An LLC in the state has only a few statutory responsibilities compared to a Delaware corporation. Recurring annual cost for registered agent and attorney in Delaware There are many reasons why to incorporate in Delaware. The property owned by one series is protected from the liabilities of every other series. Delaware doesn't impose income tax on corporations registered in the state which don't do business in the state. Disadvantages of Delaware LLC If you choose to incorporate your Florida business in Delaware, you will need to comply with the business requirements of both states. Also, shareholders who don't reside in Delaware need not pay tax on shares in the state. It requires dual registration for out-of-state LLCs It is not beneficial for small businesses to incorporate their LLCs in another state because it requires a dual registration. Whether you incorporate in Delaware or form a limited liability company, the filing costs can be higher than some of the other states. Additional filing costs Forming a corporation in Delaware can cost between $1-2K more than in other states. Delaware is viewed as a haven for businesses due to Delaware's General Corporation Law being the most advanced and flexible corporation statutes in the nation. Delaware has a lot of advantages over other states. Delaware tends to incorporate businesses rapidly compared to other states. With so many companies incorporating in Delaware this has created a robust body of corporate law that promotes predictable and probable outcomes when litigating and settling business law suits. For example, in Florida, all businesses (LLCs, non-profits, LPs, LLPs, and corporations) must file an annual report no later than May 1st of every year. Moreover, a small filing is required to form an LLC. Despite some of the disadvantages listed above, there are many advantages to creating an LLC. Disadvantages of Filing an LLC in Delaware When it comes to setting up a business, considering some critical things will help you succeed. List of the Disadvantages of a Delaware LLC 1. Some key benefits include: Minimal paperwork. List of the Cons of Living in Delaware 1. Filing cost are high compared to other states. A series LLC is like one LLC with multiple miniature LLCs (called "series") built into it. Forming corporations in Delaware helps to solve thorny tax-related problems as compared to other states of the US. Let's look at an example: Nathan is from Connecticut He read online "Delaware is the best state to form an LLC" He forms an LLC in Delaware He is a resident of Connecticut He already pays taxes in Connecticut His home office is in Connecticut Delaware also provides more anonymity for the owners versus other states. Besides those tax advantages, corporations operating in Delaware are free from some other taxes including inventory, unitary tax, value-added taxes on business transactions, inheritance tax, and capital shares or stock transfer taxes. "For most business owners, forming their LLC in Delaware will not offer many benefits. In general, an LLC requires far less paperwork. LLCs have a number of advantages over other business structures like sole proprietorships, partnerships, and corporations. Delaware has many advantages, including very low incorporation and LLC formation fees, low annual franchise taxes, and no state corporate income tax for companies that operate outside Delaware. Here is a list of disadvantages too. An unusual plus is that the law includes the Delaware corporations court which it calls the . myoffshoreliving Offshore Agent Apr 8, 2016 #1 Delaware Company Formation advantage and disadvantages.Most international businesses take advantage of the friendly business environment in Delaware to make more profits and not pay any corporation tax. Brett Melson There are several advantages to a Delaware series LLC, which is why so many people inquire about the structure of the Delaware series LLC. Delaware has very friendly business and corporate laws. CALL US ON +971 50 4467827 - TO SETUP YOUR NON-CRS COMPANY STRUCTURE IN DUBAI. The reason why it is not beneficial for small businesses to incorporate their LLC in another state because it requires a dual registration. There are also a few possible disadvantages. This provides some privacy, but keep in mind that complete anonymity is never absolutely certain. Compared to forming a corporation, setting up an LLC typically involves much less paperwork. Disadvantages of Forming an LLC in Delaware Payroll or self-employment taxes Not all professionals are allowed to form as an LLC Each transfer of membership requires the consent of all owners, can slow down transaction times Single-member LLCs do not have as much asset protection as standard LLCs Order Now Who Should Start an LLC in Delaware? Disadvantages of Delaware LLC There are two sides to every coin, if there are advantages there are disadvantages too. Advantages of Delaware LLC Straightforward formation and minimal requirements It is no myth that you only need to file very little information to incorporate an LLC in Delaware. Here are some of the biggest advantages of forming an LLC: Personal liability protection Tax flexibility Easy to start Less compliance paperwork Privacy Management flexibility Distribution flexibility Charging orders Delaware allows businesses to form series LLCs. Pros of a Delaware Statutory Trust (DST) 1. Also Delaware, has been rated as the state with the best legal climate for 10 years in a row by the U.S. Camber Institute for Legal Reform. A legal analysis of the possible advantages/disadvantages of forming an LLC in Delaware vs New York is outside the scope of this (tax) article. Apart from the initial incorporation or formation documents, you may be required to file an . It is a very business friendly state, so if your company is sued and Delaware law & courts apply, the company generally has a favorable position. Despite that small size, there are about 1 million people who have decided to call it their home. Annual Delaware LLC Fees Advantage #6: Low Annual Fees and Simple Maintenance One of the advantages of a Delaware LLC (that attracts many aspiring business owners) is that costs are simple and inexpensive. Let's take a closer look at the advantages and disadvantages associated with this type of business structure! It instead ends up being an unnecessary and often expensive step." That extra step of registering as a foreign entity costs valuable time and additional filing feesboth upfront and on an ongoing basis. Potential Disadvantages of Incorporating in Delaware There are many reasons why to incorporate in Delaware. 2. Additional filing costs. Once a year, a simple form and an annual Franchise Tax Fee of $300 must be filed with the Delaware Secretary of State. However, the cost of registering and maintaining a Delaware LLC may be prohibitive for smaller business ventures. There are also a few possible disadvantages. The advantages of incorporating here include: The state offers some tax benefits. The franchise tax is one of the Delaware LLC advantages and disadvantages as they are required to pay a flat tax of $300. Diversification. Because the minimum investment in a DST is between $25,000 and $100,000, even someone with as little as $200,000 can own multiple DSTs and thus create their own little custom real estate portfolio. It requires dual-registration for out-of-state LLCs. Delaware is the second-smallest state in the country, with a landmass of less than 25,00 square miles. In a series LLC, owners need only form one LLC; they can then establish any number of separate series internally, without any additional expenses for the creation of an these individual series. LLC advantages. Not only would you be incorporating in Delaware, you would also be incorporating in your state of residence. A Delaware LLC offers prestige and advantages, especially for large, high-risk companies that earn a significant amount of income from patents and trademarks. You will need to content with a high population density when living here. This is because the state usually has pre-drafted articles of organization form that you can . Whether at the time of formation or anytime afterward, the Delaware Division of Corporations does not require an LLC to publicly disclose its members or managers. Forming a corporation in Delaware can cost between $1-2K more than in . It provides several advantages: Each series can have different members from the others. Advantages of incorporating in Delaware: 1. Disadvantages of a Delaware LLC. Investing in a DST allows you to diversify your real estate investment portfolio easily. However, the reader should understand that a Delaware LLC operating in New York will be subject to New York jurisdiction for any cause of action occurring in the State (NY). 8. Delaware maintains a separate "Chancery Court" specifically for business disputes, known for its well-established record of decisions and speed. The disadvantages of forming an LLC in Delaware far outweigh any "advantages" you may have read.