When you start a business, one of the most important decisions you have to make is where to incorporate. Delaware is known for its flexible laws and protections for corporations, limited liability companies, and limited partnerships.
However, the choice of a state depends on a variety of factors. It is a good idea to discuss your goals with an experienced business attorney.
Taxes
An LLC is a business entity that combines many of the characteristics of a corporation and also a partnership or sole proprietorship (depending on how many owners are involved). Owners are called members and are taxed at their personal income tax rates.
Depending on your company’s specific needs, it may be more beneficial to incorporate in Delaware instead of Florida. Specifically, Delaware offers stronger asset protection for LLCs than Florida does.
For example, a creditor can only seize an LLC’s assets through a charging order in Delaware. In contrast, creditors can file a personal lawsuit against an LLC’s owner in Florida and have their claims heard by a judge.
It is important to consider all of the factors that come into play when deciding where to incorporate. This decision is not a trivial one and will have lasting impacts on your company.
Asset protection
Whether you’re a new entrepreneur or a seasoned business owner, incorporating an LLC is one of the best ways to structure your company. There are many advantages to doing so, including flexibility and tax benefits.
If asset protection is your top priority, Delaware might be the better choice for you. In Delaware, LLCs are considered separate entities and protected against creditors.
The state of Delaware is home to the Court of Chancery, a well-respected non-trial court that focuses on commercial litigation and real estate matters. Unlike other courts, it relies on case law instead of public opinion when deciding legal issues.
It also offers exceptional privacy protection. You’re not required to list your member names and addresses in your filings, so you can run your business anonymously if desired.
Flexibility
If you are looking for a more flexible entity to use for your business, then an LLC is one of the best choices. Both Delaware and Florida have flexible laws that allow you to create a structure that fits your company’s needs.
Both states allow you to choose a tax treatment for your LLC. Single-member LLCs can be taxed as a disregarded entity or partnership, while multi-member LLCs can choose to be treated as an S corporation.
This flexibility allows you to minimize your taxes and avoid double taxation on your income. You also get to decide how much money you want to pay in franchise and sales taxes.
In addition to minimizing your taxes, an LLC provides reliable asset protection for its owners. Creditors cannot pursue the owners’ assets like they can with a sole proprietorship.
Cost
Florida and Delaware are both business-friendly states that offer low taxes and easy formation procedures. They also have flexible laws that allow LLCs to tailor their structure to fit their needs.
Both states do not require a minimum capital requirement for an LLC, which means you can form an LLC with whatever amount you have in hand. This is great for entrepreneurship because it promotes the growth of start-ups at every stage of development.
In addition, both states have a strong asset protection law that protects LLC owners’ assets from creditors. However, Delaware offers stronger asset protection than Florida.
In addition, Florida requires businesses to hire a registered agent that can accept service of process on their behalf and provide a street address within the state of incorporation. This is a cost that can be high.