Deciding where to incorporate your LLC is one of the most exciting — albeit daunting — aspects of launching a business venture. It may be clear from the beginning of your journey that some states are better for LLCs than others for a host of reasons, not limited to tax benefits and more lenient or supportive environments for corporations.
Delaware is one of these states. Establishing a Delaware LLC is a popular move for many businesses due to its business-friendly laws and privacy protections, among other benefits.
If you’re on the fence about forming an LLC in Delaware, read on for our top seven reasons why it may be the right choice for your business!
Delaware is one of your best options if you're a non-resident looking for investment opportunities in the U.S. This is because you don't have to reside in the state or even visit it to form your LLC.
Granted, other states, such as Wyoming, New Mexico, and Nevada, also allow non-residents to form LLCs. But Delaware's simple formation process makes it a suitable choice. You just need to find a registered agent to act as a point of contact between you and the Delaware Secretary of State.
Stable makes it easy to incorporate your LLC in Delaware through our physical address and registered agent services. We have a physical address in Delaware and are available during regular business hours, which meets Delaware's registered agent requirements. Further, we offer virtual mailbox services and can receive and help you manage all business correspondence — government or otherwise!
One of the main benefits of forming an LLC in Delaware is that you can structure your LLC as you see fit. This means that you don't need to follow any playbook or copy other Delaware company agreements. Essentially, you can draft everything from how your LLC divides shares to how it partners with other entities without following predetermined policies.
This right is explicitly protected in Delaware's freedom of contract. As you can already tell, this freedom allows parties to create agreements however they like without interference from the government.
This is something the Delaware Supreme Court has consistently upheld. For example, in 2022, the Supreme Court reaffirmed that the freedom of contract prevails over equitable defenses. Your LLC operating agreement will always be the first consideration when deciding on business matters.
LLC anonymity is an excellent provision for shareholders who may want to keep their business and personal affairs separate or protect themselves from harassment. It also keeps members' investments private, which is great for anyone who wants to avoid public records.
Delaware is one of only four states that allow you to maintain your anonymity. Anonymous LLCs' members or managers don't need to disclose their names, addresses, or other identifying information in business formation documents. Instead, they can contract a registered agent to represent their LLC.
To designate your business as an anonymous or series LLC, you just need to file a Certificate of Formation and include your registered agent's details instead of yours. When you do, the agent receives all legal correspondence on your behalf and sends it to you through mail forwarding services.
Despite being one of the smallest states in the U.S., Delaware is home to over 60% of Fortune 500 companies. Why? Because it has some of the country's lowest fees and tax rates.
Delaware charges a filing fee of $90 and an annual state fee of $300. This is quite low compared to states like California, which imposes a $70 filing fee and an $800 annual franchise tax, and Massachusetts, which has a $500 filing fee and annual fee.
The state also has a relatively low corporate income tax rate (8.7%) compared to options like Minnesota (9.8%) and Alaska (as high as 9.4% depending on earnings). Further, Delaware doesn't have a sales tax, which can reduce the cost of doing business in the state. This makes it a friendlier option (for businesses that sell goods) than choices like Indiana and New York, which charge a 7% and 7% to 8.875% sales tax, respectively.
Another tax advantage for shareholders is that they don't pay taxes on shares in the state if they don't reside there.
One of the main benefits of forming a limited liability company is that it's a separate business entity from its members. Due to asset and liability protection, business creditors can't go after personal assets in case of business defaults, and personal creditors can't go after business assets in case of personal liability.
That said, there are various courses of action personal creditors can take. For example, in Delaware, they can obtain charging orders — orders issued by courts directing LLCs to pay creditors the revenue they'd otherwise pay debtors. But this is Delaware's only remedy for creditors. And, it remains the LLC's decision whether or not to make distributions. Whether they do or not, personal creditors can't foreclose on a member's interest or order a dissolution.
In states like California, a charging order isn't the exclusive remedy for personal risks — creditors can foreclose on your LLC interest to pay off debts, limiting your asset protection.
Delaware has had among the most new business registrations in 2024. With over 200 years of business-friendly laws, it's easy to see why the state is a top choice for entrepreneurs.
Delaware has a Court of Chancery, a unique court system composed solely of judges with vast corporate law experience who rely on the state's case laws to make decisions. This system speeds up the process of resolving business disputes and makes decisions relatively predictable — until the Musk payout decision, of course.
Beyond the Delaware court system, the state has legislation that saves national businesses from paying taxes on money earned in the state — they can do so by forming shell companies or subsidiaries in Delaware.
No other state in the U.S. runs a specialized court system or offers such an opportunity to save money. So, while the Musk case has left some people questioning Delaware's business environment, it's still better than what most states offer.
Delaware has one of the strongest venture capital and investment markets in the U.S. The proof is in the numbers — there are nearly 1.4 million business entities in the state.
Venture capitalists and other investors prefer to invest in Delaware-based LLCs because of all the above factors. The state offers more privacy, has a unique corporate court system and developed case laws, and allows non-residents to form businesses seamlessly.
VC preferences for Delaware make it a beneficial state to incorporate in, as it could mean easier access to investments for your business. If you're a startup or small business with a growth goal in the near future, Delaware is definitely worth considering.
While Delaware is an excellent option for many business owners, it may not be the right one for your LLC. Here are some instances when other states may be better options:
If your home state already offers a business-friendly environment, there's no reason to form your LLC in Delaware. Incorporating in your home state is a much simpler process and can be cheaper too — you won’t incur business address or registered agent costs.
This isn't to say that your home state should always be the first choice. Sometimes, registering your business in a different state may be the best option. For example, if you want to establish a base in a tax- or legislation-friendly state, Delaware should be your go-to. Also, if you live abroad and want to form a U.S. business or if you already operate in many states, Delaware's ease of registration and tax benefits make the state worth considering.
State of Delaware law requires LLCs to have a local registered agent to remain in good standing. But, while registered agents offer a lot of value (they receive legal and government correspondence on your behalf and can help keep LLC owners and members anonymous) sometimes it’s challenging to hire them. This may be the case for brand-new businesses that aren't sure they can justify the cost of registered agent services.
If your current state has a business-friendly environment and you can't afford registered agent services, postponing your registration in Delaware may be a good idea. You can always incorporate later on in the state as a foreign entity.
Despite recent concerns over Delaware's business environment, the state remains one of the best options for entrepreneurs. It has relatively low taxes, offers anonymity and asset protection, has advanced business laws and a specialized court system, and makes it easy for non-residents to register businesses.
Stable can help you establish your business in the state by providing virtual mailbox services. With this service, you get a professional and local address to register your LLC. We also offer registered agent services, meaning we can act as your point of liaison with the government. These services allow you to run a Delaware LLC without having to invest in an office space or physically work in the state.
Ready to set up your Delaware LLC? Contact us today!
