A limited liability company, or LLC, is a flexible form of business association that combines the limited liability of a corporation with the pass-through federal taxation of a partnership. Forming a Delaware LLC is particularly attractive to business owners because of Delaware’s favorable tax rates. An individual does not need to be a Delaware resident or even be present in Delaware in order to form a Delaware LLC.
Anyone over the age of 18 may form a Delaware LLC. The Delaware LLC act does not contain any residency requirement, so a Florida resident or even a non-citizen may form a Delaware LLC. However, if you do not reside in Delaware, you will need to hire a Delaware registered agent. A Delaware registered agent is a business or individual that resides in Delaware that will receive service of process if your LLC is ever sued or subpoenaed.
Forming a Delaware LLC
Forming a Delaware LLC requires filing a document, called a Certificate of Formation, with the Delaware secretary of state. This can be done by mail, in person or online. The Certificate of Formation requires an organizer to provide the name of an LLC, the name and address of the LLC’s registered office, and the date of dissolution. As of 2010, the filing fee for a Certificate of Formation is $90.
For a Florida resident looking to form a business, there are a number of tax benefits to operating as a Delaware LLC. Delaware does not assess any sales tax, inventory tax or personal property tax. Delaware also allows exemptions for some investment structures. The corporate income tax in Delaware is also among the lowest in the country, at only 8.7 percent. Additionally, the license fees for many industries, such as manufacturers, retailers and LLCs engaged in farming are among the lowest in the country. The annual fee assessed on LLCs is only a flat fee of $250, as opposed to a percentage of LLC income.
While there are a number of significant tax advantages available for a Florida resident to form a Delaware LLC, there are also some financial drawbacks. If as a Florida resident you were to form a Delaware LLC with the intent of operating a business in Florida, you would need to register your Delaware LLC as a “foreign LLC” in Florida. As of 2010, the cost of filing as a foreign LLC in Florida is $100. Additionally, your Delaware LLC would need to pay a portion of any income derived from conducting business in Florida to the Florida Department of Revenue.