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Delaware corporate tax statute provides significant savings for passive investments held in the state of Delaware. A Delaware Holding Company (DHC) is a legal entity incorporated in Delaware which limits its activities in Delaware to the maintenance and management of intangible assets. The passive income produced by those assets are entirely exempt from Delaware state income tax. 30 Del. C. §1902(b)(8). (*see footnote)
The passive income of which we speak are such things as dividend income, interest on notes receivable, capital gains, trademark payments, rents and royalties. Delaware permits a corporation to establish a wholly-owned Delaware subsidiary to own and manage the parent company's intangible assets.
We can provide you with a wide variety of DHC services. These include the following:
- Situs Management
The DHC must provide "sufficient substance" within Delaware in order to minimize the possibility of taxation in another state. Situs management includes the establishment of Delaware as the DHC's place of business. We can provide for executive office rental, mail forwarding, secretarial services, accounting and legal services. In addition we can provide administrative services.
- Corporate Custody
We have connections with all of Delaware's premier banks. Any of them would be more than happy to provide for the safekeeping of the DHC income-producing assets. Making certain that the possession of those passive assets is in the State of Delaware is critical to the tax exemption being sought.
- Investment Management
While not absolutely required, it is generally a good idea that the investment portfolio be managed within the State of Delaware. Once again, we can provide introductions to portfolio managers, including banks and brokerage institutions, who will professionally manage the assets within the State of Delaware.
These portfolios may be structured to include money market instruments, mutual funds, taxable and tax-exempt, fixed-exempt income securities as well as equities.
Do not hesitate to contact Michael Ashley at (302) 427-6970 should you want further information in this regard and see How to Improve the Bottom Line.
*Footnote: 30 Del. C. §1902(b)(8) : Corporations whose activities within this State are confined to the maintenance and management of their intangible investments or of the intangible investments of corporations or business trusts registered as investment companies under the Investment Company Act of 1940, as amended (15 U.S.C. 80a-1 et. Seg.) and the collection and distribution of the income from such investments or from tangible property physically located outside this State. For purposes of this paragraph, "intangible investments" shall include, without limitation, investments in stocks, bonds, notes and other debt obligations (including debt obligations of affiliated corporations), patents, patent applications, trademarks, trade names and similar types of intangible assets.
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