Can I Form an LLC in Delaware if I Live in Florida?

By Edward A. Haman, J.D.

Can I Form an LLC in Delaware if I Live in Florida?

By Edward A. Haman, J.D.

You may have heard that there are advantages to forming a limited liability company (LLC) in Delaware. You may be wondering whether you can, and if you should, form your LLC in Delaware if your business is located in Florida. Here are some factors to consider.

Man writing on sheet of paper in front of laptop

Who Can Form an LLC in Delaware?

Delaware allows anyone 18 years of age or older to form an LLC. You do not need to be a Delaware resident, a U.S. citizen, or conduct any business activities in Delaware. Even if you operate your business solely in Florida, you can still form a Delaware LLC.

Forming an LLC in Delaware

Organizing a Delaware LLC is simple. You need to file a cover memo and Certificate of Formation with the Delaware Division of Corporations, as well as pay a nominal filing fee and a registered agent fee (in addition to what you pay the registered agent). These forms are available on the Delaware Division of Corporations website.

Unless you will have a business office in Delaware, you will need to make arrangements for a registered agent located in Delaware. A registered agent is someone designated to receive legal papers if the LLC is sued or issued a subpoena. This typically involves hiring a registered agent in Delaware, where costs start at about $130 per year.

Benefits of a Delaware LLC

Of the many benefits claimed for forming a Delaware LLC, most only apply to companies that will do business either in Delaware or in more than one state. The most commonly cited benefits include the following.

Simple and Low-Cost Formation

Forming an LLC in Delaware is a simple process compared with that of many other states. However, Florida's process is no more complex and you will still need to register your business in Florida.

Taxation

A Delaware LLC not doing business in the state does not pay the Delaware state income tax or gross receipts tax. There is no Delaware tax on intangible property. LLC members who are not Delaware residents are not taxed on their share of profits. However, an LLC not doing business in Delaware does pay an annual franchise tax and an annual registered agent fee, which combined come to several hundred dollars.

Confidentiality and Asset Protection

A Delaware LLC is not required to disclose any information about the owners. Anyone seeking to sue you or to find out information about your financial situation will not be able to check the Delaware LLC records and determine your ownership interest. However, Florida registration requires the names and addresses of managers, and with a member-managed LLC, the names and addresses of members will be disclosed.

Specialized Business Court

For more than 200 years, the Delaware Court of Chancery has developed a large body of business law, most of which applies to LLCs. Disputes are resolved by judges with expertise in business law, not by unknowledgeable juries. This gives a great degree of predictability as to how disputes will be resolved.

Freedom of Contract

The structure and operation of an LLC are governed by the entity's operating agreement. Delaware law affords an LLC great freedom in how it sets up the operating agreement. However, Florida's restrictions on operating agreements are also minimal.

Series LLCs

Delaware offers the ability to create a series LLC, which allows a single LLC to have numerous divisions, known as series. Each series operates as a separate entity, with its own assets, members, and limitation of liability. However, only the parent LLC pays filing and annual fees. In the event of a lawsuit against one series, the assets of other series are protected. This is commonly used by rental property owners, who assign each property to its own series. However, Florida law does not provide for a series LLC, so it is unclear how the Florida law would treat a series LLC set up in Delaware, for both liability and tax purposes.

Disadvantages of a Delaware LLC

If you will only be operating your business in Florida, there are several disadvantages to organizing your LLC in Delaware. These should be considered before deciding where to form you business.

Dual Registration and Reporting

Your Delaware LLC will have to register as a foreign LLC in Florida. In addition to the Delaware formation costs, you will need to pay a nominal fee to register in Florida. Florida also requires what it calls a “Certificate of Existence," so you also need to pay a small fee to Delaware to obtain a Certificate of Good Standing. In addition to paying the annual Delaware franchise tax and registered agent fee, you need to file an annual report with Florida and pay a fee. Florida registration and annual report fees are the same for LLCs formed in Florida.

Dual Registered Agents

You will need a registered agent in both Delaware and Florida. If you maintain a regular business office in Florida, someone in that office can serve as the registered agent. Otherwise, you need to hire a Florida registered agent.

Dual Taxation

In addition to the annual Delaware franchise tax and registered agent fee, Florida taxes need to be paid, the same as if the LLC were formed in Florida.

Lawsuits

Unless you are operating a type of business with a high likelihood of being sued, you will probably never need to use the Delaware Court of Chancery. If you do end up in court, it can be a burden to have to travel to Delaware for court appearances.

A business operating solely in Florida can form an LLC in Delaware, but for most small LLCs operating solely in Florida, the disadvantages outweigh any possible advantages.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.