The State of Delaware is the second smallest state in the US. It is bordered by the states of New Jersey, Pennsylvania and Maryland. This gives its inhabitants easy access to New York City and Washington DC.
LLCs (Limited Liability Companies) combine the most beneficial aspects of a corporation and a limited partnership. This form of entity protects the personal assets of its owners, while providing them with “pass-through” taxation. The Delaware LLC provides similar benefits to a traditional ‘offshore’ company. Business transactions conducted by an LLC are usually tax free where the members of the LLC are non-resident aliens.
Other benefits of forming a Delaware LLC are as follows:
- Due to the limited liability status of the LLC, the law protects the members from the debts and other obligations of the LLC.
- A Delaware LLC may be fully owned by non-resident aliens.
- There are minimal compliance requirements.
- Anonymity of members may be preserved by the use of nominee shareholders.
- Delaware maintains a separate corporate law system, called the Delaware Court of Chancery, that uses only judges who are corporate law specialists.
- One person can hold all officer positions and serve as the sole director of the LLC. Directors names are not required to be listed in the articles of incorporation.
- No minimal capital investment in the LLC is required.
- As Delaware is a US state, LLCs have access to the extensive range of tax treaties between the US and other countries.
- Delaware LLCs are ideal as holding companies or companies that own trademarks, patents and other IP (a major concern for many entertainment entities).
- Foreign investors may be able to participate in grants and other incentives, such as the Delaware Competitiveness Fund and the Technology-Based Seed Fund.
- Even if income is apportioned to Delaware, it is subject to an extremely low rate of tax.
- Delaware does not impose dividend, interest or royalty withholding tax.
- Delaware has no thin capitalisation, controlled foreign company or transfer pricing rules.
Due to the nature of the industry, many entertainment entities are global in nature. Due to the favorable corporate, tax and IP laws in Delaware, it is a very attractive jurisdiction for global entertainment entities to establish a holding company or presence.
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