Are you considering starting a business in either Delaware or New Mexico? One of the first steps is deciding which type of legal entity to form.
Limited Liability Companies (LLCs) are becoming an increasingly popular choice due to their flexibility and liability protection benefits.
Here we will provide a side-by-side comparison of Delaware vs. New Mexico LLCs, highlighting the key differences in company formation, operating agreements, management structures, taxes, and asset protection.
Delaware vs. New Mexico LLC
Taxation: Delaware has variable personal and corporate income tax rates but no state sales tax.
New Mexico offers lower personal and corporate income tax rates but imposes a sales/gross receipt tax.
Filing Costs: Delaware has a lower initial filing fee but an annual franchise tax. New Mexico charges a lower initial filing fee and has no annual report fee.
Sales Tax: Delaware does not have a state sales tax, while New Mexico imposes a sales/gross receipt tax ranging from 5.125% to 8.8675%.
| Delaware LLC | New Mexico LLC |
|---|---|
| Delaware charges an initial filing fee of $90. | New Mexico has a lower initial filing fee of $50. |
| It imposes an annual franchise tax of $300 on LLCs. | It does not impose an annual report fee for LLCs. |
| Delaware has variable personal income tax rates, ranging from 2.20% to 6.60%. | New Mexico offers lower personal income tax rates, ranging from 1.70% to 5.90%. |
| It imposes a corporate income tax rate of 8.70% on LLCs that choose corporate taxation. | It has a lower corporate income tax rate, varying from 4.8% to 5.9%. |
| Delaware does not have a state sales tax rate. | New Mexico imposes a sales/gross receipt tax ranging from 5.125% to 8.8675%. |
| Registered agent fees in Delaware typically range from $100 to $300 or more per year, depending on the service provider. | Registered agent fees in New Mexico typically range from $50 to $150 per year, depending on the provider and services offered. |
| It is home to the Delaware Court of Chancery, a specialized business court known for efficiently handling corporate disputes. | It does not have a specialized business court. |
| Delaware is known for its extensive legal expertise in corporate law, with a well-established body of case law. | New Mexico provides a simpler and more straightforward legal environment. |
| It allows for a higher level of anonymity, as it does not require the public disclosure of member names and addresses in formation documents. | It has moderate privacy regulations. |
| Delaware requires an annual franchise tax, while New Mexico does not impose an annual report fee for LLCs. | New Mexico does not require an annual report fee for LLCs, simplifying ongoing compliance. |
Cost Breakdown of The Two
You may use our free LLC cost calculator by state to find out filing fees, tax percentages, income taxes, and more.
Delaware LLC:
Filing Fees: Delaware charges an initial filing fee of $90 to establish an LLC.
Annual Franchise Tax: Delaware imposes an annual franchise tax of $300 on LLCs, which must be paid to maintain good standing.
Registered Agent Fees: The cost of a registered agent in Delaware can vary but typically ranges from $100 to $300 or more per year.
New Mexico LLC:
Filing Fees: New Mexico requires an initial filing fee of $50 for the formation of an LLC.
Annual Report Fee: Unlike many states, New Mexico does not impose an annual report fee for LLCs, reducing ongoing compliance costs.
Registered Agent Fees: The cost of a registered agent in New Mexico typically ranges from $50 to $150 per year.
Related Posts:
- Delaware LLC: Cost Breakdown, Pros and Cons, Requirements
- New Mexico LLC: Cost Breakdown, Pros and Cons, Requirements
Similarities Between Delaware and New Mexico LLC
Limited Liability Protection: Both Delaware and New Mexico offer limited liability protection to members (owners) of LLCs.
This means that the personal assets of members are generally protected from business debts and liabilities.
Operating Flexibility: LLCs in both states enjoy flexibility in terms of management structure and operational procedures.
Members can choose to manage the LLC themselves or appoint managers.
Pass-Through Taxation: Delaware and New Mexico both follow the federal tax treatment for LLCs, allowing income to “pass through” to the members’ individual tax returns.
This avoids double taxation at the entity level.
No State Sales Tax: Neither Delaware nor New Mexico imposes a state sales tax. This can be advantageous for businesses and consumers in both states.
Registered Agent Requirement: Both states require LLCs to designate a registered agent with a physical address in the respective state.
The registered agent is responsible for receiving legal documents and official mail on behalf of the LLC.
Privacy Regulations: Both states offer a level of privacy for LLC members.
While specific requirements may vary, neither state typically requires the public disclosure of members’ personal information in formation documents.
Additional Resources:
Steps to Form LLC in Delaware
Choose a unique name for your LLC that complies with Delaware naming rules.
Appoint a registered agent with a physical address in Delaware.
File a Certificate of Formation with the Delaware Secretary of State online or by mail, along with a $90 filing fee.
Create an operating agreement outlining how your LLC will be managed (not mandatory but recommended).
Obtain an Employer Identification Number (EIN) from the IRS if your LLC has employees or multiple members.
Register for Delaware state taxes if your business activities require it.
Comply with local permits and licenses as required.
File an annual report and pay the $300 annual franchise tax to maintain good standing.
Steps to Form LLC in New Mexico
Choose a unique name for your LLC that complies with New Mexico naming rules.
Appoint a registered agent with a physical address in New Mexico.
File Articles of Organization with the New Mexico Secretary of State, along with a $50 filing fee.
Create an Operating Agreement outlining how your LLC will be managed (not mandatory but recommended).
Obtain an Employer Identification Number (EIN) from the IRS if your LLC has employees or multiple members.
Register for New Mexico state taxes if your business activities require it.
Comply with local permits and licenses as required.
There is no annual report fee in New Mexico, but you may need to file an annual report with the state to keep your LLC in good standing.
Feature Comparisons Between Delaware LLC vs. New Mexico LLC
Delaware LLC:
Business-Friendly: Delaware is known for its business-friendly environment and well-established legal system.
Specialized Business Court: It has the Delaware Court of Chancery, a specialized court for business disputes.
Legal Expertise: Delaware offers extensive expertise in corporate law and governance.
Flexibility in Taxation: LLCs in Delaware can choose between pass-through taxation and corporate taxation.
Privacy: Delaware allows for a higher level of anonymity, as it does not require public disclosure of member names and addresses in formation documents.
Annual Franchise Tax: Delaware imposes an annual franchise tax.
New Mexico LLC:
Simplified Environment: New Mexico provides a simpler and more straightforward legal system, making it accessible for small and medium-sized businesses.
Lower Initial Costs: It charges a lower initial filing fee and does not impose an annual report fee for LLCs.
Moderate Taxation: New Mexico has lower personal and corporate income tax rates, but it does have a sales/gross receipt tax.
Registered Agent Fees: Registered agent fees are typically lower in New Mexico compared to Delaware.
No State Sales Tax: Similar to Delaware, New Mexico does not have a state sales tax rate.
Business Environment
Delaware LLC:
Business-Friendly: Delaware is renowned for its business-friendly environment, attracting many large corporations and businesses.
Legal Expertise: Delaware boasts extensive legal expertise in corporate law, with a well-established body of case law.
Specialized Court: It is home to the Delaware Court of Chancery, a specialized business court known for efficiently handling corporate disputes.
Predictable Regulations: Delaware offers consistency and predictability in legal matters, which can be advantageous for larger corporations and complex transactions.
Tax Flexibility: Delaware allows LLCs to choose between pass-through taxation and corporate taxation, offering flexibility based on business needs.
Privacy: Delaware allows for a higher level of anonymity, as it does not require the public disclosure of member names and addresses in formation documents.
New Mexico LLC:
Simplified Environment: New Mexico provides a simpler and more straightforward legal system, making it accessible for small and medium-sized businesses.
Lower Initial Costs: It charges a lower initial filing fee and does not impose an annual report fee for LLCs, reducing the cost of formation.
Moderate Taxation: New Mexico has lower personal and corporate income tax rates, making it appealing for businesses seeking tax advantages.
Registered Agent Fees: Registered agent fees are typically lower in New Mexico compared to Delaware, reducing ongoing compliance costs.
No State Sales Tax: New Mexico does not have a state sales tax rate, which can benefit businesses and consumers.
Read Also:
- 30 Best Business Ideas in Delaware
- 24 Best Business Ideas in New Mexico
- 50 Good Reasons Why Home State LLC is Preferable
Delaware vs. New Mexico Taxes
Delaware LLC:
Personal Income Tax: Delaware has variable personal income tax rates, ranging from 2.20% to 6.60%.
LLC members report their share of income on their individual tax returns.
Corporate Income Tax: Delaware imposes a corporate income tax rate of 8.70% on LLCs that choose corporate taxation.
Sales Tax: Delaware does not have a state sales tax rate, which can be advantageous for businesses and consumers.
New Mexico LLC:
Personal Income Tax: New Mexico offers lower personal income tax rates, ranging from 1.70% to 5.90%.
LLC members report their share of income on their individual tax returns.
Corporate Income Tax: New Mexico has a lower corporate income tax rate, varying from 4.8% to 5.9%.
Sales Tax: New Mexico imposes a sales/gross receipt tax, which can impact businesses and consumers. Rates range from 5.125% to 8.8675%.
Flexibility in Rules and Regulations
Delaware LLC:
Legal Expertise: Delaware is known for its well-developed legal system and extensive case law, providing a comprehensive framework for business operations.
Specialized Business Court: Delaware hosts the Delaware Court of Chancery, a specialized business court that handles corporate disputes, offering consistency in legal matters.
Tax Flexibility: Delaware allows LLCs to choose between pass-through taxation and corporate taxation, offering flexibility based on business needs.
Privacy: Delaware allows for a higher level of anonymity, as it does not require the public disclosure of member names and address information documents.
New Mexico LLC:
Simplified Environment: New Mexico provides a simpler and more straightforward legal system, making it accessible for small and medium-sized businesses.
Lower Initial Costs: New Mexico charges a lower initial filing fee and does not impose an annual report fee for LLCs, reducing the cost of formation.
Moderate Taxation: New Mexico has lower personal and corporate income tax rates, making it appealing for businesses seeking tax advantages.
Registered Agent Fees: Registered agent fees are typically lower in New Mexico compared to Delaware, reducing ongoing compliance costs.
Key Differences Between Delaware and New Mexico- An Overview
