delaware llc vs texas llc [With Pictures]

Last updated : Sept 24, 2022
Written by : Delia Spaziano
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delaware llc vs texas llc

Should I form an LLC in Texas or Delaware?

The primary reason you would incorporate in Delaware instead of Texas is if you anticipate raising professional venture capital. Outside of this possibility a Texas business will save more money by remaining in Texas. Unless you are facing a round of venture capital with an established securities firm, stay in Texas.

Why is an LLC better in Delaware?

Delaware is often considered one of the best states to form an LLC because it has limited fees and tax obligations. In fact, many businesses choose to form an LLC in Delaware even if they don't intend on doing business in Delaware.

Is Texas a good state to file an LLC?

Texas offers many advantages to LLCs formed in the state. Notably, its business environment and economic strength, asset protection for the members of the LLC, tax benefits, and a great deal of flexibility. If your business has a physical location in Texas, it is probably best to form your LLC in Texas.

Which state is better for LLC in USA?

Delaware. Delaware takes one of the top spots as the best state to form LLC. More than 50% of all U.S. publicly-traded companies and roughly 63% of Fortune 500 companies are incorporated in Delaware.

Does a Delaware LLC need to file a tax return?

A. Delaware treats a single-member “disregarded entity” as a sole proprietorship for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a return with the State of Delaware.

Why do companies form in Delaware?

The most famous reason Delaware has attracted the eye of corporations across the world is the lenient taxes imposed by the state. Corporations registered in Delaware that do not do business in the state do not pay corporate income tax.

What is the Delaware tax loophole?

Companies and wealthy individuals can use Delaware to avoid paying some taxes in other states. So there's a thing called the Delaware Loophole, which essentially enables companies to avoid paying state corporate income tax where they earn the revenue.

Why is Delaware considered a tax haven?

The state has no value-added taxes (VATs), it does not tax business transactions, and it does not have use, inventory or unitary tax. There is no inheritance tax in Delaware, and there are no capital shares or stock transfer taxes.

Is there an annual fee for an LLC in Delaware?

LLC/Partnership Tax Information All Domestic and Foreign Limited Liability Companies, Limited Partnerships, and General Partnerships formed or registered in Delaware are required to pay an annual tax of $300.00. There is no requirement to file an Annual Report.

What taxes do LLC pay in Texas?

The two types of business taxes for an LLC in Texas are sales tax and the Texas franchise tax. All businesses are subject to sales tax.

What is the tax rate for LLC in Texas?

All members or managers who take profits out of the LLC must pay self-employment tax. This tax is administered by the Federal Insurance Contributions Act (FICA) and covers Social Security, Medicare and other benefits. The current self-employment tax rate is 15.3 percent.

What are the advantages of forming an LLC in Texas?

  • Limited Liability Protection.
  • Pass-through taxation.
  • Tax options.
  • Simplicity.
  • Ownership flexibility.
  • Increased credibility.
  • Name registration.

Is Texas a good state to incorporate?

The freedom from liability for business debt and legal issues, relatively low registration costs, flexible tax treatment, flexibility for membership and minimal formalities, all make Texas one of the best states to consider for your LLC incorporation.

Which state has the lowest taxes for business?

Nevada, South Dakota, and Wyoming have no corporate or individual income tax (though Nevada imposes gross receipts taxes); Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax.

Which state is the best to register a business?

Best State for Corporations and LLCs Owners Delaware LLCs and corporations are given the strongest legal protection available by any state. Piercing the corporate veil, or making individuals personally liable for claims against their business, is very unlikely in Delaware.

Does a Delaware LLC pay federal taxes?

Limited Liability Companies (LLCs) Like S corporations, standard Delaware LLCs are pass-through entities and are not required to pay federal or state income tax. LLCs are, however, required to pay a flat annual tax of $300 to the state.

What happens if I don't pay Delaware LLC tax?

If you don't pay the Delaware Franchise Tax and file the Annual Report for two straight years, the State of Delaware will administratively dissolve the Corporation. If you have any questions about forming your new Delaware LLC, LP, or Corporation, give us a call today.

Do I have to renew my LLC Every year in Delaware?

LP/LLC/GP Tax Although Limited Partnerships, Limited Liability Companies and General Partnerships formed in the State of Delaware do not file an Annual Report, they are required to pay an annual tax of $300.00. Taxes for these entities are due on or before June 1st of each year.

Do companies in Delaware pay taxes?

Every domestic or foreign corporation doing business in Delaware, not specifically exempt under Section 1902(b), Title 30, Delaware Code, is required to file a corporate income tax return (Form 1100 or Form 1100EZ) and pay a tax of 8.7% on its federal taxable income allocated and apportioned to Delaware.

What are the benefits of registering a business in Delaware?

  • The state offers some tax benefits.
  • There is a corporation court.
  • Filings are processed quickly.
  • Privacy is protected.
  • Residency is not required.
  • You can have a slimmed-down corporate structure.
  • Investors prefer Delaware.

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delaware llc vs texas llc

Comment by Mireille Herriott

Thanks for this great article

Thanks for your comment Mireille Herriott, have a nice day.
- Delia Spaziano, Staff Member

Comment by Damian

there is so much hype online about where to open your llc and while it is i guess it is a big decision for most of my clients it doesn't make that big of a difference when you go to any of the hyped up states and let me explain first let's take a step back for u s residents and people who live in the united states you should probably just register an llc in the state where you live and do business this will be cheaper for you in the long run and easier and easier to comply with local regulations that's fine so i got that out of the way if you end up if you're based in the us and you're in florida but you want a delaware company it's fine it'll work but you need better reasons than just to pay no taxes because it doesn't really work like that you still have to pay florida taxes because you live and do business in florida so that said most of my clients and the people i work with are non-residents and they'll say things like um there's the big the big four i guess delaware wyoming nevada and new mexico are the most popular ones that i see i don't see that many nevada to be honest with you it's mostly delaware wyoming and new mexico and i'll talk about some differences between these what i like the most and what you should consider when you're opening a company so first of all all of these options will maintain the privacy of the owner they don't see who the owner is and you generally have an attorney or third party opening the company on your behalf so the state won't even know who you are and that's the same for all of these options every option in basically every state requires a registered agent and that's nothing new you have to usually you pay for that and usually it's the same across all the states the filing fees for opening these companies are a little bit different nevada's a little bit higher delaware's i think a little lower but the renewal cost is a little more uh and then wyoming and new mexico are the cheapest wyoming actually has a renewal that you have to do every year where you have to pay you have to pay the state to um to renew the company and keep it in legal status which is about hundred and fifty dollars whereas new mexico doesn't have this delaware is a three hundred dollar annual renewal so it's a little bit more expensive so apart from that from a tax standpoint they're all exactly the same you can open a florida llc a new york llc a delaware llc a california llc and as a non-resident with no u.s trade or business you still won't pay taxes in the u.s so there's no benefit of this state or that state in that instance for a u.s corporation uh i would generally use delaware or wyoming because they don't have corporate taxes uh the same way that other states do whereas if you had a florida corporation you're paying i think 4.5 percent don't quote me on that i didn't i didn't research it you're paying something you can't you're paying income taxes on your profit pending the there's also a 50 000 exception in florida so if you're using an llc like i said you're non-resident with no u.s source income new mexico is a fine choice wyoming is a good choice and so is delaware again i don't like nevada as much a little more expensive the the pro with new mexico is a little cheaper in the long run um but i for most of my clients use wyoming and this is the the biggest reason i use wyoming for the llc's that i open there's two reasons first it's a little bit cheaper that's fine it's not the most important thing um the second thing i like about wyoming llc is over delaware and i'm not going to comment much on new mexico because i haven't opened very many new mexico companies it's generally uh wyoming because i just like the way their back office works i like the um the way the speed in which they issue the documents and i like the way that they're set up and structured another thing that i like the reason i don't usually go with delaware is because at this point delaware is on the blacklist of certain countries for example i believe in brazil it's a it's a tax haven delaware's wyoming isn't so it's kind of interesting that they have the same tax impacts but one is a blacklisted and the other one isn't so it's right now wyoming is less is more is less infamous to me than delaware is delaware is like this big corporate tax haven uh thing that a lot of uh people look at it like when when reality wyoming has the same exact tax impacts so i mean i'm giving you insights into how i look at it and what it what's what i usually do however the truth is and the most important thing is that the income tax differences don't really matter and the there's no differences in the sales taxes generally and then also um the fees are pretty similar in doing this as well so with an llc it really doesn't matter i usually pick wyoming new mexico is a fine choice so is delaware so is nevada florida is fine it's not private you can look up who the owner is but really from a tax standpoint it doesn't matter if you don't have nothing to hide then there's no reason that you wouldn't want a florida company instead you know it doesn't matter that much so my point for this video is to just start already open the company and get rolling and see what you can do with to see if you can make some money when we're talking about a corporation which i don't know that's not really the whole point of this video it's going to be first where you're doing business is where you would want to open the company second would be in either a state with no income taxes like delaware or wyoming and then third thing you want to consider is the is the governance and the corporate governance most major companies use delaware because of the uh how do you say they're how the the the laws that have been passed and the and the precedent that has been set uh in terms as the uh of like publicly traded companies and the rules for ownership and all those different things it has more historical um private industry favored laws which have been supported by the president and are easy to cite going forward i'm not an attorney so i don't know that much about that stuff and i haven't dealt with any clients that have specifically had the pre previous legal code and legal decisions cited that happened in delaware so i don't have a lot of experience with that but that is something that if you have a huge company you would want to consider and hopefully if you have a huge company you're not using videos on the internet to make your decisions you're probably seeking a proper legal counsel so i hope this video was helpful i hope it cut through a lot of the bs that's out there and that you're able to use it to more quickly and efficiently start your us business and find all the success that you deserve i hope that you enjoyed the video like and subscribe and i'll see you on the next one thanks

Thanks Damian your participation is very much appreciated
- Delia Spaziano

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