As with most things in America, each state has different laws when it comes to business practice.
Florida and Delaware are both considered to be top competitors in the LLC contest, which is why many business owners are eager to register their businesses there. Each state has its pros and cons, depending on what you’re looking for.
In this article, we’ll be comparing the states of Delaware vs. Florida LLC to see which one might be the best option for your business. We’ll be discussing factors such as taxation, additional fees, privacy, and law. We’ve also included a table to help you compare two states more closely to each other.
Comparison Overview
| Conditions | Delaware | Florida |
|---|---|---|
| LLC Formation Fees | $90 | $100 (plus a $25 registered agent fee) |
| LLC Maintenance Fees | $300 annual business entity tax | $138.75 annual report |
| No annual report | x | |
| No franchise tax | x | |
| One-person corporation | x | x |
| Meetings held anywhere | x | x |
| No minimum capital requirements | x | x |
| Officers and members have privacy | x |
Delaware
Delaware has been known to be one of the best states to have an LLC. Over 66% of Fortune 500 companies are registered as LLCs in the state, making the argument for a Delaware license quite strong.
Part of what makes Delaware such a great state for LLCs is because of the advanced legal options available. Business owners’ personal interests are protected by two statutes: the Limited Liability Act and the Delaware General Corporation Law.
If your business’ legal dispute reaches a courtroom, you won’t be faced with a jury. Instead, a judge specializing in business law will preside over the case, making sure that all the correct procedures are being followed. These courtrooms regularly see legal disputes through, as more than 1,000 of these cases are processed each year.
Most states make business owners’ details a part of public records, but Delaware allows you to register your LLC without divulging information like your address or name. Bear in mind, however, that any filings made with the Delaware Division of Corporations will indeed form part of the public record.
Tax laws, which can often be a bit of a headache, are more lenient in Delaware. You also have the option of running a “series” incorporation, which means that you can have multiple businesses under one umbrella. However, you’ll have to pay an annual flat tax rate of $300.
Although it’s only a once-off cost, it’s worth noting that registering an LLC in Delaware costs $90, a much lower amount than what you would pay in most states. If you own an LLC in Delaware but don’t conduct your business there, you won’t be required to pay this fee. You don’t need to have a bank account in the state or have any meetings there, which is why so many people outside of Delaware register their LLCs there.
Florida
Florida is still relatively new in the LLC game, but that’s not to say that the Sunshine State isn’t a worthy competitor.
Having an LLC in Florida comes with a tax advantage, as these companies don’t need to abide by the state’s taxation laws. This means that you’ll have the freedom of choosing between being taxed as a corporation or a partnership.
In a partnership, each partner receives separate taxation for items applying to them specifically. According to the Taxation Foundation, Florida ranks fifth place as one of the most favorable tax climates for businesses.
Because LLCs are still relatively new in Florida, owners won’t have the advantage of the vast legal history and expertise available in Delaware. A state with a long legal history has many previous court cases that can be cited as examples.
Additionally, business owners have been spooked by a 2010 court case finding. In Shaun Olmstead, et. al, vs. Federal Trade Commission, the Florida Supreme Court found that a single-member Florida LLC owner can be forced to hand over their entire interest in the company to settle outstanding debts. This has resulted in hesitation regarding Florida LLCs, as some business owners are uncertain of how safe their assets really are.
As of 2018, starting up a Florida LLC requires a filing fee of $100. You’ll also need to pay $25 for a registered agent and $138.75 for an annual report. If you submit your annual report after the 1st of May, you’ll need to pay a filing fee of $538.75. These costs can all amount to an uncomfortable number if you don’t prepare for them.
Conclusion
As you can see, both Delaware and Florida are good options for LLCs. Each one comes with its own factors that you need to keep in mind.
Businesses are always going to carry risks, and that’s why you need to think carefully with each decision you make. LLCs have long been a way for owners to protect their personal assets, but the topic of which state allows the best LLC benefits remains a hotly debated one.
While Delaware may have a better legal system in place for LLCs, Florida offers great tax benefits. While you don’t need to pay franchise tax in Florida, Delaware offers greater privacy for business owners. These are only some of the factors you need to keep in mind when making your decision.
In the end, there is truly no right or wrong option. Base your decision on detailed information on all the states you’re considering for your LLC. Consult lawyers and other experts on the best path to take. Finally, remember that your business is unique and will face challenges that aren’t necessarily that important to others.