Why Solar Companies Should Form Delaware LLCs

By Matthew Dochnal | Published May 28, 2024

solar energy

The solar energy industry has been experiencing remarkable growth, driven by increasing demand for renewable energy solutions. As solar companies expand and navigate the complexities of the market, selecting the right business structure becomes a crucial decision. 

Forming a Delaware Limited Liability Company (LLC) offers many benefits for solar companies. This article explores why Delaware LLCs are a popular choice among solar businesses and the specific advantages they provide.


What Benefits Are There to Solar Companies Forming a Delaware LLC?

Delaware LLCs provide real legal benefits to all types of businesses, including solar companies. Here are the top five benefits of Delaware LLCs for solar businesses:

Benefit #1: Limited Liability Protection

Delaware LLCs offer limited liability protection, which shields business owners’ personal assets from the company’s debts and liabilities. This protection is especially valuable for owners of solar energy businesses, as they face risks such as equipment malfunctions, installation errors, or contractual disputes.

For example, if a solar panel installation leads to property damage and a lawsuit, the business owner’s personal assets—like their home or personal savings—can be protected from legal claims. Limited liability protection allows solar entrepreneurs to focus on expanding their business without the constant fear of losing their personal wealth.

Benefit #2: Credibility

Operating as a Delaware LLC can give a solar company added credibility. Potential customers, partners, and investors often view Delaware LLCs as being more established and reliable businesses. Credibility can lead to more business opportunities and attract higher paying clients and investment in the competitive solar industry.

For example, a solar installation company structured as a Delaware LLC may be perceived as more professional and trustworthy. This may make it easier to secure large contracts and partnerships with major corporations and government entities.

Benefit #3: Tax Advantages

Delaware LLCs provide tax flexibility that can be particularly beneficial for solar companies. Owners of Delaware LLCs can choose to have their businesses taxed in various ways, including as a disregarded entity, a partnership, a C-Corporation, or an S-Corporation

Under the Check-The-Box rules, the IRS allows LLCs to choose a tax election based on which structure benefits their business the most.

Solar businesses often have varying levels of income and expenses due to the project-based nature of their work. Being able to choose the most favorable tax treatment can help optimize a company’s finances and lead to big savings.

Benefit #4: Easy to Set Up And Maintain

Setting up a Delaware LLC is relatively easy and there are minimal requirements to maintain a Delaware LLC. Solar entrepreneurs can benefit from this simplicity when they need to focus on their projects and clients rather than navigating complex legal or administrative tasks. 

A Delaware Registered Agent, like IncNow, can handle the entire LLC formation process for you. The only Annual Requirement for Delaware LLCs is paying the $300 Delaware Annual Franchise Tax.

Benefit #5: Easy to Transfer Ownership

As solar companies grow and evolve, they may need to bring in new partners or transfer ownership. Delaware LLCs make it easy to transfer ownership of a business or change management. All you need to do is amend the company’s private LLC Operating Agreement

What Is A Delaware Limited Liability Company (LLC)?

A Delaware limited liability company, or “LLC”, is a legal business structure that offers limited liability protection for its owners. Delaware LLCs can protect a business owner’s personal assets from the company’s liabilities and financial obligations. Owners of an LLC are called “Members.” 

Delaware LLCs are flexible business entities used for various purposes, from small-scale consulting businesses to large enterprises. Solar companies utilize Delaware LLCs to protect both tangible assets, like solar panels and installation equipment, and intangible assets like intellectual property and customer contracts.

Why Form An LLC In Delaware? Top Benefits

delaware welcome sign, "the first state"Delaware provides many benefits to entrepreneurs who choose to form legal entities in the state. These include:

  • Business-friendly legal climate, low fees, fast filing,
  • A dedicated business court for dispute resolution, and
  • No residency requirement for global entrepreneurs.

Read More –> Top Benefits Of A Delaware LLC

Delaware has become the preferred state for LLC formation due to its business-friendly laws, affordable fees, and quick filing process. According to the Delaware Division of Corporations, 1.3 million Delaware LLCs were created in 2021 alone. Delaware’s business laws are renowned for providing robust protections for managers and owners.

Delaware’s specialized business court, known as the “Court of Chancery,” efficiently resolves disputes while respecting the rights of business owners.

There is no residency requirement for creating a Delaware LLC. This allows entrepreneurs worldwide to benefit from Delaware’s laws. Additionally, there is no requirement for a Delaware office or even visiting the state to form an LLC.

Operating as a sole proprietor can be straightforward and cost-effective, but forming a Delaware LLC provides solar companies with improved protection, credibility, and potential tax benefits. Solar businesses should consider forming a Delaware LLC to enhance their operations and secure their growth in the competitive renewable energy market.

How To Form A Delaware LLC

Registering a Delaware LLC requires filing a formation document with the Secretary of State’s office called the Certificate of Formation. In Delaware, the only information required to complete this document is the LLC name and details about the company’s Delaware registered agent.

When deciding where to form your company, consider that Delaware has advantages over your home state that may benefit you. Go