For most business owners, forming their LLC in Delaware will not offer many benefits. Instead, it ends up being an unnecessary and often expensive step.
Tax Implications
Taxes are paid where the 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
Delaware’s 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.
Legal and Administrative Considerations
While large corporations benefit from Delaware laws, most small businesses do not. Home state laws are usually simpler and have lower costs.
Is a Delaware LLC Worth It?
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 an LLC in Delaware is an unnecessary and often expensive step.
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.
Why not to form an LLC in Delaware? It ends up being an unnecessary and often expensive step for most small business owners. Home state laws usually have lower costs and are simpler. Most small LLCs still owe taxes where they make money, not Delaware. Annual franchise taxes and fees to form an LLC in Delaware are higher than most other states.