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Form a Delaware LLC

Most of these benefits are unavailable to sole proprietorships and general partnerships. Forming a Delaware LLC provides the following advantages:

• Limited liability protection: Owners are not responsible for business debts and liabilities. This is referred to as a corporate veil or shield.
• Flexible management structure: LLCs may create different membership classes allowing for custom distribution of economic and voting rights.
• Fewer formalities: LLCs require less annual paperwork than corporations and do not face the meeting requirements imposed on C corporations and S corporations.
• No ownership restrictions: Very few ownership restrictions, e.g. members may be other LLCs, the number of owners isn't limited.

Delaware Corporation

One common purpose for forming a corporation is that it's a separate legal entity, formed under state law, which protects owners from creditor claims. It can be viewed as a basic form of asset protection. Incorporating a business automatically makes a "C" or "regular" corporation. A Corporation is considered a separate taxpayer, with taxation occurring at the corporate level, independently of the owners.

Corporate profits may then be distributed to owners as dividends. Many small businesses do not opt for C Corporations because of this tax feature. This feature, along with different privacy considerations compared to a Delaware LLC, make the choice dependent on your specific needs.

• Raise capital easily: Capital can be raised through selling stock.
• Earnings remain inside the business: Earnings may be retained for reasonable business needs, rather than distributing them to owners.
• Unlimited life: When a corporation's owner incurs a disabling illness or dies, the corporation does not cease to exist.
• Salaries are deductible: Salaries paid to owners, though taxed at the individual level, are deducted from corporate profits for income tax purposes.