Are you considering starting a business in either Delaware or Florida? One of the first steps is deciding which type of legal entity to form.
Limited Liability Companies (LLCs) are becoming an increasingly popular choice due to their flexibility and liability protection benefits.
Here we will provide a side-by-side comparison of Delaware vs. Florida LLCs, highlighting the key differences in company formation, operating agreements, management structures, taxes, and asset protection.
Delaware vs. Florida LLC
Delaware offers a highly customizable legal framework, while Florida provides a simpler, straightforward structure for LLCs.
Delaware’s appeal lies in its lack of state income tax for out-of-state operations, whereas Florida doesn’t impose a state income tax on LLCs, making it tax-friendly.
Delaware’s benefits come with higher annual fees, whereas Florida generally has lower ongoing costs and simplified reporting requirements for LLC maintenance.
|Forming a Delaware LLC involves a minimum filing fee of $90, which can vary based on the number of authorized shares.
|Establishing a Florida LLC requires a filing fee of $125 for online filing, ensuring the legal formation of the entity.
|Delaware imposes an annual franchise tax that varies depending on the number of authorized shares, with a minimum payment of $300.
|Florida LLCs have an annual report filing requirement along with a minimum annual filing fee of $138.75.
|Its annual franchise tax serves as the annual report, requiring payment instead of a separate filing.
|It must submit an annual report and pay a filing fee of $138.75 to maintain its active status.
|Delaware has a graduated state individual income tax, with rates ranging from 2.20 percent to 6.60 percent.
|Florida does not impose a personal income tax at the state level, offering potential tax benefits to LLC members.
|It does not impose a state-level sales tax, affecting how LLCs handle sales transactions within the state.
|It has a state sales tax rate of 6.00%, which applies to goods and services sold by LLCs in the state.
|Delaware offers strong charging order protection, limiting creditors to seeking financial remedies without seizing LLC assets.
|Florida provides charging order protection, aligning with the protective measures offered in many other states to safeguard LLC assets.
Cost Breakdown of The Two
Formation Fee: Typically around $90 to $200.
Annual Franchise Tax: Delaware imposes an annual franchise tax that varies depending on the number of authorized shares, with a minimum payment of $300.
Registered Agent Fee: Approximately $100 to $300 per year.
Formation Fee: Around $125.
Annual Report Fee: Approximately $138.75. This fee is required each year to maintain the LLC’s active status.
Registered Agent Fee: Variable, around $50 to $150 per year.
- Delaware LLC: Cost Breakdown, Pros and Cons, Requirements
- Florida LLC: Cost Breakdown, Pros and Cons, Requirements
Similarities Between Delaware and Florida LLC
Both Delaware and Florida offer the key benefit of limited liability protection to members (owners) of an LLC.
This means that the personal assets of members are generally shielded from the company’s debts and liabilities.
In both states, an LLC is recognized as a separate legal entity distinct from its owners.
This separation allows the LLC to enter into contracts, own property, and engage in legal actions in its own name.
Both states allow LLCs to have flexible ownership structures, with the ability to have single-member LLCs (owned by one individual) or multi-member LLCs.
While not required by law, both states allow LLCs to establish an operating agreement.
This document outlines the internal workings of the LLC, including ownership percentages, management roles, and operating procedures.
Both states require LLCs to submit annual reports to maintain their active status.
These reports typically include basic company information and, in some cases, a small fee.
Both Delaware and Florida require LLCs to designate a registered agent, who is responsible for receiving legal and official documents on behalf of the LLC.
It is often associated with more complex legal structures, both states allow LLCs to enjoy a level of legal simplicity and flexibility in terms of operations and management.
Steps to Form LLC in Delaware
Choose a unique name that meets Delaware requirements.
File the Certificate of Formation with the Division of Corporations.
Designate a registered agent with a Delaware address.
Create an operating agreement outlining management.
Obtain an EIN from the IRS for taxes and banking.
File annual franchise tax reports and fees.
Follow foreign qualification rules if operating outside Delaware.
Maintain compliance with state requirements and records.
Steps to Form LLC in Florida
Choose a unique name that complies with Florida naming rules.
File Articles of Organization with the Florida Division of Corporations.
Appoint a registered agent with a physical Florida address.
Create an operating agreement outlining internal management.
Obtain an Employer Identification Number (EIN) from the IRS.
File the annual report and pay the associated fee to maintain active status.
Understand and fulfill any local county or city requirements.
Comply with ongoing state regulations and recordkeeping.
Feature Comparisons Between Delaware LLC vs. Florida LLC
Legal Flexibility: It offers a high degree of customization through its well-established legal framework, making it attractive for complex business structures.
Court of Chancery: Its Court of Chancery specializes in business disputes, providing a predictable and experienced legal system.
Tax Advantages: Delaware doesn’t impose state income tax on out-of-state LLCs, making it beneficial for businesses operating outside Delaware.
Privacy: It allows members’ names to remain confidential in public documents.
Simplicity: Florida provides a straightforward LLC formation process and uncomplicated ongoing compliance, making it suitable for smaller businesses.
No State Income Tax: Florida doesn’t have state income tax at the corporate level, which can be advantageous for both in-state and out-of-state businesses.
Affordability: Florida generally has lower formation and ongoing costs compared to Delaware.
Local Business Environment: Florida’s robust local economy and diverse industries make it an attractive option for businesses catering to the local market.
Delaware has a longstanding reputation for being business-friendly, with a well-established legal system that is often favored by larger corporations due to its flexibility and predictability.
It has a robust body of corporate case law that provides clarity and consistency in business disputes.
Delaware allows for greater privacy, as members’ names can be kept confidential in public documents.
It has higher initial and ongoing costs, making it more suitable for well-established businesses that can afford these expenses.
Florida boasts a diverse and vibrant economy, catering to various industries including tourism, technology, real estate, and more.
Florida’s lack of state income tax is appealing to businesses seeking to minimize their tax burden.
Florida generally offers lower formation and ongoing costs compared to Delaware, making it accessible for startups and small businesses.
Florida’s business environment can be particularly advantageous for companies targeting the local market and those that thrive in the state’s economic sectors.
- 30 Best Business Ideas in Delaware
- 26 Best Business Ideas in Florida
- 20 Reasons and Scenarios When a Foreign LLC is Useful
Delaware vs. Florida Taxes
State Income Tax: Delaware has a progressive state income tax ranging from 2.20% to 6.6% for individuals.
Corporate Income Tax: Delaware imposes a flat corporate income tax rate of 8.7% on corporations.
Franchise Tax: For corporations incorporated in Delaware, the franchise tax is calculated based on the company’s authorized shares and par value capital. The minimum tax is $175.
Sales Tax: Delaware does not have a state sales tax, which can be beneficial for certain businesses.
State Income Tax: Florida does not impose a state income tax on individuals, which can be advantageous for residents and businesses.
Corporate Income Tax: Florida has a 5.50 percent corporate income tax.
Sales Tax: Florida has a state sales tax rate of 6% on the sale of most goods, with some counties adding additional local sales taxes. The total rate can vary.
Flexibility in Rules and Regulations
Customizable Operating Agreements
Delaware is known for its flexible legal framework, allowing businesses to create highly customized operating agreements that suit their specific needs.
Predictable Case Law
Delaware’s extensive body of corporate case law offers guidance and predictability for businesses.
The Court of Chancery, which specializes in business disputes, ensures consistent interpretation of laws.
Delaware permits members’ names to remain confidential in public documents, providing an extra layer of privacy.
Simplified Operating Procedures
Florida offers straightforward rules for LLC formation and operation, which can be appealing for smaller businesses or those looking for a simpler legal structure.
Minimal State Regulations
Florida’s business regulations are often less intricate than those in Delaware, allowing for a streamlined approach to business management.
Ease of Compliance
The minimal bureaucracy in Florida can make it easier for businesses to maintain compliance with state requirements.