6 Reasons Why You Shouldn’t Form an LLC in Delaware (for U.S. residents)

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NOTE: If you live in Delaware, or do business in the state, then this information does not apply to you. You should form an LLC in Delaware. This information does also not apply to you if you are a non-US citizen or a non-US resident.
If you don’t live in Delaware or do business in Delaware, and you’ve heard that you should form an LLC in Delaware, let me save you a lot of money and headaches: you should not form an LLC in Delaware. The disadvantages of forming an LLC in Delaware far outweigh any “advantages” you may have read.
Domestic LLC vs. Foreign LLC: If you form an LLC in the state where you reside (aka your “home state”), this is known as a Domestic LLC. If you form an LLC outside of your home state (for example: Delaware), you’ll be required to register that out-of-state Delaware LLC as a Foreign LLC in your home state.
You now have 2 LLCs (one in Delaware and one in your home state), you have to pay 2 State filing fees, you will be required to pay for a Registered Agent in order to use their address for your Delaware LLC, and you have to pay 2 Annual Report fees.
This defeats the whole purpose and ends up being a big headache.
Delaware is better suited for publicly traded companies that sell shares on the stock market (like Microsoft, Apple, IBM, Chase, Coca-Cola), or companies that have multiple investors or need to raise venture capital.
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This information is provided for educational purposes only and in no way constitutes legal, tax, or financial advice. For legal, tax, or financial advice specific to your business needs, we encourage you to consult with a licensed attorney and/or CPA in your state.
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