Choosing between a Delaware and a Florida LLC, which each have their own indisputable benefits and drawbacks, is a crucial decision when forming an LLC.
Both States' taxation
Delaware LLCs offer taxation flexibility. Its LLCs have the option of being taxed as either partnerships, S corporations, or even disregarded entities. By choosing to pass through revenue to themselves, owners can avoid paying taxes twice. Florida LLCs also have a comparable setup. Depending on the member, LLCs might request to be taxed as corporations, partnerships, or sole proprietorships.
In Delaware, an LLC is subject to a $300 yearly flat tax, but a sole proprietorship is subject to personal income tax. But sales tax will be charged to your LLC. Only those who sell physical or intangible items or render services inside the state of Delaware are subject to Delaware's gross receipts tax.
Intangible assets like trademarks, copyrights, and patents can pass through taxes thanks to a special tax procedure in Delaware known as "the Delaware loophole." Let's use the following example to put this in context:
You are the owner of a stop-motion studio in California with an annual net income of more than $100 million. Your income would immediately be subject to three taxes: state income tax, an AMT, and a corporation tax rate at the federal level to cap it all off.
You can pay for the privilege to utilize your own patent if you establish a Delaware subsidiary. Additionally, since Delaware doesn't charge corporation income tax or a sales tax, your bottom line would be better retained. However, you shouldn't undertake it without receiving in-depth legal advice from a recognized attorney.
However, until these LLCs employ people, neither a partnership nor a sole proprietorship will be taxed in Florida. These modest startup expenses, however, could be offset by various Florida taxes and levies, including as state taxes, corporate income taxes, franchise and LLC taxes.
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