LLC vs Corporation in Delaware

Delaware is the most popular state for incorporating venture-backed companies, but that does not make it the right choice for every business. This comparison covers what a Delaware LLC and a Delaware corporation cost and when each makes sense.

Filing costs

The figures above come from our state data. Confirm current amounts with the Delaware Division of Corporations before you file. Corporations can pay significantly more than the minimum franchise tax if they use the wrong calculation method, so use the assumed par value capital method and consider professional help.

Why Delaware is popular

• The Court of Chancery, a business court with judges rather than juries and a large body of precedent
• A well-developed corporate statute and predictable case law
• Familiarity: most venture investors and acquirers expect Delaware corporations
• Flexible LLC and corporation laws with strong contractual freedom

Delaware LLC: when it fits

A Delaware LLC can make sense for holding companies, investment vehicles, and businesses that expect to have outside members and want Delaware's contract-friendly law. For a small operating business run from another state, it usually adds cost, because you will also need to register as a foreign LLC in your home state and pay both states' fees.

Delaware C corporation: when it fits

If you plan to raise venture capital, issue preferred stock, or grant stock options, a Delaware C corporation is the default choice. Investors' lawyers know the framework, which speeds negotiations and lowers legal friction.

The home-state cost

Forming in Delaware does not move your business's taxes. If you live and work in another state, that state will generally still tax your income and require the entity to register there. Compare both states' costs in our state fee table, and see LLC vs corporation for the general trade-offs.

This is general information, not legal advice.

Decision summary

Ongoing compliance in Delaware

• LLC: the annual tax is due June 1 each year, and missing it leads to penalties and interest
• Corporation: the annual report and franchise tax are due March 1
• Both: keep a registered agent in Delaware at all times, since the state will not accept filings without one
• Both: register in the state where you actually operate, and keep up its reports and taxes too

Common mistakes

• Choosing Delaware for the reputation without adding up the home-state costs
• Using the wrong franchise tax calculation method for a corporation and overpaying
• Forgetting the Delaware annual filing because the business runs elsewhere
• Not documenting ownership and management terms in an operating agreement or bylaws

For reference, California's minimum annual franchise tax is $800 regardless of where the LLC was formed, which is a common surprise for founders who form elsewhere but operate in California.