Is Delaware right for you?
Delaware’s advantage is its Court of Chancery — a business court, centuries old, with no juries and judges who do nothing but corporate law. The result is a body of case law so deep that lawyers can predict outcomes, which is precisely what investors are paying for when they insist on Delaware.
If you are raising a priced round from U.S. venture capital, this is not really a choice. Term sheets assume a Delaware C-Corporation, and converting later costs more than starting there.
If you are not raising, the calculus flips. Delaware charges every LLC a flat $300 franchise tax annually whether or not it trades, and unless you have a Delaware address you still need a registered agent. You are paying a premium for a court you will never use and a reputation your customers will never check.
- Startups raising from U.S. venture investors
- Companies planning multiple share classes or an eventual acquisition
- Businesses that expect complex ownership arrangements between founders
- Flat $300 annual franchise tax for LLCs regardless of revenue
- Corporations calculate franchise tax differently and can face far larger bills if the authorised share count is set carelessly
- For a single-owner online business, the benefits are largely theoretical
What Delaware taxes
A summary, not advice — your actual position depends on where you live, where your customers are, and how the company is treated federally.
Income tax
No Delaware income tax on income earned outside the state
Sales tax
None — Delaware has no sales tax
Franchise tax
Flat $300 per year for LLCs. Corporations are assessed on shares or assumed par value
Delaware for a non-resident founder
Straightforward for non-residents and unusually well understood by banks and payment providers, which smooths applications. You are paying for that recognition through the annual franchise tax.
What Delaware asks for every year
Formation is the easy part. These are the obligations that keep the company alive — and the ones people forget.
- 01
Franchise Tax
LLCs owe a flat $300 by 1 June each year. Late payment adds a $200 penalty plus interest.
- 02
Registered Agent
Required continuously. Delaware agent fees tend to run higher than other states.
- 03
Annual Report (Corporations only)
Corporations file an annual report alongside their franchise tax. LLCs do not.