Comparing LLCs in Delaware and Florida

Have you narrowed down your new limited liability company’s future location to be in either Delaware or Florida? If so, you’re probably looking at the many pros and cons of starting an LLC in each state. Fortunately, we’ve put together an article that collects this info and lays it out for you so you can make a clearer and more informed decision. Check it out below!

Delaware LLC Pros and Cons

It’s always best to weigh the pros and cons of any decision, especially one that involves your future business. Here are some pros and cons of starting an LLC in Delaware. 

Pros of Starting a Delaware LLC

Let’s begin by going over some pros of starting a Delaware LLC.

Liability Protection

LLCs are known for their liability protection, and it’s no different for an LLC in Delaware. This means that the owner’s personal assets will be safe if the company is ever sued or investigated by creditors. However, there are some instances where this protection may not apply, so reach out to a business attorney or other professional for more information. 

Rules and Structure Can be Customized 

A Delaware LLC’s rules and structure can be organized and shaped in its Operating Agreement. This means that the owner(s) have the freedom to decide how the LLC will operate as long as it’s within the law. 

Privacy for Owners

An LLC in Delaware also grants privacy for its owners. The owners aren’t required to disclose specific information to the state. However, this doesn’t mean that the LLC can operate outside of the law.  

Pass-Through Taxation

LLCs are a very popular business type because they’re “pass-through” entities. This means that the company doesn’t pay federal or state income taxes and these obligations are passed down to the members instead. 

It Won’t Dissolve if an Owner Dies, Leaves, Etc.

Unless otherwise stated in the LLC’s agreement, if an owner dies, leaves, is expelled, etc., the company will not be dissolved and can continue operating under new management. 

Cons of Starting a Delaware LLC

Consider these cons if you’re planning to start an LLC in Delaware. 

Potentially Higher Filing Fees

Delaware incurs higher filing fees. This includes fees for drafting Articles of Organization and reserving a business name, for example. Although the former is required, the latter isn’t, so some fees may not apply to you. 

A Business License is Required

Delaware requires LLCs to have a business license. Although this is a good thing and many LLC owners won’t be bothered by it, it will, however, incur fees. Additional licenses may also be required depending on which industry you’re in, what you sell/offer, and where the LLC is located in the state.  

Operating Agreements Are Required

A Delaware LLC is required to draft an Operating Agreement. Although this is also a good thing, drafting this document will require some time and maybe even some outside help. 

Florida LLC Pros and Cons

As we did with a Delaware LLC, we’ll be going over the pros and cons of creating an LLC in Florida below.

Pros of Starting a Florida LLC

Let’s go over the pros of starting an LLC in Florida first. We’d like to point out that many of the pros of starting/owning a Delaware LLC also apply to Florida LLCs. 

Liability Protection

Like a Delaware LLC, a Florida LLC will also have the luxury of enjoying limited liability protection. Keep in mind that you should reach out to a business attorney nonetheless to learn exactly how liability protection for an LLC works in Florida. 

Pass-Through Taxation

An LLC in Florida can also enjoy pass-through taxation. This is a great benefit for first-time entrepreneurs who will undoubtedly worry about money during the first few years of their business’s existence. 

Credibility 

An LLC is known for being a relatively credible business entity. This can be really beneficial since it’ll show customers and specific institutions (like banks) that you’re the real deal. 

Ownership Flexibility

Florida offers LLC owners a high level of flexibility. You can structure the management and ownership of the LLC however you see fit as long as it’s within the law. 

No Operating Agreement Required

Unlike Delaware, Florida does not require LLCs to draft an Operating Agreement. However, this should be strongly considered since these agreements offer an extra level of protection to the company. 

Cons of a Florida LLC

Now, let’s go over a few cons of starting/owning an LLC in Florida.

A Business License May be Required

Florida does not issue a state-wide business license. Instead, they’re issued at the county level (and called a “business tax receipt”) for almost all businesses (including LLCs), which will incur a fee. Keep in mind, though, that not all counties require this, so check with yours. You may also need to apply for state licenses and/or permits depending on your industry, location, etc. 

It May Dissolve if an Owner Dies, Leaves, Etc.

If an owner dies, leaves, is expelled, etc., then the LLC might be dissolved unless such an instance is specifically addressed in the operating agreement. Be sure and speak with a professional about this topic. 

Taxes: Delaware LLC vs. Florida LLC

Tax benefits are one of the main reasons entrepreneurs choose the LLC structure. Let’s look at these benefits across both states.

Delaware

• Delaware has a flat annual franchise tax of $300. 
• Delaware has no sales tax. 

Florida

• If an LLC is incorporated, it must pay state income taxes at a rate of up to 5.5%.
• Florida has a sales tax rate of 6%.

As always, we encourage you to reach out to a tax professional if you require more information about taxes for LLCs, or in general, in Delaware and Florida. 

Forming an LLC in Delaware and Florida

Forming an LLC in Delaware and Florida will undoubtedly take some work, effort, time, and money. The great news is that you won’t have to do this alone. We offer many services to help you set up your LLC.

You should first get informed with each state’s LLC creation process. Here, you’ll find the article on starting an LLC in Delaware. And here, you’ll find an article about starting an LLC in Florida. 

Additionally, we offer these how-to articles for all 50 states and Washington, D.C.