One of the first and most important decisions to make when creating an LLC is which state to choose.
In this blog, we will list the most attractive aspects of forming an LLC in Delaware or Nevada, and what you can expect in terms of taxation, costs, commercial laws, privacy, and protection from each state.
What Makes Delaware and Nevada More Business-Friendly Than Other States?
Both of these states have a corporate-savvy legal system that leads to quick decision-making by experienced judges instead of juries. Additionally, the privacy and asset protection these states offer, along with tax benefits and flexibility, make Delaware and Nevada an ideal place to run a business.
Delaware and Nevada have a lot in common in terms of providing a good place for startups. The following perks are the most notable.
Business-Friendly Legal System
In Delaware, all corporate cases and disputes are resolved by the Court of Chancery. The Court of Chancery allows business issues to be resolved quickly by a judge. This is a reputable, non-trial court that focuses on cases concerning commercial litigation and real estate property. There are no juries involved only experienced judges who are well-versed in corporate law and have expertise in complex corporate rulings.
The State of Nevada works to emulate Delaware’s corporate legal system and invests a lot of effort to create a climate that benefits businesses.
Much like in Delaware, Nevada business-related cases are resolved in a non-trial court by a judge with expertise in corporate law. The court functions in a similar way when resolving corporate disputes that is favorable to businesses.
No Minimum Capital Requirements
Neither Delaware nor Nevada have a minimum capital requirement to form an LLC.
Meetings Can Be Held Anywhere
While there is no statutory mandate for meetings with Delaware and Nevada LLCs, should an LLC hold meetings of its members and keep minutes of those meetings? The answer is yes. To do this you can hold your meetings anywhere.
Forming a Delaware LLC
The biggest benefit of forming a Delaware LLC is for privacy and asset protection.
You can submit your necessary documents and forms to the Division of Corporations, with the filing fee payment, which is a one-time fee of $90. If you want to speed up the process, you can pay the expedited fee of $100 for same-day filing or $50 for 24-hour filing on top of the filing fee. To maintain your Delaware LLC the annual franchise tax is $300.
Delaware LLCs are not required to list members’ names and addresses in their filings. The LLC’s operating agreement is the only document where members’ and managers’ names and addresses need to be specified. Since this document is private, the ownership and management structure isn’t available to public view.
Many individuals use LLCs to protect their assets from lawsuits. Delaware LLCs provide superior asset protection because it is one of the few states that considers a charging order to be the only means to collect debt from LLCs. By contrast, many other states allow judgment collectors to go after the personal assets of the owners of single-member LLCs.
Delaware does not tax companies that operate outside of its borders. This means you do not end up paying Delaware state taxes if you have no physical office or do business directly within the state.
- No state sales tax needs be collected from customers.
- No corporate tax on interest or other investment income in a Delaware holding company.
- No taxes for fixed income or equity investment gains on the state level.
- No value-added taxes, use tax, or even inventory tax.
- No inheritance tax.
- No capital shares or stock transfer taxes.
- No tax on intangible assets such as trademarks, patents, and naming rights.
- No personal/business property tax.
Although, there are many tax advantages having a Delaware LLC requires you to pay an annual franchise tax.
If you need help you can follow our 4 Steps to Setting Up a Delaware LLC.
Forming a Nevada LLC
Forming a Nevada LLC is attractive for many reasons, but the most important of them are because it offers tax benefits and strong privacy and asset protection for businesses.
Registering a new LLC in Nevada involves the following payments. To register you must pay $200 for a business license, $150 for a list of officers, and $75 for articles of organization. The total to form a Nevada LLC is $425. To maintain your Nevada LLC note that you must file your business license and list of officers annually. It will be $350 annual filing fees.
Nevada is one of seven states where LLCs are not charged state income tax. Your LLC is not subject to taxes for the income it makes in the state of Nevada.
Additionally, members of Nevada LLCs don’t pay the following taxes:
- No corporate tax.
- No personal income tax.
- No franchise tax
LLC members in Nevada can expect thorough asset protection in the event of a lawsuit.
All employees, members, agents, and directors are protected from being personally liable in a lawsuit. Firms are not required to hand over a list of their business assets, and apart from filing with the IRS, there is no record of the asset being linked to the company. Also, Nevada won’t request corporate income tax information and share it with the IRS.
Strong Privacy Protection
Another benefit of forming your LLC in Nevada is it is not required that owners or board members of Nevada LLCs be listed in public records when filing with the state, assuring an extra layer of anonymity.
If you need help you can follow our 6 Steps to Forming an LLC in Nevada.
Both Delaware and Nevada have similar business laws, no minimum capital requirements for forming an LLC, and meetings can be held according to member preference anywhere.
Delaware’s most beneficial features include high privacy standards for LLCs and strong asset protection that keeps the personal belongings of LLC members out of reach.
As far as Nevada benefits go taxes, privacy, and asset protection remain the strongest advantages for businesses.
Overall, Delaware and Nevada have plenty of different benefits to offer when it comes to forming an LLC. It is important to weigh what benefits matter most to your business plan.