Delaware has made a name for itself as one of the best places to form entities or move established businesses due to its business friendly tax rate. Delaware’s proximity to Washington D.C., Philadelphia, and New York City is another reason that blue and white-collar jobs flock to this state. Knowing Delaware laws will protect you and your business. Experienced Delaware business attorneys at Mattleman, Weinroth & Miller, P.C. are here to assist you with any questions or concerns.
I want to start a business. What do I do first?
The first thing you should do when starting a business, create an entity. This can be a Limited Liability Company (LLC), a Special Corporation (S-Corp), or a Corporation (C-Corp). Creating an entity is important because it protects you from personal liability. In Delaware, entities are considered a separate person, aside from the member(s), owner(s), and shareholder(s) that own it. In the case of any judgment of liability for your business, the personal assets of any member, owner, or shareholder are protected. If your business makes any profit in Delaware, you must register your business on the Department of Treasury’s website.
What is the difference between an LLC, S-Corp, and C-Corp?
Each business type offers a different form of taxation and structure. An LLC has no shares and no requirements, such as shareholder meetings or bylaws. S-Corporations and C-Corporations have requirements for bylaws and shareholder meetings. C-Corporations are taxed at the corporate rate and dividends can be taxed again. An S-Corporation is like a C-Corporation, but you can choose the way in which you’re taxed.
Do I need an operating agreement for my LLC?
Delaware has laws that, if violated, put you and your assets at risk. LLCs already have a basic operation agreement. However, drafting your own operating agreement will govern how disputes among the members will be resolved, avoiding future litigation. A strong, detailed operating agreement can protect you if you and your partner get into a fight about the business.
I want to buy a business. What do I need to know?
When buying a business in Delaware, you should look at the tax history of the business. Get a clear picture of the business’s profits and liabilities by investigating their past filings with the IRS. Make sure your business purchase and sale agreement is strong and concise. This protects you from the seller. Always make sure there are no lawsuits or liens against the business that would become your problem if you purchased the business.
How Can I Protect my Business’s Name or Brand?
Register a trademark to protect your business’s name. When you first start operating under a trade or business name and are using a name in commerce, you are technically already trademarked. We still recommend that you register the name with the United States Patent and Trademark Office. This gives you statutory damages should somebody start using a name that is confusingly similar to your business’s name. You can prevent the other company from using it and receive a large monetary penalty for the infringement on your trademark.
What is a non-profit status and how can I obtain one?
A non-profit is a status reserved for businesses that act a charitable organization. Non-profit businesses are not required to pay income tax. Also, any donation to your business is tax deductible for the donor. Though desirable for many people, you need to be a charity, or do charitable work, to fit this category.
What is a choice of law provision?
A choice of law provision decides the state or jurisdiction’s laws that can be used in interpreting a contract later in a business’s life. Most corporations will pick Delaware in their choice of law provision since Delaware favors corporations and is generally predictable in resolving disputes.
Always contact an attorney
Whether you are starting, maintaining, buying, or selling a business, you need a competent attorney to guide you through Delaware laws. In addition, an attorney can help you hundreds, if not thousands of dollars, by alerting you to any unforeseen obstacles. Do not put your business at risk. Our attorneys at Mattleman, Weinroth & Miller, P.C. are versed in all angles of Delaware business law and will counsel you through all levels of business.