You may be contemplating the registration of your business as a Delaware LLC. The state has a reputation for being business-friendly. Incorporating in Florida vs Delaware has many advantages. This includes the elimination of filing two annual reports, having two registered agents, and paying fees in both states.
The State of Florida has 1,912,039 limited liability companies (LLC). Florida allows LLC operating agreements to include a provision that allows one member to sue another member. The lawsuit needs to meet specific circumstances to proceed, and there are other ways to resolve a dispute.
The ability of a member to take legal action is only one of the advantages of incorporating in Florida vs Delaware. Before filing your LLC, check out this guide for Florida entrepreneurs so you can make an informed decision.
Misconceptions About a Delaware LLC
When people think about creating an LLC, the state of Delaware comes to mind. Many have a misconception that to incorporate in Delaware is a sound business decision. This is because their opinion is based on public opinion, not an understanding of Delaware LLC faults.
The state promotes itself using attention grabbers. They throw out nibbles such as not having to pay income tax and same-day filing, but are they really looking out for your company’s best interests?
Delaware is looking out for Delaware. There are many disadvantages to a Delaware LLC that make it more financially sound to file in Florida.
Disadvantages of Delaware LLC
If you choose to incorporate your Florida business in Delaware, you will need to comply with the business requirements of both states. For example, in Florida, all businesses (LLCs, non-profits, LPs, LLPs, and corporations) must file an annual report no later than May 1st of every year.
This report is mandatory to maintain authorization to conduct business in the state. If you do not file the annual report in a timely fashion, you will be subject to a late fee. If you fail to file the report, your business may be administratively dissolved.
This is in addition to your annual requirements for maintaining your Delaware LLC. In Delaware, you must file your entity with the Delaware Division of Corporations. You will also need to obtain a Federal Employer Identification Number (FEIN) from the IRS and register your corporation with the Division of Revenue.
If you have employees, you will need to register with the Division of Workers’ Compensation and the Delaware Division of Unemployment Insurance. You also need to verify whether you need to apply for Delaware licenses, certifications, or registrations to complete your business registration requirements.
You will need a registered agent within the state of Delaware who can accept legal filings on your behalf. If there are any legal disputes you will need to travel to Delaware to attend court. You will also need a Delaware attorney to handle your legal disputes.
In addition to the initial filing fees, there are also annual fees you will incur when you register your LLC in Delaware.
Delaware LLC Cost
If you decide to file your LLC in Delaware, there are numerous expenses. You will be paying for:
- Name reservation (holds entity name for 120 days)
- Annual fee for a business license
- Delaware registered agent
- Certificate of Formation for LLC with stamped “filed” copy of submission
- Optional certified copy of the certificate of formation
- Annual taxes for LLC due June 1st of every year
- Certificate of Good Standing (short form)
- Certificate of Good Standing (long form)
- Franchise Tax—based on the value of your stock shares
When filing your paperwork, you must include all filing fees with your submission.
Advantages of a Florida LLC
By incorporating in your home state, you avoid paying the fees you must pay as a foreign entity registering in Delaware. Forming an LLC in Florida only requires a few steps.
Your first decision is selecting a name for your LLC, which under Florida law must include the words “limited liability company” or “limited company.” Abbreviations are acceptable, such as L.C., L.L.C, and you may use Ltd. for limited and Co. for company.
To make sure the name you select is not being used by another organization, check the business name database. If rather than your official business name you plan to conduct business as a DBA (doing business as) you will need to apply for use of the fictitious name.
You will need to have a registered agent within Florida. This person must have a physical street address in the state and be capable of accepting legal paperwork on the company’s behalf. You will also need an Employer Identification Number (EIN) from the IRS.
You will need to file your Articles of Organization with the Florida Division of Corporations. This includes the address of the LLC’s main office, information regarding the LLC registered agent, names and addresses of LLC managers, and the effective date of the LLC. An authorized representative or member must sign the articles.
The key to preventing mistakes that can negatively affect your business when deciding on your business entity and where to file for an LLC is to consult with a business law attorney. They will assist you in setting up your entity, preparing all necessary documents, and making sure you meet all legal business and licensing obligations.
Florida LLC Is Low Maintenance
To register a new LLC in Florida you will pay fees for the following:
- Filing fee
- Registered agent fee
- Reserve name fee (optional)
Your annual costs for maintaining your Florida LLC include:
- Annual report and supplemental fee
- Certificate of status
- Certified copy of the record
There are additional fees if you need to amend your annual report. Other fees include changing a registered agent, articles of correction, or any other amendment.
The best way to make sure everything is handled correctly and in a timely fashion is to hire a Florida business law attorney. They will advise you on what services you need and prepare and file all necessary documents to keep your LLC current.
A Florida LLC Is a Financially Sound Decision
If you reside in the state of Florida, forming a Delaware LLC is not a financially sound decision. Forming your LLC is in Florida allows you to have all registered agents, taxes, reports, licenses, and legal relationships within the state you are doing business.
Before making any decisions regarding the formation of your LLC contact Boyer Law Firm, P.L. by calling (904) 236-5317. You may also contact us using our online form and while there sign up for our monthly legal news updates.
