Delaware LLC Formation: Myth Busted
Brad Smith • Oct 25, 2019
A common misconception we’ve noticed over the years is that many people think forming a business in Delaware is cheaper than doing so in other states, such as Illinois and Missouri.
In this post, we’ll dispel that rumor and reveal some of the hidden costs of doing business. Here are some misconceptions about Delaware LLC formation:
The Costs Of Registering A Delaware LLC
Registering a Delaware LLC used to be considerably less expensive than in other states. However, one by one, states are lowering their fees.
As of 2016, Delaware charges $90 to file a certificate of formation. By comparison, Missouri
charges $50 to file the certificates online (and $105 by paper). Illinois
recently reduced this fee from $500 to $150.
Table 1: Comparing LLC Registration Fees By State (Non-Exhaustive)
State
Fee (Paper)
Fee (Online)
Delaware
$90
N/A
Missouri
$105
$50
Illinois
$150
N/A
As you can see, LLC registration fees are relatively in line with each other for these states.
LLC University has a complete listing of LLC fees for each state.
Where Costs Start To Add Up
Costs begin to add up when you register your organization in several states.
For example, you can set up your organization in Delaware and pay the Delaware fees, but you also still have to register your company in states in which your company does business, such as Illinois or Missouri.
In other words, if you do business in a state and are physically working out of that state, you still have to pay the taxes and registration fees in the states in which you are located.
Larger companies, who, for example, may launch an IPO and sell stock would likely need to set up their organization in Delaware.
Smaller companies, though—particularly mom-and-pop stores doing less than $5 million in revenue—should probably not register in Delaware. There’s no need to pay the additional fees.
Another area that adds up is legal fees.
If you’re sued, you are not a local company. You run the risk of someone filing a lawsuit in Delaware that you have to defend. Juries typically don’t want to see local businesses go under from lawsuits.
On the other hand, if you file a lawsuit, you might have to go to federal court or file your lawsuit in Delaware. In this scenario, you have no connections to lawyers and you must travel to Delaware to prosecute or defend a lawsuit compared to if you were doing the same in your local area.
In brief, the cost of forming a business in Delaware is more nuanced than saying that it simply has a lower registration fee. The costs of doing business in Delaware, especially for small- to medium-sized businesses, raise a number of other concerns that business owners should evaluate.
If you’ve thought about whether to establish your business in Delaware, but you aren’t sure of all the details, contact us today. We’d be happy to help provide the best advice for your company.
Interested in Working With Us?
If you need help with estate planning or any other legal concerns, we are here for you. Don't hesitate to contact our firm directly for assistance. Our dedicated team is ready to provide support and guidance to you and your loved ones during important life transitions.
Whether you're ready to schedule a strategy session to discuss your specific needs or if you're interested in exploring our wide range of complimentary guides and additional resources, we encourage you to get in touch with us.
With licensed attorneys and offices located in both Illinois and Missouri, we are well-equipped to serve clients in these regions. Reach out to us today and let us leverage our expertise and care to guide you through the legal process.
Helpful Guides
Begin your journey by taking advantage of our collection of complimentary guides.
Online Documents
Simple & Convenient, Cost Effective, Attorney Reviewed Documents.
Recent Posts
As we journey through life, one inevitable truth is the process of aging. In the United States, this reality brings about a myriad of legal considerations and challenges, prompting individuals and families to seek guidance in the realm of elder law. From estate planning to long-term care, understanding the intricacies of elder law can greatly ease the burden of navigating the complexities of aging. In this blog, we explore some frequently asked questions about elder law and delve into the landscape of aging in America.
As we journey through life, one inevitable truth is the process of aging. In the United States, this reality brings about a myriad of legal considerations and challenges, prompting individuals and families to seek guidance in the realm of elder law. From estate planning to long-term care, understanding the intricacies of elder law can greatly ease the burden of navigating the complexities of aging. In this blog, we explore some frequently asked questions about elder law and delve into the landscape of aging in America.
Many people overlook the importance of ongoing estate planning, assuming a will or trust is adequate. However, this passive approach can bring costly consequences for both finances and family in the future.
Are you feeling overwhelmed by the complexities of Medicaid in Illinois and Missouri? You're not alone. Many people find themselves in a maze of regulations, paperwork, and confusing terminology when trying to access this vital healthcare program. In this blog post, we'll break down some of the key aspects of Medicaid and discuss why seeking help is essential for ensuring you get the benefits you deserve.
When it comes to estate planning, delaying action can have far-reaching consequences that extend well beyond our lifetimes.
If you don't have a plan in place for your assets, the state will step in to decide how they are distributed. While some may trust the state's judgment, it's important to recognize that it doesn't understand your individual circumstances, and the process can be both time-consuming and expensive.
Click HERE To View April Newsletter
Submit Your Confidential Request
Click the button & fill out the form so we can better understand how we can help.