you have to incorporate it, or is sole proprietorship a better choice? If you are still undecided, why not consider a limited liability company (LLC)? This hybrid structure combines the benefits of corporations with the advantages of a partnership.
Reasons To Choose Delaware
An LLC provides flexibility and multiple inherent benefits. Choosing the right location can help you focus more on your company’s operations and growth. If you are wondering if it is right to choose Delaware for your business, here are some of the reasons many entrepreneurs think of it as the best option:
- The state implements specific laws for businesses. Generally, Delaware has some of the most business-friendly state laws in the United States. The General Corporation Law and the Limited Liability Company Act govern the different business entity structures. They are regularly updated to ensure that the state remains at the forefront of many business law developments. Some states even use Delaware laws as a model for their corporate regulations.
- Courts efficiently resolve business-related disputes. Delaware has a Court of Chancery that hears lawsuits involving business entity statutes. Judges who decide on the cases specialize in that area. Aside from their efficiency, they resolve disputes with a sense of urgency. Because of this, you can expect the case law on business to be well-developed, and you can easily plan for the future of your company.
- The state provides liability protection for members. The owners of Delaware LLCs, who are also known as members, enjoy liability protection. Their personal properties are not affected even if the company has liabilities. Additionally, the state offers an extra layer of protection for the business against the creditors of its members.
- The tax laws are flexible. The owner of an LLC can choose how the IRS will tax the company’s income.
- Disregarded – This taxation may be a good option for single-member LLCs. It is when the sole owner pays both income and self-employment taxes on the net business income.
- Partnership – This is the default tax treatment for LLCs with multiple owners. The company will report its income to the IRS. However, each member will pay self-employment and income taxes on their income share.
- S Corporation – A company has to qualify to get this tax treatment. Generally, it is similar to a partnership, but it offers more flexibility that can keep taxes to a minimum.
- C Corporation – This refers to the treatment that involves double taxation. If you choose this, your company will have to pay taxes at the rate of corporate tax. At the same time, the members will have to pay income tax on distributions.If you do not plan on doing business transactions in the state, then you can enjoy three additional benefits. First, you will not have to pay income tax. The company only needs to pay the $300 franchise tax annually. Second, there is no sales tax. Third, the state will not impose taxes on intangible income.
- You can choose the management structure. You can choose to have the members manage the company, making it a member-managed business. You can also appoint certain members for management responsibilities or hire managers, which makes the entity manager-managed.
- Delaware allows privacy. Unlike other states, Delaware does not require you to disclose the names and addresses of the members and managers on your formation documents. All you need to provide is the company name and the registered agent and their address.
- You can form series LLCs. The state allows the formation of multiple miniature LLCs or a series under a single company. You can even have different members for each series. Additionally, the properties of one series cannot be held liable for the obligations of the others.
What You Have To Do
Before you form a business in Delaware, it is best to have a concrete plan. This will serve as the roadmap of your company. Include your goals and the strategies you may have to apply to achieve success.
You should also take certain steps to ensure that your company complies with the regulations that the Secretary of State has set. You may have to do additional tasks as well.
- Choose the right business structure.
- Come up with a unique business name and follow the state naming guidelines.
- Register your business with the Secretary of State by filing the appropriate paperwork.
- Get a Federal Employer Identification Number (FEIN) from the IRS.
- Consider opening bank accounts and credit cards under the company name. Doing so will help keep your personal and business expenses separate.
- Obtain the necessary business licenses and permits. You may need to get these from your county or city to have proper authorization to operate.
- File your annual and ongoing obligations.
Delaware is a good location to start a business. Its laws and court system provide a business-friendly environment. However, you have to go through a process before you can start operating. If you need help in figuring out the whole ordeal, contact a third-party organization like DoMyLLC to ask for assistance.
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