Everyone and their LinkedIn guru wants you to form a Delaware LLC. “It’s where all the big companies incorporate!” they shout. “Best business laws in the country!” they promise. “Tax advantages!” they lie.
Here’s the truth after helping 300+ entrepreneurs navigate the Delaware LLC maze: Unless you’re raising venture capital or actually doing business in Delaware, you’re about to waste $410 per year for zero benefit.
That’s right. Delaware charges $110 to form your LLC, then hits you with a $300 annual franchise tax that makes other states look like bargain bins. And if you don’t live in Delaware? Add another state’s fees when you register as a foreign LLC where you actually operate.
But sometimes—just sometimes—Delaware is exactly right. Let me show you when Delaware makes sense, when it’s a expensive mistake, and how to form your LLC there if you’re one of the few who actually should.
The Delaware LLC Reality Check
What Delaware Actually Offers
- Chancery Court: Specialized business court with 230+ years of precedent
- Series LLCs: Create sub-LLCs under one umbrella (complex but powerful)
- Flexible Operating Agreements: Maximum freedom in structuring your business
- Privacy: Members/managers not listed in formation documents
- Speed: Same-day formation available (for a price)
What Delaware Actually Costs
- Formation: $110 (middle of the pack)
- Annual Franchise Tax: $300 (one of the highest)
- Registered Agent: $50-300/year (required, you probably don’t live there)
- Foreign LLC Registration: $100-500 in your home state
- Total First Year: $560-1,210 (for most out-of-state founders)
Who Should Actually Form a Delaware LLC
Scenario 1: You Live or Work in Delaware
Congratulations, you’re in the 0.3% of Americans who actually live in Delaware. Form your LLC there. Case closed.
Scenario 2: You’re Raising Venture Capital
VCs love Delaware because they understand it. Their lawyers understand it. The precedent is clear. If you’re building the next unicorn, Delaware it is.
Scenario 3: You Have Complex Ownership Structures
Multiple classes of membership interests? Complicated profit distributions? Unusual voting arrangements? Delaware’s flexibility shines here.
Scenario 4: You’re Building to Sell
Planning an exit in 3-5 years? Buyers prefer Delaware entities. The premium you’ll pay now saves headaches during due diligence.
Scenario 5: Real Estate Investment with Series LLC
Own 10+ properties? Delaware’s Series LLC lets you isolate each property’s liability under one master LLC. Brilliant for sophisticated investors.
Who’s Wasting Money on a Delaware LLC
The Online Business Owner in Ohio
You’re dropshipping from your Columbus apartment. Delaware offers zero advantages. You’ll pay Delaware $300/year plus Ohio foreign LLC fees. Total waste.
The Consultant in California
Your clients are in California. You work from California. Delaware won’t save you from California taxes. You’re just doubling your paperwork.
The “I Heard Delaware is Best” Crowd
Your buddy’s cousin’s mentor said Delaware is where real businesses incorporate. They’re confusing C-Corps with LLCs. Different game entirely.
The Tax Avoider
Think Delaware will save you taxes? Wrong. You pay taxes where you do business, not where you form your LLC. Delaware knows this. That’s why they charge $300/year—because they can.
Your 6-Step Delaware LLC Formation Process
If you’ve decided Delaware is actually right for you (be honest), here’s how to do it:
Step 1: Name Your LLC
Delaware’s naming rules are refreshingly simple:
- Must include “Limited Liability Company” or abbreviation (LLC, L.L.C.)
- Must be distinguishable from existing entities
- Can’t imply you’re a bank, trust, or insurance company
Pro tip: Delaware allows name reservations for 120 days ($75). Useful if you’re not ready to form yet but found the perfect name.
Use Delaware’s name search tool before getting attached. “First State LLC” was taken in 1997. Be original.
Step 2: Get a Delaware Registered Agent
You need a Delaware street address that’s staffed during business hours. Since you probably don’t live in Delaware, you’ll hire a service.
The options:
- Budget services: $50-100/year (bare minimum, often sketchy)
- Reliable services: $125-200/year (actually answer the phone)
- Premium services: $300+/year (white-glove treatment you don’t need)
Jake’s pick: Stick with established players who’ve been around 10+ years. This isn’t where you cheap out.
Step 3: File the Certificate of Formation
Delaware offers three speeds:
- Standard: 10-15 business days ($110)
- 24-hour: Next business day ($200 total)
- Same day: By 7pm if filed by 2pm ($310 total)
- 2-hour: For the truly impatient ($1,110 total)
What you’ll need:
- LLC name
- Registered agent name and address
- Authorized person’s signature (that’s you)
That’s it. Delaware keeps it simple. No operating agreement required. No members listed. Pure minimalism.
Filing options:
- Online: Through Delaware’s system (clunky but works)
- Fax: Yes, Delaware still accepts faxes in 2025
- Mail: For those who miss the 1990s
Step 4: Draft Your Operating Agreement
Delaware doesn’t require an operating agreement. Delaware is wrong.
Your operating agreement is your business bible. It covers:
- Ownership percentages
- Profit distributions
- Management structure
- What happens when someone wants out
- What happens when someone dies
For single-member LLCs: Still need one. Proves your LLC isn’t your alter ego.
For multi-member LLCs: Absolutely critical. Without it, Delaware’s default rules apply, and they’re basic at best.
Step 5: Get Your EIN
Your LLC needs its Social Security number. It’s free from the IRS and takes 15 minutes online.
With SSN/ITIN: Apply online, get it instantly Without SSN/ITIN: Fax or mail Form SS-4, wait 1-3 months
Critical: One LLC = One EIN. Forever. Don’t get multiple EINs. It creates IRS nightmares.
Step 6: Register in Your Home State (The Step Everyone Forgets)
If you don’t live in Delaware, your Delaware LLC needs to register as a foreign LLC where you actually do business.
Example: Form Delaware LLC → Register as foreign LLC in Texas → Pay both states annually
This is where the Delaware dream dies for most people. You’re not avoiding your home state; you’re paying both states.
The Delaware Franchise Tax Trap
Every Delaware LLC pays $300 annually by June 1st. No exceptions. No sliding scale. No discounts for being small.
The timeline:
- LLC formed in 2025
- First franchise tax due June 1, 2026
- Every June 1st thereafter until you dissolve
Miss the deadline?
- $200 penalty
- 1.5% monthly interest
- Potential administrative dissolution
Pro tip: Set a calendar reminder for May 15th. Delaware doesn’t send friendly reminders.
Delaware LLC Myths Debunked
Myth 1: “Delaware Has No Taxes”
Reality: No sales tax, but there’s income tax, gross receipts tax, and that $300 franchise tax.
Myth 2: “Delaware Protects Your Privacy”
Reality: Your registered agent is public. Your home state filing is public. True privacy requires more sophisticated structures.
Myth 3: “Delaware is Cheaper”
Reality: $300/year franchise tax plus foreign registration fees. Most expensive option for out-of-state businesses.
Myth 4: “All Serious Businesses Use Delaware”
Reality: 67% of Fortune 500 companies are Delaware C-Corps, not LLCs. Different entity, different benefits.
Myth 5: “Delaware Courts Are Better”
Reality: True for complex corporate litigation. Irrelevant for your Amazon FBA business.
The Real Cost Comparison
Delaware LLC (Non-Resident)
- Formation: $110
- Annual franchise tax: $300
- Registered agent: $125
- Foreign LLC registration: $100-500
- Annual total: $525-925
Your Home State LLC
- Formation: $50-500
- Annual report: $0-200
- Registered agent: $0 (you)
- Annual total: $0-200
See the problem?
When to Abandon the Delaware Dream
You should NOT form a Delaware LLC if:
- You’re a small business owner in another state
- You’re trying to avoid taxes (doesn’t work)
- You heard it’s “more professional” (it’s not)
- Your business is location-dependent
- You’re bootstrapping (that $300/year matters)
You SHOULD form in Delaware if:
- You actually live there
- You’re raising institutional capital
- You have complex equity structures
- You’re building to sell to sophisticated buyers
- You understand exactly why Delaware benefits your specific situation
My Honest Recommendation
For 90% of businesses, form your LLC in your home state. It’s simpler, cheaper, and provides the same liability protection.
For the 10% who need Delaware:
- Make sure you actually need it (not just want it)
- Budget $600-1,000 annually
- Get a reliable registered agent
- Don’t forget foreign registration
- Set franchise tax reminders
Delaware is like a Ferrari—impressive, expensive, and completely unnecessary for your daily commute. But if you’re racing Formula 1, nothing else will do.
The Bottom Line
Delaware is the gold standard for complex corporate structures and venture-backed companies. For everyone else, it’s an expensive status symbol that provides no real benefit.
I’ve watched hundreds of entrepreneurs waste thousands on Delaware LLCs they didn’t need. Don’t join them. Form your LLC where you actually do business, save the money, and invest it in growing your company.
If you genuinely need Delaware’s advantages, you probably have lawyers telling you exactly that. Everyone else? Your home state is fine.
Still Thinking About Delaware?
If you’re still convinced Delaware is right for your business, at least you now know the real costs and benefits. No myths, no BS, just facts.
For more straight talk about LLC formation without the sales pitches and fear tactics, check out llciyo.com. We’ll help you figure out what you actually need versus what formation services want to sell you.
Remember: The best state for your LLC is usually the one where you’re actually doing business. Everything else is just expensive complexity.
Jake Lawson has helped over 1,200 entrepreneurs form LLCs, including 300+ who initially wanted Delaware before learning better. He’s dissolved more unnecessary Delaware LLCs than he cares to count and still believes the First State’s marketing department deserves a raise for convincing everyone they need a Delaware entity.