Delaware has long been a popular choice for incorporation due to its corporation-friendly laws and tax advantages. However, Florida has become a viable competitor with lower costs and filing fees.
A Delaware LLC can do business in Florida, but it must register as a foreign entity. This process is relatively straightforward and includes low fees.
The state in which you incorporate can have a significant impact on your business. The choice can have financial, tax, legal and other costs that are both beneficial and harmful. It is important to consider all of these factors when making your decision.
Delaware and Florida have relatively low start-up costs. However, Florida can have high ongoing costs due to state taxes and franchise taxes.
In addition to the cost of incorporation, Florida has requirements for businesses to have a physical address in the state and a registered agent that will accept service of process and official state correspondence. In addition, Florida requires the annual report to be filed with the Florida Secretary of State. This information is public record and can be accessed by anyone. Delaware does not require this information to be made public. Delaware also allows companies to use a virtual office and a registered agent, which can reduce the costs of filing.
Choosing the right state to incorporate can be one of the most important decisions that a business owner makes. It’s vital to consider all the costs and benefits associated with both options before making a final decision.
For publicly traded companies and those raising equity capital from institutional investors, Delaware is often the preferred choice due to its internationally recognized and annually updated corporate law, extensive and robust caselaw, and administrative user-friendliness. But homegrown start-ups and other privately held companies may be able to benefit from Florida’s more comprehensive statutes in areas such as duty of care, appraisal rights, and the ability to avoid taxation on distributions to investors.
All businesses incorporated in Florida are required to designate a Registered Agent within the state and provide that agent with a street address where it can receive service of process. Many of these agents charge annual fees, which can add up quickly. The cost of a Registered Agent is also a consideration when considering the cost of incorporating in Florida vs Delaware.
Incorporating a business involves a wide range of legal tasks and requirements. These include paying taxes, filing reports, maintaining records, and keeping licensing up-to-date. A Florida business law attorney can help your company manage all of this and more. They can also help you determine which state is better for your business.
The Sunshine State has laws in place that protect LLC ownership interests from judgement creditors. These laws prevent judgement creditors from seizing assets like financial accounts and real estate. This is a major asset for small businesses seeking to protect their assets.
Delaware is known for its international reputation as a corporate-friendly state. Many magazines rank the state as having one of the most favorable environments for start-ups and other corporations. However, a closer look at the statutory and judicial elements of Florida corporate law reveals some significant differences that may neutralize the seeming advantages of incorporating in Delaware.
Many people choose to incorporate in Delaware because it has a history of being very business-friendly. The state offers low filing fees and no sales tax, for example. However, Florida also has some attractive benefits.
One example is the ability to have a single person serve as manager, member and officer — something that is not possible in most other states. Additionally, in Florida it is possible for an LLC to be taxed as a disregarded entity. This means that the LLC does not pay taxes at the federal level, and the individual members pay their own income and self-employment taxes on the net business profits.
Another benefit of Florida is its statutory provision for mandatory indemnification of officers. While Delaware case law may have similar standards, the availability of a specific statutory provision can be useful for counsel in formulating opinions and addressing duty of care issues. It can also be helpful when drafting an operating agreement with clients.