Comment by loeber
3 hours ago
This is totally false, sorry. Delaware entities are the standard. Delaware corporate law is better understood than any other by a long shot. Dealing with a random non-Delaware LLC is usually a hint that your counterparty is a rube.
I think the person you're replying to is just saying that having an LLC in your home state is usually simpler and cheaper than a Delaware LLC. This is usually true for the sorts of small businesses that would want to operate as an LLC.
The bad advice comes from the grandparent. Unless you're certain you never want to take investment or compensate employees with stock or options, an LLC (Delaware or otherwise) is probably the wrong choice. You'll need to convert to a C-Corp at the point you do either of those, which will be a big unnecessary hassle at a time in the life of the company when you don't want any unnecessary hassles.
- They're wrong about the Delaware franchise tax. There are 2 options for computing this: either authorized shares or assets, and if you choose the latter, a new company will end up paying the minimum tax.
- They're wrong about the foreign registration -- in California (and I believe most other states), you also need to register foreign LLCs.
- They're wrong about investments -- SAFEs are very easy for corporations (no lawyers required), but they can't even be used by LLCs. LLCs don't have stock, and most boilerplate documents will not work for LLCs.
- They're wrong about taxes being significantly simpler for LLCs -- even if you're treating it as a pass-through entity, you still need to compute revenue and expenses before passing through profits to members.
Confidently incorrect, the best kind of incorrect.
How much did the State of DE pay you for this post? :)
Huh? You got any sources on that? I’ve never heard anyone say a non-Delaware LLC is a bad idea. And most sources seem to say incorporating in your home state is usually the right call.