Delaware has become recognized globally as a corporate paradise and is home to several famous firms. Although a small state, Delaware has been incentivizing businesses to stay with relaxed tax policies, reduced restrictions, and simplified corporate laws.
Starting a business in Delaware is beneficial to entrepreneurs and just like in every other countries, starting a business begins with making a plan and choosing the appropriate legal structure. And in comes the LLC – the most popular legal structure in the world.
A Delaware LLC
A Delaware LLC is a business vehicle with a legal existence separate from its owners. The owners and managers of a Delaware LLC are not personally accountable for the company’s debts and obligations.
A Delaware LLC can be treated as a pass-through entity for tax purposes. And in respect of this, it is regarded as a hybrid business formation that incorporates some of the best features of corporations and partnerships.
Conducting multiple businesses with Delaware LLC
Delaware LLCs can operate any lawful business activity anywhere in the world. But when it comes to operating several different businesses, entrepreneurs have to explore options such as the Delaware Series LLC, DBAs, and Delaware holding company.
- Delaware Series LLC
The Delaware Series LLC is an LLC without a predetermined shape. When you establish a Delaware Series LLC with the Delaware Division of Corporations, the entity established can be described as an umbrella. Under this umbrella, you can add as many divisions to your company as you want (these divisions are called “series”), and each series can enter into its own contracts, open its own bank account, and have its own limited liability insurance.
The Delaware series LLC is very attractive since there is only one annual Franchise Tax payment to the state of Delaware and one annual Registered Agent Fee.
But, the structure of this business entity is new and unproven, so there are often many obstacles that arise when dealing with a series LLC.
- Delaware DBAs
Many entrepreneurs consider setting up DBAs for several, different businesses operating under the umbrella of one LLC.
What is a DBA?
A DBA (doing business as) is an imaginary name registration, also referred to as an assumed business name. It’s a way for a business to operate under a name other than its registered name. But, it does not give the same legal protections as having a separate business entity, such as an LLC.
In a DBA, if anything should happen to any one component of the LLC, the LLC as a whole, as well as every other aspect of the business, could potentially be impacted and held liable.
- Delaware holding company
A Delaware holding company is a type of business entity (usually an LLC) that doesn’t perform any operations, or ventures, or engage in the trading of products and services. Rather, it is formed for the maintenance and management of intangible investments or the intangible investments of firms or business trusts.
Holding companies in Delaware can be used by enterprises of all sizes and in all industries, but are generally suitable for enterprises with multiple business units.
Separate LLCs for separate businesses : Delaware series LLC vs DBA vs holding company
Generally, when starting a business in Delaware, entrepreneurs choose a Series LLC because there is only one accounting line and tax spending in Delaware. But, as this new business model is still new, most pass on It.
Next in line is the DBA but this doesn’t have a legal separation for different businesses, so if something goes wrong with one LLC, then the other LLCs will be affected too.
It is naturally safer and smarter for entrepreneurs to keep their business ventures completely separate from one another by forming an LLC for each aspect of a business, but the Series LLC and DBAs fall short in this sector, so in comes the Delaware holding company. A Delaware holding company is a practical tool to safeguard a corporation’s passive income from home-state taxation.
With the Delaware holding company, the assets, debts, and liabilities of each LLC under it will be completely divided and shielded from one another in the event of any possible litigation. This way, entrepreneurs’ debts, assets, and liabilities will be protected in case something goes wrong. So the Delaware holding company is the best candidate in this situation.
Why the Delaware holding company?
In addition to Tax exemption, asset protection, and Ease of funding and financing, the Delaware holding company also offers Low administration costs.
What’s more, starting a Delaware holding company involves just two key stages – choosing your business structure, and filing your paperwork.
Although, it involves a few stages, incorporating a holding company can be rather difficult, especially if the business involves multiple subsidiaries and operating companies, so in order to simplify the process of setting up your Delaware holding LLC, let’s go ahead and contact your Damalion expert now.
