In Delaware, a corporation must contain one of the following words: Incorporated, Company, Corporation, Club, Institute, Limited, Society, Syndicate, Union or Foundation. Abbreviations are acceptable. For instance; Corporation can be "Corp.", Limited can be "Ltd.", and Incorporated can be "Inc." An LLC can end in Limited Liability Company, LLC, or L.L.C. Of course, the end of the name also depends upon which type of entity is best suited for your business.

The following is a brief description of the types of businesses and corporations:

GENERAL ("C) CORPORATION

This is the most common type of large corporation which allows for an unlimited number of stockholders. This type of entity may raise capital by the issuance of stock if you comply with the requirements of the Securities Exchange Commission (SEC).

CLOSE CORPORATION

This type of entity limits the number of stockholders to approximately 30. The stock of a close corporation cannot be publicly traded and there are some limitation on the transfer of stock.

"S" CORPORATION

A general corporation may elect to become an S corporation by preparing IRS form 2553. The corporation must make the election within 75 business days of the date of incorporation in order to elect that tax year. S corporations avoid double taxation because the profits and losses are reported on the personal tax returns of the shareholders. The maximum number of shareholders of an S corp. is 100. There are some restrictions with an S corp. so we encourage you to seek the advice of an accountant or attorney before making the S election.

Limited Liability Company (LLC)

The LLC is the newest type of entity. The LLC combines the pass through taxation advantages of a partnership or S corp. and the limited liability aspect of a corporation. The main differences between the LLC and the corporation is that LLCs cannot have or issue stock. The rule of thumb is that if the entity is to own real real estate, the LLC is likely to be the best choice.

NON-PROFIT CORPORATION

A non-profit corporation is a corporation that is restricted from having or selling stock. Any income or profit cannot be passed to the directors, officers or members. A non-profit seeking tax exempt status must apply with the IRS. We recommend that you seek assistance from an attorney or accountant when applying for tax exempt status. We prepare generic non-profit Articles of Incorporation and therefore recommend that your attorney or accountant prepare the incorporation documents so that it meets the IRS requirements under Section 501 (c)(3).

The above information is general in nature. If you are not positive about which type of entity is best suited for your business, please contact us at 302-424-1996 for more information.

Contact the Registered Agents & Incorporators of Delaware

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