If you have an active interest in starting your own business, you probably heard somewhere along the way that you should start your business in Delaware. This tiny state is home to so many of the country's Fortune 500 companies (well over 50 percent, in fact). The common refrain from many business coaches and advisors is to at least consider incorporating your business in Delaware due to its business-friendly laws and the relative ease of starting your business there. This post will consider the pros and cons of starting an LLC in Delaware; around 75 percent of businesses registered in Delaware are LLCs.
Starting Your LLC in New York
New York requires owners of an LLC to file articles of incorporation with the Secretary of State's office and pay a $200 filing fee. The next step is to publish the formation of your LLC with at least two newspapers within 120 days of filing the articles of incorporation. Once your LLC's information has been published for six weeks (which can cost over $1,000), you must submit the certificate of publication and a $50 fee to the Secretary of State's office. Finally, New York requires LLCs to have an operating agreement, which should be drafted and adopted within 90 days of formation.
Starting Your LLC in Delaware
Relative to New York, starting an LLC in Delaware is simpler and less expensive. You must simply file your certificate of formation and pay a $90 filing fee. If your LLC is registered in Delaware, you must pay a $300 annual fee prior to June 1 of each year. On the surface, that is all that is required of Delaware LLCs.
What are the Tradeoffs?
If you reside in Delaware and plan to do business within your home state, then you are fortunate to be living in, arguably, the most business-friendly state. However, if you live in New York and plan on doing business primarily in The Empire State, it might not be worth it to form your LLC in Delaware for a few reasons.
For example, you must file an Application for Authority ($250) and publish notice of your business in two newspapers as if you were actually filing your articles of incorporation in New York. Additionally, you must submit a form stating that your LLC is in good standing in Delaware and pay for a registered agent in Delaware (should your LLC ever be party to litigation). You will not have to file annual tax returns if your LLC does not conduct business in Delaware, but you will have to file Form IT-204 in New York regardless of where your LLC was formed. You will also have to pay the biennial LLC filing fee in New York as well as the annual LLC filing fee in Delaware.
We Can Help You Refine Your Goals
There are some benefits to forming your LLC in Delaware, but it might not be advantageous to do so if you will still be conducting the majority of your business in New York. Every situation is unique, though, which means you need the help of a qualified and experienced business attorney to identify your goals and prescribe the optimal path forward.
The Browne Firm is well-equipped to help you form your LLC and ensure that all documents and registrations are in line. We have introduced flat-fee billing, which can give you certainty when it comes to legal costs.