Delaware compliance for U.K. founders

Choose entity type with tax consequences in mind- Delaware C-Corporation (Delaware corp): common for venture-funded startups and U.S. investors; taxed as U.S. domestic corporation (file Form 1120). S-corp election not available to non‑US shareholders.

Delaware corporate law and investor familiarity are primary reasons.- Delaware LLC: flexible for tax classification (disregarded entity, partnership, or elect to be taxed as C-corp). Single-member foreign-owned LLCs are commonly treated as disregarded entities for U.S. tax and face special reporting (Form 5472 + pro forma Form 1120) for reportable transactions with related parties.2) State-level formation basics (Delaware Division of Corporations)- Registered agent: Delaware requires a registered agent with a Delaware street address (cannot use only a mailbox).

Use a professional registered agent service.- Formation filings: file Certificate of Incorporation (corporation) or Certificate of Formation/Organization (LLC) with the Division of Corporations (online, mail, or in-person, but online document upload has restricted hours).

Keep Delaware file number.- Foreign qualification: if your Delaware entity will “do business” in other U.S. states, you must foreign‑qualify there. Foreign qualification forms/fees: typical Delaware filing fees for foreign qualification were cited in practice guides (examples: $245 corp / $200 LLC for filing in Delaware as a foreign entity via forms listed by Harbor Compliance).3) Delaware ongoing (state) compliance, deadlines and amounts (most critical)- Delaware corporations: Annual Report + Franchise Tax due March 1 each year.

Minimum franchise tax: $175 (Authorized Shares method) / $400 (Assumed Par Value method) with maximums (historically up to $200,000; large filers higher). Annual Report filing fees (non-exempt corp) and penalties apply.

Late filing penalty: $200 plus interest (1.5% per month) on unpaid tax.- Delaware LLCs / LPs / GPs: flat annual tax $300 due on or before June 1 each year. Penalty for late payment: $200 plus interest (1.5% per month).- Important: Delaware sends franchise/annual notices to registered agents in December; electronic filing/payment is required for certain filings.4) Federal (IRS) compliance and reporting for foreign-owned U.S. entities- EIN: an Employer Identification Number (EIN) is required for tax filings, hiring, payments processors, and most U.S. banking.

Non‑resident applicants without SSN/ITIN cannot use the online EIN application; file Form SS‑4 by fax or mail and observe the IRS rules for the “responsible party” (must be an individual) and the special handling for foreign applicants.

Many formation providers assist with this process.- Form 5472 (and pro‑forma Form 1120): a single‑member foreign‑owned U.S. LLC treated as a disregarded entity must file a pro‑forma Form 1120 with Form 5472 to report reportable transactions with foreign related parties.

Penalties for failure to timely file Form 5472 are severe (statutory penalties apply—usually $25,000 initial penalty; additional penalties may apply). Even foreign-owned U.S. corporations must comply with 5472 rules when reportable transactions occur.- Withholding and payments to foreign persons: Payments of U.S.-source FDAP income to foreign persons may require withholding (Forms 1042/1042‑S), and many payments from a U.S. entity to foreign parties must be evaluated for withholding and reporting.- Responsible party rules: the IRS requires listing a “responsible party” (an individual) on the SS‑4; mistakes here can delay EIN issuance.5) FinCEN / Corporate Transparency Act (BOI reporting)- Beneficial Ownership Information (BOI): under FinCEN rules, reporting companies must file BOI reports.

Existing reporting companies had a statutory filing window (e.g., prior guidance set an April 25, 2025 deadline for many existing entities; new companies generally have 30 days from formation to file).

Timely BOI filing is required for new entities and many existing filers; check FinCEN for current deadlines and exemptions.6) Banking / KYC practicalities for UK founders- Opening a U.S. bank account: many traditional banks require in‑person visits and U.S. presence; however, fintech banks (e.g., Mercury, Brex, others) often provide remote account opening for Delaware entities with an EIN and formation documents.

Expect to provide: certified formation documents, EIN letter (IRS CP 575), a government ID (passport), operating agreement/bylaws, proof of address for the entity, and often the personal identity of beneficial owners and the responsible party.- Expect enhanced KYC: banks will request ownership structure, BOI, passports, proof of address, and may require an SSN/ITIN for primary signers.

Some banks accept corporate officers without SSNs but may impose transaction limits or additional scrutiny.

Choose entity type with tax consequences in mind- Delaware C-Corporation (Delaware corp): common for venture-funded startups and U.S. investors; taxed as U.S. domestic corporation (file Form 1120). S-corp election not available to non‑US shareholders.

Delaware corporate law and investor familiarity are primary reasons.- Delaware LLC: flexible for tax classification (disregarded entity, partnership, or elect to be taxed as C-corp). Single-member foreign-owned LLCs are commonly treated as disregarded entities for U.S. tax and face special reporting (Form 5472 + pro forma Form 1120) for reportable transactions with related parties.2) State-level formation basics (Delaware Division of Corporations)- Registered agent: Delaware requires a registered agent with a Delaware street address (cannot use only a mailbox).

Use a professional registered agent service.- Formation filings: file Certificate of Incorporation (corporation) or Certificate of Formation/Organization (LLC) with the Division of Corporations (online, mail, or in-person, but online document upload has restricted hours).

Keep Delaware file number.- Foreign qualification: if your Delaware entity will “do business” in other U.S. states, you must foreign‑qualify there. Foreign qualification forms/fees: typical Delaware filing fees for foreign qualification were cited in practice guides (examples: $245 corp / $200 LLC for filing in Delaware as a foreign entity via forms listed by Harbor Compliance).3) Delaware ongoing (state) compliance, deadlines and amounts (most critical)- Delaware corporations: Annual Report + Franchise Tax due March 1 each year.

Minimum franchise tax: $175 (Authorized Shares method) / $400 (Assumed Par Value method) with maximums (historically up to $200,000; large filers higher). Annual Report filing fees (non-exempt corp) and penalties apply.

Late filing penalty: $200 plus interest (1.5% per month) on unpaid tax.- Delaware LLCs / LPs / GPs: flat annual tax $300 due on or before June 1 each year. Penalty for late payment: $200 plus interest (1.5% per month).- Important: Delaware sends franchise/annual notices to registered agents in December; electronic filing/payment is required for certain filings.4) Federal (IRS) compliance and reporting for foreign-owned U.S. entities- EIN: an Employer Identification Number (EIN) is required for tax filings, hiring, payments processors, and most U.S. banking.

Non‑resident applicants without SSN/ITIN cannot use the online EIN application; file Form SS‑4 by fax or mail and observe the IRS rules for the “responsible party” (must be an individual) and the special handling for foreign applicants.

Many formation providers assist with this process.- Form 5472 (and pro‑forma Form 1120): a single‑member foreign‑owned U.S. LLC treated as a disregarded entity must file a pro‑forma Form 1120 with Form 5472 to report reportable transactions with foreign related parties.

Penalties for failure to timely file Form 5472 are severe (statutory penalties apply—usually $25,000 initial penalty; additional penalties may apply). Even foreign-owned U.S. corporations must comply with 5472 rules when reportable transactions occur.- Withholding and payments to foreign persons: Payments of U.S.-source FDAP income to foreign persons may require withholding (Forms 1042/1042‑S), and many payments from a U.S. entity to foreign parties must be evaluated for withholding and reporting.- Responsible party rules: the IRS requires listing a “responsible party” (an individual) on the SS‑4; mistakes here can delay EIN issuance.5) FinCEN / Corporate Transparency Act (BOI reporting)- Beneficial Ownership Information (BOI): under FinCEN rules, reporting companies must file BOI reports.

Existing reporting companies had a statutory filing window (e.g., prior guidance set an April 25, 2025 deadline for many existing entities; new companies generally have 30 days from formation to file).

Timely BOI filing is required for new entities and many existing filers; check FinCEN for current deadlines and exemptions.6) Banking / KYC practicalities for UK founders- Opening a U.S. bank account: many traditional banks require in‑person visits and U.S. presence; however, fintech banks (e.g., Mercury, Brex, others) often provide remote account opening for Delaware entities with an EIN and formation documents.

Expect to provide: certified formation documents, EIN letter (IRS CP 575), a government ID (passport), operating agreement/bylaws, proof of address for the entity, and often the personal identity of beneficial owners and the responsible party.- Expect enhanced KYC: banks will request ownership structure, BOI, passports, proof of address, and may require an SSN/ITIN for primary signers.

Some banks accept corporate officers without SSNs but may impose transaction limits or additional scrutiny.

U.S. vs. UK tax considerations (high level—seek cross-border tax advice)- Delaware corporation

taxed as U.S. domestic corporation. U.K. shareholders need to consider UK capital gains and anti-avoidance rules. Pay attention to “central management and control” to avoid unexpected UK tax residency for the U.S. entity.- Delaware flip: common path for UK startups seeking US VC investment, but triggers UK tax/regulatory considerations (capital gains, EIS/SEIS preservation, transfer pricing, potential stamp duty issues). Seek HMRC advance clearance when needed.

Payroll, hiring & other operational compliance- Hiring U.S. employees triggers U.S. payroll tax, withholding, unemployment insurance registrations, and I-9 verification obligations. If hiring UK contractors/employees, comply with UK employment and tax rules (PAYE, IR35 considerations) and consider cross-border payroll arrangements.- Consider using a U.S. Professional Employer Organization (PEO) or global employment platform to simplify U.S. hiring and payroll compliance for remote founders.9) Practical checklist & timeline for a U.K. founder setting up a Delaware entityPre-formation (0–1 week)- Decide LLC vs C-corp with tax and investor counsel.- Choose company name and check availability on Delaware Division of Corporations.- Engage a Delaware registered agent (required).Formation (1–5 business days typical with expedited Delaware filings)- File Certificate of Formation (LLC) or Certificate of Incorporation (Corp) with Delaware Division of Corporations; obtain Delaware file number and certified copy if needed.- Apply for EIN (Form SS‑4) by fax or mail for non‑residents (or use formation provider assistance).- File FinCEN BOI report within 30 days if the entity is newly formed (confirm current deadline/exemptions).Post‑formation (weeks 1–8)- Open U.S. bank account (prepare certified docs, EIN letter, ID). Consider fintech banks for remote onboarding.- Draft Operating Agreement (LLC) or Bylaws & stock ledger (Corp). Prepare equity documents, founder stock agreements, and 83(b) elections if applicable for U.S. tax residents.- For LLCs with single foreign owner

prepare to file Form 5472 + pro‑forma Form 1120 when required; set up bookkeeping to track reportable transactions.Ongoing (annual)- Corporations: file Delaware Annual Report + Franchise Tax by March 1 each year; pay franchise tax (calculate using authorized shares or assumed par value methods; compare both methods to minimize tax).- LLCs/LPs/GPs: pay Delaware annual tax $300 due June 1 each year.- Keep registered agent contact up to date; review BOI report updates as ownership changes.10) Penalties & risks to avoid- Missing Delaware deadlines: penalties ($200) and interest (1.5%/month) and possible loss of good standing/void status.- Failure to file Form 5472 for foreign‑owned disregarded entities: heavy penalties (statutory penalties; e.g., initial $25,000 for failure to furnish information) and compliance headaches.- Failure to submit BOI (FinCEN) when required: potential civil penalties and increased regulatory scrutiny.- Bank account KYC mismatches: delays or denials if formation documents, EIN, or BOI/ownership details don’t align.11) Recommended next steps (practical & prioritized)- Engage a US/Delaware formation provider or corporate counsel to file formation, registered agent, and expedite Delaware filings if you need speed.- Engage a cross‑border tax adviser (U.S./UK) before flipping or issuing founder equity—this minimizes UK capital gains surprises and residency risks.- Obtain EIN early (via SS‑4 fax/mail) and prepare BOI filing if required.- Choose banking route early: contact fintech banks (Mercury, Brex, etc.) and traditional banks to compare KYC requirements and remote options.- Implement bookkeeping from day one to capture intercompany transactions that trigger Form 5472 reporting.