Consistent with its reputation as one of the most business friendly states, Delaware’s Limited Liability Company (LLC) laws have been crafted to be as customizable as a Delaware corporation. A Delaware LLC is largely a creature of contract, and almost anything that an LLC’s members or managers agree upon amongst each other or with the company concerning its internal affairs will be respected. James Hsui, PLLC can help you form a Delaware LLC, and assist you in deciding whether doing so is right for your business.

Delaware is also a preferred state from an asset protection perspective because it is a “charging order only” state. “Charging order protection” was born from English lLaw out of the policy that a partnership should be able to choose its partners. If a company does not have charging order protection, then when a member or shareholder of the company owes money, a creditor can seize control of that member’s ownership interest in the company, and whatever partnership or ownership rights that accompany it.

Delaware’s LLC statute provides that the charging order is the “exclusive remedy” for a creditor. This is not so in the LLC statutes of all states. For example, New York’s statute provides that that the charging order can be a remedy, but does not say it is the “exclusivey”. This means that a New York court may be open to choose something else.

While Delaware may be, all other things being equal, one of the most favorable places for LLC formation, a Delaware LLC may not be the best option for all businesses. Similar to a Delaware corporation, a Delaware LLC cannot do business in another state unless it first seeks authority to do so from that state. Maintaining the authority to do business in another state usually requires at least the same amount of effort as maintaining the registration of an LLC. This means that a Delaware LLC formed solely to do business in another state will have to expend at least double effort.

If you have any questions about the Delaware LLC, it would be our pleasure to answer them. Make an appointment today for a free consultation!