Are There Benefits to Forming an LLC in Delaware?

When forming an LLC, the general rule is to form your LLC in the state where you will be doing business. A few reasons are because if you are doing business in one state, but you form your entity in another state, then your company’s structure will be more complicated, it will be more expensive to maintain entities in different states, and the benefits to forming an entity in certain states, like tax benefits in Delaware, are often oversold. However, there is one unique benefit to Delaware LLCs, and that is privacy.

Forming an LLC in most states requires you to disclose information about the owner(s) of the LLC. In Delaware and a select few other states (Nevada, New Mexico, and Wyoming), you do not have to disclose information about the owner(s) of your LLC. If privacy is your goal, and you are willing to pay for additional annual fees, then it might be worth it to form your LLC in Delaware.

Other websites hype up Delaware LLCs by claiming Delaware has a better legal system for entities, better tax system, better asset protection, easier formation etc., but many of these purported benefits are overstated or may not be applicable to your LLC. There may be truth to some of these purported benefits, but are they worth the fees and complexity added to your LLC by forming in two states? Delaware may have courts that are more business oriented, but how does that specifically help your LLC? If your LLC is sued, there might be more LLC related caselaw, but is that worth paying increased fees? You will pay taxes in the state where your business is located, so if your business is not located in Delaware, then you will not benefit from Delaware’s tax laws.

It should be noted that if your LLC is not doing business in any states (e.g., your LLC is a holding company), then it does not matter where you form your entity. You would not have to pay annual fees in two states, just one. Thus, if privacy is your goal and your LLC is not doing business in another state, then there would not be too many downsides to forming your LLC in Delaware, Nevada, New Mexico, or Wyoming.

Overall, there are not too many genuine benefits to forming an LLC in Delaware. If privacy is your goal, then it might be worth it if you are willing to pay more annual fees each year.