Which state is better for founding an LLC, Delaware or Florida?

Most organizations would migrate from their sole proprietorship period to an LLC in the conventional manner. It is the most adaptable corporate vehicle ever and provides a wide variety of benefits that can support a company’s recent expansion.

Due to its welcoming business environment and attractive taxation system, Delaware is a thriving business state that draws investors and companies from all industries. However, if you don’t belong to the 1% of mega-corporations with unlimited resources, visiting Florida would be a better choice.

The two States’ tax systems
Delaware LLCs provide tax flexibility. Its LLCs have the option of being taxed as a disregarded business, S corporation, or even a partnership. This indicates that owners who want to pass through revenue to themselves will not be subject to double taxes. Florida LLCs have a comparable framework as well. Depending on the member of the LLC, it is possible to request that it be taxed as a corporation, partnership, or sole proprietorship.

In Delaware, an LLC will pay a $300 yearly flat tax whereas a sole proprietorship would pay personal income tax. However, sales tax will be applied to your LLC. Delaware only levies a gross receipts tax on those that sell physical or intangible items or render services within the state.

Intangible assets like trademarks, copyrights, and patents can pass through taxes because to a special tax procedure in Delaware termed “the Delaware loophole.” With the following example, let’s put this in perspective:

You manage a stop-motion studio in California that earns +100 million in net income annually. Three taxes would be levied against your income right away: a state income tax, an AMT, and a corporation tax rate at the federal level to cap it all off.

The use of your own patent can be purchased by creating a Delaware subsidiary. Furthermore, your bottom line would be better retained since Delaware doesn’t charge a corporation income tax or a sales tax. However, you should get the advice of a qualified attorney before attempting anything without it.

However, until these LLCs have workers, neither a partnership nor a sole proprietorship in Florida will be taxed. These modest startup expenses could be offset by Florida’s state taxes, corporate income taxes, franchise and LLC taxes, among other taxes and fees.

Source and full article: https://bbcincorp.com/offshore/articles/delaware-vs-florida-llc