Business

Top reason to setup offshore company in Delaware

  1. Register company in Delaware

Foreign investors and business owners who wish to set up an offshore company may consider Delaware as a prime jurisdiction. This may be because of its business-friendly government policies, simple incorporation process, and more. In this article, you will find the top reasons to register company in Delaware.

Before we begin, you must understand what an offshore company is. An offshore company is a business entity set up in a jurisdiction other than the home country of the business owner.

What are the top reasons to set up an offshore company in Delaware?

  • Tax benefits and incentives:

The Delaware government provides offshore companies with various tax benefits and incentives as a way to attract foreign direct investment to the country and thus, stimulate the economy. 

Firstly, offshore companies that are registered in Delaware but conduct their business activities elsewhere, in different states or countries, will not be subjected to any corporate income tax.

Secondly, the government exempts businesses from paying any tax on sales, intangible properties, capital gains, and more.

Thus, businesses are subjected to 0% tax making it feasible for businesses to conduct business globally while incurring low taxes in Delaware. However, businesses are required to pay a Delaware franchise tax which is based on the value of the shares of the business. 

Despite Delaware being one of the tax haven states in the United States of America, it is not associated with the usual negative notion accompanying ‘tax haven’. Moreover, it is not on the blacklist of the Organisation of Economic Cooperation and Development (OECD).

  • Simple Incorporation Process:

Setting up an offshore company in Delaware is a relatively simple and straightforward process. 

Firstly, businesses need to choose whether they wish to incorporate a Delaware Corporation Company or a Delaware Limited Liability Company (LLC). Thus, there are fewer options of business structures available for businesses allowing for a quick decision-making process. 

Despite there being certain differentiating features between the two entities, the important features in both the case remain the same. However, most businesses looking to set up offshore companies choose to set up a Delaware Limited Liability Company.

Secondly, offshore businesses have to meet fewer compliance requirements as compared to that in other countries with no minimum paid-up share capital, fewer documents required, no filing and auditing requirements, and more. However, you will need to have a local resident director to represent your business on your behalf along with a registered local office address.

Thirdly, the incorporation process can be completed quickly, within a period of one week.

  • Inexpensive incorporation process:

Firstly, the government charges relatively low fees during the business registration process. This amount is lower than that charged in other states in the United States of America and also other parts of the world.

Secondly, businesses are subjected to maintenance fees that are in the form of annual payments to relevant authorities once the business is operational. This fee that is charged from businesses is also relatively low compared to that in other states or countries.

  • Flexibility:

In Delaware, businesses are offered with a lot of flexibility when conducting business. This is because an offshore LLC must comply with the Operating Agreement that is prepared by the owner of the business. This agreement states the guidelines and procedures for running the business and is recognised by the government of Delaware.

Businesses can, therefore, decide their own business structure and regulations. Therefore, if required, a single individual can hold all the necessary positions of an offshore company and can become the sole owner of either the corporation or LLC.

  • Reputation:

Since 1965, the government in Delaware has been trying to develop the region to become a prime location for businesses to set up offshore companies in. Currently, there are approximately 63% of the Fortune 500 companies incorporated in Delaware. This shows how various businesses prefer Delaware as a prime jurisdiction for an offshore company. This, thus, develops a good reputation for the State of Delaware as an offshore jurisdiction.

  • Privacy and Security:

The government in Delaware offers businesses with high levels of privacy and security. This is because offshore companies do not need to disclose the names and other personal information of the shareholders of the business. In fact, only the details of the resident director appointed by the business are required to be disclosed.

Moreover, information about the offshore company and its unique beneficial owners is also not available to the public.

  • Court of Chancery:

The Court of Chancery is established in Delaware to handle the different corporate disputes that may arise. In this Court, cases are not presented to juries but to a judge who has specialised in the corporate law and commercial disputes. 

With a large number of business cases, statutes, and precedents that have been created over the past years, the Delaware Court can handle cases quickly and efficiently, with high levels of predictability in terms of the results of the case. In fact, the cases are usually handled within a few months if not weeks.

  • Infrastructure:

In Delaware, the government has developed its infrastructure over the past years in terms of transportation, utilities and energy, and more. Presently, there is a strong transportation infrastructure developed in the region with airports, seaports, trains, roads, and more. Businesses can take advantage of the same. 

How to register an offshore company in Delaware:

Now that you have understood the reasons why you should incorporate your offshore company in Delaware, you also need to understand how to do so. 

Step 1: Choose an optimum business structure:

  • You must choose a suitable business entity for your company. It could be an LLC or a Corporation. 
  • You must understand the features of each of these entities before choosing the best suited one for you based on your requirements.

Step 2: Meet all the pre-registration requirements:

  • You must reserve your preferred business name with the Delaware Division of Corporations.
  • You must appoint a local registered agent to act on your behalf who will act as a link between the business and the authorities.
  • You must also prepare required incorporation documents including the Proof of address, Certificate of Formation, Operating Agreement, and more.

Step 3: Register your business:

  • You can then register your business with the Delaware Divisions of Corporation virtually.

Step 4: Open a bank account:

  • You must then open a bank account for your newly incorporated company.

Step 5: Staying compliant:

  • Even after registration is completed, you will need to ensure your compliance with the government policies by obtaining required licenses, registering business with the IRS, and more.

 

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