Delaware LLC glossary
Plain-English definitions for Delaware LLC and federal tax terms. Each entry includes the definition, context, an example, and common pitfalls. Use these when reading Delewarellc's pillar pages or any Delaware-related contract.
The legal document filed with the Delaware Division of Corporations that creates a Delaware LLC under 6 Del. C. § 18-201.
The internal contract among Delaware LLC members defining ownership, management, distributions, and exit rules.
The person or company designated to receive legal documents and state correspondence on behalf of a Delaware entity, with a physical Delaware address.
The 9-digit federal tax identifier assigned by the IRS to a business entity, used for tax filings, banking, and platform onboarding.
The application form for obtaining a federal EIN from the IRS, used by non-residents via the fax-application path.
The annual federal information return required from foreign-owned single-member US LLCs treated as disregarded entities. $25,000 penalty for failure to file.
An annual flat $300 tax due June 1 for Delaware LLCs; variable for Delaware Corporations using Authorized Shares or Assumed Par Value methods.
Federal report filed with FinCEN under the Corporate Transparency Act, disclosing beneficial owners of US entities. Due within 90 days of formation.
A limited liability company with one owner. Treated as a disregarded entity for federal tax purposes by default.
An entity that is treated as not separate from its owner for federal tax purposes. The default classification for single-member LLCs.
The IRS form used to elect a different federal tax classification for an LLC. Common election: changing default classification to C-Corp.
Personal US tax ID for non-resident individuals who must file US tax returns. Distinct from an SSN or EIN.
The form filed by foreign entities to claim treaty-rate withholding reduction on US-source income.
A bilateral agreement between the United States and another country that affects how cross-border income is taxed.
A tax-treaty concept defining when business activity creates a taxable presence in another country.
US-source income that is connected to a US trade or business and is taxed at graduated US income tax rates.
A Delaware-issued document certifying that an entity exists and is current on all state-level obligations.
Registering a Delaware-formed entity to do business in another US state where it has nexus.
The Delaware statute governing all Delaware LLCs, codified at 6 Del. C. Chapter 18, sections 18-101 to 18-1109.
The federal corporate income tax return. The pro forma version is filed by foreign-owned single-member LLCs alongside Form 5472.
The physical Delaware street address at which the registered agent is reachable during business hours.
The constituent document that creates an LLC in most US states. Delaware uses the term 'Certificate of Formation' instead.
The legal process of creating a business entity (LLC, Corporation, partnership) by filing required documents with a state.
A person designated to file Delaware LLC formation documents on behalf of the future members. Often the formation service or legal counsel.
The US state where an entity is legally created. For Delaware LLCs, this is Delaware.
The legal home of an entity, typically equivalent to the state of formation.
An LLC formed in one US state that is registered to do business in another US state.
An LLC operating in its state of formation. A Delaware LLC operating in Delaware is a domestic Delaware LLC.
The person who files the Certificate of Formation to create a Delaware LLC. Often used interchangeably with 'authorized person.'
The corporate-law equivalent of LLC organizer. The person who files the Certificate of Incorporation for a Delaware C-Corp.
An owner of an LLC. Membership represents both economic interest (right to distributions) and management interest (voting rights, unless modified in Operating Agreement).
A person designated to operate the LLC's business, distinct from members. Required only in manager-managed LLCs.
An LLC where members directly manage the business. The default structure under Delaware LLC Act.
An LLC where designated managers run operations on behalf of members. Common for passive-investor structures.
An LLC with two or more members. Defaults to partnership treatment for federal tax.
The ownership stake in an LLC, combining economic rights and (typically) management rights.
The right to share in LLC profits, losses, and distributions, separate from management rights.
Cash, property, or services contributed by a member to the LLC in exchange for membership interest.
The running balance of each member's economic stake in the LLC, tracked for tax and distribution purposes.
Cash or property paid by the LLC to a member, typically out of profits or capital.
A final distribution to members made when the LLC is winding down and ceasing operations.
A guaranteed minimum return to certain members before others share in profits.
An interest in future LLC profits without entitlement to current capital. Common as employee equity grant.
A timeline over which a member's or employee's equity becomes non-forfeitable.
Reduction in existing members' percentage ownership when new equity is issued.
US federal tax identifier issued to US citizens and authorized residents. Distinct from EIN (entity ID) and ITIN (non-resident personal ID).
A near-blank Form 1120 filed by foreign-owned single-member LLCs as the filing vehicle for Form 5472.
The federal partnership return filed by multi-member LLCs treated as partnerships for tax purposes.
The federal individual income tax return for non-resident aliens with US-source income.
The form used by partnerships and multi-member LLCs to report each member's share of income, deductions, and credits.
The form used by US-resident single-member LLC owners to report business income on personal Form 1040.
Fixed, determinable, annual, periodical income. US-source passive income subject to flat-rate withholding for non-residents.
A treaty article that restricts who can claim treaty benefits, typically targeting treaty-shopping abuse.
Stripe's incorporation product. Forms Delaware C-Corporations for $500 with integrated Mercury banking.
US neobank operated through Choice Financial Group. Default banking for many Delaware LLC formation services.
Multi-currency business account from Wise. Highest approval rate for non-resident Delaware LLC founders in 2026.
Cross-border payment platform with marketplace integrations (Amazon, Upwork, Fiverr). High approval rate globally.
US-based payment processor. Card-payment acceptance for online businesses with US LLC + EIN.
Shopify's built-in payment processor (powered by Stripe). Required for native Shopify checkout.
Amazon's seller dashboard for marketplace sellers. Requires LLC + EIN + US bank routing for Professional Seller account.
Amazon's $39.99/month seller tier with full Seller Central features. Required for serious FBA operations.
Shopify-hosted e-commerce storefront. Standard choice for DTC brands and product founders.
Amazon's fulfillment service. Sellers ship inventory to Amazon warehouses; Amazon handles storage, packing, shipping, and customer service.
FinCEN's beneficial-owner disclosure required under the Corporate Transparency Act for newly formed US entities.
Federal law (31 U.S.C. § 5336) requiring beneficial-owner disclosure for US entities. Effective 2024.
Financial Crimes Enforcement Network. The US Treasury bureau that administers BOI reporting and other anti-money-laundering rules.
Delaware's specialized business court since 1792. The de facto US business court for corporate-law disputes.
Legal presumption protecting directors who make informed, good-faith business decisions from personal liability.
Legal duty to act in the best interests of another party. For directors and managers: duty of care, duty of loyalty, duty of good faith.
A legal doctrine where courts disregard the entity's limited liability and hold owners personally liable for entity debts.
A Delaware filing that modifies a previously filed Certificate of Formation.
A Delaware filing that voluntarily ends an LLC's legal existence.
A Delaware-issued document certifying an LLC's good standing status.
Delaware Division of Corporations service tiers that prioritize certificate processing.
Delaware Division of Corporations online search and filing portal.
A Delaware LLC structure that creates internal cells with separate liability protection under 6 Del. C. § 18-215.
A Delaware LLC structure that includes a stated public benefit purpose alongside profit-making.
A legal process for changing an entity's form (LLC to Corporation, or vice versa) under 6 Del. C. § 18-211.
A process for a foreign-jurisdiction entity to become a Delaware LLC while preserving its existence.
A US tax concept that triggers US income tax on income effectively connected with that trade or business.
Income sourced to the US under IRS source-of-income rules, potentially subject to US withholding.
A US tax exemption that exempts certain interest payments to non-residents from US withholding.
A 30% US tax on foreign corporations US branch earnings deemed repatriated to the home office.
A US tax credit that offsets US tax liability for foreign income taxes paid.
A US tax exclusion for foreign-earned income of US citizens living abroad, up to about $130K per year (2026 estimate).
An IRS test that determines US tax residency based on physical presence days.
IRS form requesting automatic 6-month extension of corporate or LLC tax filing deadline.
IRS form to elect S corporation tax treatment for eligible entities.
IRS annual return for US withholding on payments to non-resident persons.
IRS recipient-level information return for US-source income paid to non-residents.
IRS information return for non-employee compensation paid to US persons.
IRS information return for miscellaneous income types (rent, royalties, prizes).
IRS information return for payment-card and third-party-network transactions.
IRS form used by US persons (including US-resident LLCs) to provide TIN to payers.
IRS form for individual foreign persons to claim treaty-rate withholding on US-source income.
IRS form for intermediary entities (foreign partnerships, certain trusts) for withholding purposes.
IRS form for non-residents claiming income effectively connected with US trade or business.
Annual partnership return reporting US withholding on partnership ECI allocated to foreign partners.
Partner-level information return for foreign partners share of partnership ECI and withholding.
FinCEN report for US persons with foreign financial accounts exceeding $10,000 aggregate.
IRS form for US persons reporting specified foreign financial assets exceeding threshold values.
IRS form for US persons reporting transactions with foreign trusts and certain foreign gifts.
A state filing required by some US states to maintain entity good standing.
A registered trade name different from the entity's legal name.
A connection to a state sufficient to trigger state-level tax obligations.
Sales tax nexus triggered by sales volume thresholds without physical presence.
IRS election for eligible entities to choose their federal tax classification.
IRS rules requiring arm's-length pricing for transactions between related parties across borders.
International bank identifier code used for cross-border wire transfers.
Standardized account number format used in international wire transfers, especially in Europe.
Automated Clearing House: US domestic electronic bank-to-bank transfer system.
Real-time electronic transfer of funds between bank accounts, domestic or international.
An entity that legally sells products on behalf of another, handling tax, compliance, and chargebacks.
An entity that aggregates payments from multiple merchants under one master merchant account.
Credit-card transactions where the card is not physically presented (e-commerce, phone, mail order).
US online business banking platform for SMBs with multi-account architecture.
A veil-piercing theory where the entity is treated as the owner's alter ego due to disregard of formalities.
A Delaware LLC asset-protection feature limiting creditors remedies against member LLC interests.
A fiduciary duty requiring informed and reasonable decision-making.
A fiduciary duty requiring managers/members to act in the entity best interest, not self-interest.
An always-applicable contractual duty that cannot be eliminated by Delaware LLC Operating Agreements.
A Delaware doctrine requiring controlling-party transactions to be entirely fair in process and price.
A provision in the Operating Agreement or charter limiting personal liability for fiduciary breaches.
Operating Agreement provision committing the LLC to reimburse members/managers for legal expenses and judgments.
An LLC equity class with preference over common equity in distributions and liquidation.
Preferred members right to receive their investment back before common members in liquidation.
A short-term debt instrument that converts to equity on specified triggers (typically priced equity round).
Simple Agreement for Future Equity: a debt-free alternative to convertible notes from Y Combinator.
An investor meeting SEC criteria (income, net worth, or qualifications) for participating in private offerings.
SEC safe harbor for private securities offerings, exempting from full SEC registration.
SEC safe harbor for offerings to non-US persons outside the United States.
Gradual earning of equity over time, often with cliff and reverse vesting provisions.
The state where the entity primary operations are conducted, distinct from formation state.
A doctrine where an acquirer assumes liabilities of an acquired entity in certain transactions.
A separate entity that holds intellectual property and licenses it to operating entities.
Copyright doctrine treating employer/commissioner as the author of certain works.
Legal transfer of rights (IP, contractual, etc.) from one party to another.
International trademark treaty enabling single-application trademark filing across multiple countries.
International patent application treaty enabling single-application patent filing in 150 plus countries.
Country-specific taxes on revenue from digital services (advertising, marketplaces, social media).
EU VAT system for non-EU digital service providers (Mini One Stop Shop / One Stop Shop).
Amazon onboarding tax process for Seller Central, KDP, and other Amazon services.
Default federal tax classification for single-member LLCs: the LLC is invisible for tax purposes.
IRS EIN application paths: online (US persons with SSN/ITIN) vs fax/mail (non-residents).
A structural distinction between LLCs that conduct active operations and LLCs that hold assets.
Synonym for registered agent in Delaware; the LLC required Delaware-based legal contact.
Brief history of the Delaware Limited Liability Company Act and its modernizing amendments.
Volunteer Delaware lawyer committee that drafts corporate-law statute amendments.
Chancery decision invalidating certain stockholder-agreement provisions, prompting Delaware SB 313.
The seven judges of the Delaware Court of Chancery (Chancellor and six Vice Chancellors).
Delaware highest court, hearing appeals from the Court of Chancery and other state courts.
A pre-drafted Operating Agreement template; useful for single-member LLCs but limited for complex structures.
Delaware Division of Corporations fee schedule for LLC, Corporation, and other entity filings.
Flat $300 annual franchise tax for all Delaware LLCs, due June 1.
The four federal tax classification options for Delaware LLCs: disregarded entity, partnership, S corporation, C corporation.
What about a Delaware LLC is public record vs private.
Comparison of Delaware (premium, case-law-deep) vs Wyoming (cheap, less case law) LLC formation.
Comparison of Delaware (premium) vs New Mexico (no annual reports or franchise tax) LLC.
Comparison of Delaware vs Nevada LLC; Nevada has higher annual fees but historical privacy advantage.
Companies providing LLC formation including filing, registered agent, EIN, banking introductions.
Online banking platforms accepting Delaware LLCs (especially non-resident-owned).
How Delaware LLC structure improves Stripe approval rates for non-resident founders.
How founders divide ownership stakes in a multi-founder LLC.
Initial ownership stakes received by founders at LLC formation.
Equity granted to advisors providing strategic guidance to the LLC.
Employee equity participation in LLCs, structurally different from corporate stock options.
Statutory conversion of a Delaware LLC into a Delaware C-corporation, typically for VC fundraising.
IRC § 1202 stock granting up to 100% capital-gains exclusion on sale after 5 years.
Total typical cost breakdown for forming and maintaining a Delaware LLC.