What Is the Advantage of a Delaware LLC?

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Advantages of a Delaware LLC

A Delaware LLC offers flexibility and strong asset protection. The state provides privacy rules to help protect your identity. Specialized courts resolve cases faster. However, a Delaware LLC has high costs. Additional paperwork also complicates things. For small businesses, the state of formation often works better.

  • A Delaware LLC avoids double taxation and offers liability protection. You can tailor management and operation. Delaware’s business-friendly legal environment draws companies. The efficient, knowledgeable courts specialize in corporate law. However, extra costs come with the series LLC structure. Accounting grows more complex. Professionals may lack expertise with this structure. For small firms focused on profitability, a standard home state LLC is simpler.

Forming a Delaware LLC

To form a Delaware LLC, you file a Certificate of Formation naming the LLC, agent, and an authorized representative. Owners and managers stay undisclosed. The state provides privacy and confidentiality around your assets and dealings.

Why not to form an LLC in Delaware

  • Even if you form your LLC in Delaware, you’ll still need to register your company as a foreign entity with your home state’s Secretary of State office. For most business owners, forming their LLC in Delaware will not offer many benefits. It instead ends up being an unnecessary and often expensive step.

  • Taxes Are Paid Where Money is Made. Most small LLCs will still owe taxes in their home state, not Delaware. This includes sales tax, business taxes, income tax, property tax, and more.

  • Delaware’s privacy rules only help if no other state requires your identity. Its specialized court system moves cases faster but does not impact most small firms. Annual franchise taxes and incorporation fees in Delaware are far higher than other states.

  • While large corporations benefit from Delaware laws, most small businesses do not. Home state laws are usually simpler and have lower costs. Additional paperwork and legal complications often outweigh touted advantages.

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