When you incorporate in Delaware, you benefit as the state has no income tax, sales tax or tax on tangible property. You will pay a franchise tax when you incorporate, but it is among the lowest in the country. As an added benefit, Delaware has no taxes on capital stock or assets, which can help as your business grows.
As an LLC, regardless of the state of incorporation you choose, you will be taxed as a pass-through entity. This means profits and losses are passed to individual LLC members to report on their personal income tax returns.
Court of Chancery
Delaware is unique in that is has a business court called the Court of Chancery. This court only hears business disputes, with judges chosen by merit who issue written opinions. This is very important as it means Delaware has a long history of legal precedent which makes business disputes easy to predict.
A Delaware LLC is very affordable to create, with a cost as low as $89. This is the lowest formation cost in the country. The annual franchise tax is also very low compared to other states.
Delaware limited liability companies do not need to keep minutes or hold regular meetings, and members may be anywhere in the world. You can choose to have a single member LLC with minimal investment, with your LLC formed as soon as you file your Articles of Formation.
Is it the right move for your business?
Whether or not forming a limited liability company in Delaware is right for your business depends on many factors. If your business is still small, and you do not do business in Delaware, you will likely save more money and effort by filing Articles of Formation in your home state, however. This is an important decision that you should discuss with your attorney and a corporate services company to make the right choice for your business.