Types of Legal Entities in Delaware

For anyone looking to take their business global via an offshore setup, Delaware is a preferred choice. However, choosing the appropriate legal entity structure among the various types in Delaware can be challenging. Our guide walks you through the numerous business formation types available in Delaware and enables you to make the right choice. Let’s learn more here.

Types of Legal Entities in Delaware

Delaware offers numerous business formation options to suit your business requirements. Here’s a detailed look at each legal entity.

1. Sole Proprietorship

Sole proprietorship is a common type of business entity in Delaware. As the name suggests, it is owned by a single person who shoulders the complete responsibility of the firm. Moreover, there is unlimited liability, meaning the owner is liable to repay the debts of the firm personally. Aside from this, all income is also considered personal income.

2. General Partnership

Title 6, Chapter 15 of the Delaware Code defines a general partnership as an association of two or more persons formed under this act to carry on any lawful business, purpose, or activity.  The partners are responsible for managing the company according to the partnership agreement, and all the partners are equally responsible for the company’s income or loss.

3. Limited Partnerships

Chapter 17 of Title 6 of the Delaware Code governs the limited partnerships in Delaware. It is one of the most common business formation types in Delaware for company setup. This type of legal entity in Delaware has two types of partners: general and limited. General partners have unlimited liability and are responsible for day-to-day operations, whereas limited partners have limited liability and are responsible only up to the amount invested by them.

4. C-Corp

There are different types of corporations in Delware, and a C-Corp is a popular type of legal entity. It can have an unlimited number of shareholders and employ a board of directors to take care of the business. Moreover, the owner enjoys limited liability and is only liable up to the amount invested by them.  A C-corp company structure is based on a double-taxation policy. The profits are taxed at the corporate level and again will be taxed during the distribution of dividends among the shareholders. However, double taxation exists only if there is US income. This type of company is suitable for small venture companies or companies that are planning to go public.

5. S-Corp

Another significant business formation type in Delaware is an S Corp. These are the corporations that elect to pass corporate income, losses, and deductions through to their shareholders. In return, shareholders of an S Corporation report this income on their personal income tax return. Moreover, a Delaware S corporation cannot have more than 100 shareholders and can issue only one class of stock. However, a firm choosing the S Corp status must be domestic.

6. Limited Liability Partnership (LLP)

Limited liability partnerships, or LLP, are governed by Subchapter X of Chapter 15, Title 6 of the Delaware Code. Unlike a general partnership, all the partners in an LLP have limited liability. Moreover, the partners control the LLP in accordance with the partnership agreement. The partners are only liable for the capital they invested in the business.

7. Limited Liability Company (LLC)

A limited liability company is a business formation type in Delaware. Through it, the member can enjoy pass-through taxation, i.e., they can choose to be taxed as a partnership or a corporation. Moreover, members in a Delaware LLC are governed by the LLC agreement, which can be oral, written, or implied. Moreover, there are no ownership restrictions for foreigners, making it a suitable structure for Delaware company formation.

The reasons to start an offshore company in Delaware are endless. It is one of the most booming states in the United States and is flourishing with business opportunities. However, navigating the compliance can be tedious for any new business owner. That’s where Business Setup Worldwide steps in. We can help you set up your firm in Delaware and ensure you miss any compliance. Contact us now to get a full understanding of offshore company formation.