Delaware LLC: probably not for you, and here's the maths
More than a million companies are registered in Delaware and the advice to join them is everywhere. It is good advice for one kind of company — a startup about to raise venture capital, which forms a Delaware C-corporation, not an LLC. For a business that operates somewhere else, a Delaware LLC does not replace the home state's obligations. It adds a second set on top: another filing, a compulsory Delaware agent, and $400 a year. Here is that arithmetic for your state, and the four cases where Delaware is genuinely right.
The Delaware story is true, and it is about corporations. Delaware has the Court of Chancery, a business court with no juries and four centuries of judges who do nothing but company law, and a body of precedent so deep that a lawyer can usually tell you how a shareholder dispute will come out before it starts. Institutional investors want that certainty, so venture funds ask for a Delaware C-corporation as a matter of routine, and every list of "companies incorporated in Delaware" is full of names you know.
None of that describes a two-person consultancy, a café, a contractor or a shop. Those form LLCs, not corporations. They have no outside shareholders to fall out with, so Chancery precedent has nothing to bite on. And crucially, forming in Delaware does not move the business to Delaware. The bakery is still in Ohio, so Ohio still requires it to be registered in Ohio, still taxes its profit as the owner's income, and still hears any lawsuit a customer brings.
The two routes, side by side
Pick the state the business is actually run from. The left column is forming there and being your own registered agent. The right column is Delaware, plus registering that Delaware LLC in your home state as a foreign LLC — which is what the law requires once you do business there — plus everything the home state charges anyway. Both columns use each state's published fee schedule. The Delaware agent and the foreign registration fee are yours to change.
- California LLC · 5 years
- $4,130 $890 to form, then $810 a year · you can be your own registered agent
- Delaware LLC + CA registration
- $6,340 $1,100 to form both, then $1,310 a year — Delaware's $400 tax, a Delaware agent, and everything California charges anyway
- Delaware costs you
- +$2,210 Over 5 years, for no change in what you owe in tax and no change in where you can be sued. Put in any agent price you can actually buy one for — the difference stays positive, because nothing in the Delaware column replaces anything in the CA column.
State fees only, from the schedules in this site's dataset. It excludes federal and state income tax — which is unchanged, because the profit is taxed where you live — a formation service if you use one, and the accountant who now has two states to think about. Delaware's annual tax is $400 for tax year 2026 onwards, due 1 June, with a $200 penalty and 1.5% monthly interest if it is late. File at Delaware Division of Corporations or California Secretary of State — bizfile Online.
Why it is always more, never less
Four things stack up, and none of them can be avoided by choosing more carefully.
- A registered agent you must pay for
- Delaware law requires every entity to keep a registered agent with a Delaware street address. Unless you live in Delaware, you cannot be your own — so this is a bill every year, forever, in a state where in most others the same job is free.
- $400 a year, flat
- Delaware's annual LLC tax rose from $300 to $400 for tax year 2026 under HB 400. It is due 1 June, it is not prorated, and there is no report to file with it. Late costs $200 plus 1.5% interest a month.
- A second registration at home
- Doing business in your own state with an out-of-state LLC means filing as a foreign LLC there — a fee, then that state's annual report and any entity tax, exactly as if you had formed there. Texas charges $750 for this; several states charge more than their domestic fee.
- Two sets of paperwork, permanently
- Two states' deadlines, two agents, two good-standing records, and an accountant who now has to think about both. The cash cost is on the tool above; this one is measured in the mornings you spend on it.
And the thing people most often hope for isn't there. Delaware does not tax the income of an LLC that does no business in Delaware — but you do not live in Delaware, and your state taxes your income wherever the LLC was formed. A single-member LLC is disregarded for tax: the profit lands on your personal return in your own state at your own state's rates. There is no version of this where forming in Delaware lowers an income tax bill.
The four claims, checked
| The claim | What's actually so |
|---|---|
| “Delaware is private — your name isn't public.” | Partly true. Delaware's Certificate of Formation doesn't list members or managers, and there is no annual report to update. But your registered agent knows who you are, banks and Stripe require beneficial ownership, and the moment you register the LLC in your home state that state's disclosure rules apply. New Mexico and Wyoming are cheaper if privacy is genuinely the goal. |
| “Delaware has the best asset protection.” | It was a leader; it is no longer alone. Charging-order protection — the rule that a creditor of a member can take distributions but cannot seize the company — is now the norm in most states, and a handful are stronger than Delaware on single-member LLCs specifically. Meanwhile a Delaware LLC operating in your state is judged by your state's courts. |
| “The Court of Chancery protects you.” | Chancery is superb and almost certainly irrelevant to you. It hears disputes about the internal affairs of the entity — shareholders against directors, members against each other. A single-member LLC has no internal affairs to litigate, and a customer suing you over a job sues where the job was done. |
| “Investors will only fund a Delaware company.” | Broadly true, and it's about the wrong entity. Venture investors want a Delaware C-corporation with common and preferred stock and an option pool — not an LLC, which they generally can't hold at all. If you get to that conversation, converting a home-state LLC into a Delaware C-corp is a standard, well-priced piece of legal work. Forming a Delaware LLC now saves none of it. |
When Delaware is the right answer
There are real cases, and they are narrower than the internet suggests.
You are raising venture capital soon, and you want the entity in place. Then you want a Delaware C-corporation, not an LLC, and you want a startup lawyer setting it up alongside vesting, an option pool and 83(b) elections. The $400 is a rounding error against that.
A multi-member LLC with a negotiated operating agreement and real money at stake. Two or more owners with unequal contributions, drag-along rights, buy-out formulas — Delaware's LLC Act is the most flexible in the country and Chancery has actually construed most of the clauses your lawyer will draft. If a dispute would be worth six figures, the certainty is worth buying.
A holding company, a fund, or an entity that does business nowhere. If the LLC holds intellectual property, other entities or investments, and has no employees, premises or customers in any state, there is no home state to register in — so the second set of costs doesn't arise and Delaware's law is a genuine benefit.
You are outside the United States with no US presence. Same logic. No home state means no foreign registration, and Delaware's agents and banks are used to non-resident owners. Wyoming and New Mexico are cheaper and equally workable; Delaware is chosen for familiarity abroad, which is a real if unglamorous advantage.
If none of those is you — you live somewhere, you work somewhere, customers find you somewhere — form where you are. The hub page has the six steps and every state's fees.
If you already formed in Delaware and shouldn't have
Common, fixable, and cheaper to deal with now than at the end of the year. There are two honest routes.
Register it at home and keep it. File as a foreign LLC in the state you actually operate in, pay whatever that state charges, and accept the Delaware agent and $400 as an annual cost. This is the low-effort option and it is fine if the business is small and you would rather not touch it. If you have been trading unregistered for a while, ask about back fees — some states charge per year of delinquency, and Texas charges its full $750 registration fee for each one.
Convert or domesticate it. Most states now allow a Delaware LLC to be converted into one of theirs, keeping the entity's history, its EIN and its contracts, after which you cancel the Delaware registration. That means a filing at home, then a Delaware Certificate of Cancellation — about $220 in state fees — and Delaware will not accept the cancellation until every franchise tax is paid, including the full $400 for the current year, because it is not prorated. So cancel early in the year rather than in December, and check your home state offers conversion before you start.
Common questions
Is it illegal to form a Delaware LLC if I live somewhere else?
No, it is perfectly legal. What is not optional is registering that Delaware LLC as a foreign LLC in the state where you actually do business, and paying that state's fees and taxes. The problem with a Delaware LLC for a local business is cost and duplication, not legality.
Will a Delaware LLC lower my taxes?
No. Delaware doesn't tax income an LLC earns outside Delaware, but a single-member LLC is disregarded for tax purposes, so the profit is taxed on your personal return in the state where you live, at that state's rates, regardless of where the LLC was formed. The $400 annual Delaware tax is a cost added on top.
How much does a Delaware LLC really cost per year?
$400 in annual tax from tax year 2026, due 1 June with no report attached, plus a registered agent with a Delaware address — typically $50 to $300 a year, and compulsory if you don't live there. If the business operates in another state, add that state's foreign registration fee once and its annual report and entity tax every year.
Does a Delaware LLC keep my name off public records?
The Certificate of Formation doesn't list members or managers, and Delaware LLCs file no annual report, so the state's own record is thin. But your registered agent holds your details, your bank and payment processor collect beneficial ownership, and registering in your home state usually puts your name on that state's record instead. If privacy is the actual goal, New Mexico and Wyoming cost less and disclose less.
Do investors require a Delaware entity?
Venture investors generally require a Delaware C-corporation — a corporation with stock, not an LLC, which most funds cannot hold for tax reasons. If you reach that stage, converting a home-state LLC into a Delaware C-corp is routine legal work priced in the low thousands. Forming a Delaware LLC today does not shorten that path.
What is the Delaware franchise tax for an LLC and when is it due?
A flat $400 a year for tax year 2026 onwards, up from $300, payable to the Division of Corporations by 1 June. There is no annual report for LLCs — just the payment. Late payment costs a $200 penalty plus 1.5% interest a month, and the tax is not prorated, so an LLC that exists on 1 January owes the full amount for that year.
I formed in Delaware and never registered at home. What now?
Register as a foreign LLC in your home state as soon as you can, and ask what back fees apply — several states charge per year of delinquency, and Texas charges its $750 registration fee again for each year. The alternative is converting the Delaware LLC into a home-state one and cancelling the Delaware registration, which keeps the EIN and the entity's history.
Is Wyoming or Nevada better than Delaware for a small business?
For a business that operates in a state where it isn't formed, all three have the same fundamental problem: a second registration, a second agent and a second set of annual fees. Wyoming is the cheapest of the three and Nevada the dearest at about $350 a year. But the only situation in which any of them beats your own state is a business with no physical presence anywhere.
Form where you are. Then get on with it.
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