Delaware LLC Formation: Myth Busted
Brad Smith • October 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
It might be time to consider a Roth IRA. Here's why.
It might be time to consider a Roth IRA. Here's why.
Whether due to a sudden illness, an unexpected hospitalization, or other urgent situations, it's important to know what essential documents should be in place and how an attorney can help ensure a smooth transition for your loved ones.
Click HERE To View March Newsletter
Understanding the difference between an heir and a beneficiary can help you navigate estate planning more effectively and ensure that your wishes are carried out properly.
Estate planning is about more than just dividing assets; it’s about making sure your wishes are honored when it comes to your health, finances, and legacy.
Beyond understanding the medical aspects, there are critical legal steps you should take to safeguard your rights, clarify your wishes, and prepare for any unexpected situations.