Delaware is a well known incorporation haven due to allowing anonymous LLCs and supportive business regulations. This fame is partly well deserved as it's home to many Fortune 500 companies; however, what's best for large corporations is not necessarily the best for a small business, or someone looking to establish an LLC. Most of the focus and benefits are geared toward large corporations with numerous shareholders.
We generally advise forming an LLC in Wyoming or New Mexico for better asset protection, the same privacy and lower fees. For example, New Mexico LLCs are anonymous and have no annual filing fee, whereas Wyoming has superior asset protection laws and a $50 annual report. Nevada has excellent asset protection laws as well, but charges several hundred dollars each year.
It's important to note not every Florida resident can form an LLC in another state and operate their business in Florida. Online companies, holding companies and other location independent industries have flexibility in where they establish their company.
If you are considered to be doing business in Florida, for example if you have W2 employees, then you will need to form a Florida LLC. In these cases, we advise the LLC be owned by a holding company in either Wyoming or New Mexico. This double LLC setup provides anonymity in Florida along with additional asset protection.
Forming Your LLC in Delaware
Delaware enjoys corporate-friendly laws and a Court of Chancery. For this reason, Delaware corporations and LLCs tend to be more attractive to investors that are raising capital or looking to go public.
Apart from their corporate tradition, there is not much to separate Delaware from other popular LLC formation locations. In fact, it tends to be a more expensive choice when compared to other states. Delaware also requires companies to pay a franchise tax, which can outweigh the similar taxes and fees of other states. While large companies don't notice these fees, small companies do.
In short, small businesses are unable to benefit from the corporate-friendly laws to the same degree and the largest difference they will experience are paying higher fees.
Forming Your LLC in Florida
The state of Florida is also considered a very business-friendly state. In comparison to Delaware, however, Florida does not impose a franchise tax. This results in relatively low annual fees in Florida, as the only renewal fee the state requires is $138 payed to Sunbiz. In addition to this aspect, there are many advantages to a Florida LLC.
There are good reasons to form an anonymous LLC. This is largely because nothing good can come from posting your assets and personal information online. If you simple form a single LLC in Florida, then you are required to list the owners name which can then easily be searched by creditors, people who want to do you harm, or those who are just curious about where you live and what you own.
The work around is to form an anonymous LLC in New Mexico or Wyoming. You may then either operate using this LLC, or use it as the owner of record for the Florida company. Then, your name does not appear anywhere, and if the Florida company is searched on Sunbiz only the anonymous LLC's information is listed. any person searching for your Florida company will see the name of a separate LLC that you have formed anonymously in a different state. Consult with our Florida LLC formation service to ensure this process is carried out correctly.
Limited liability companies are taxed as pass-through entities by default. If there is one owner, then it's treated as a disregarded entity, and if there's more than one, then the company will be taxed as a partnership. In each case, the income flows onto your personal return and the company does not file its own as a corporation would. This also avoids the dreaded double taxation of a corporation.
Given Florida has no state income tax, you will not pay more or less in income tax by setting up the company in another state. Further, having a holding company and subsidiary will not affect your taxes either. In each case the income flows from the companies and onto the owner's return.
Flexible Management & Organization
Not only are LLCs simple to form in the state of Florida, they also provide greater flexibility in management style compared to that of a corporation. With an LLC, members are allowed to define and implore the management structure as they see fit. Additionally, they can decide how profits are to be distributed among members.
Whereas LLCs are easy to form an manage, Corporations are more complex. They have shareholders, officers and a board of directors. These roles and responsibilities are defined by the Organizational Minutes, Share Subscription Agreement and Bylaws. These documents are significantly more complex, and thus difficult to understand and draft, when compared to an LLC's operating agreement. For that reason, we generally advise clients form a limited liability company rather than a corporation.