When entrepreneurs and business owners embark on the journey of forming an LLC.
They often find themselves at a crossroads, deliberating between different states in which to establish their business entity.
Two popular choices among them are Delaware and Indiana, each offering its unique advantages and disadvantages.
The decision between Delaware and Indiana as the home for your LLC hinges on various factors, including legal and tax considerations, and the specific needs and goals of your business.
In this exploration, we will explore these critical factors to help you make an informed choice, ensuring that your LLC not only complies with the law but also aligns with your long-term business objectives.
Delaware vs. Indiana LLC
Delaware
Filing fee: $90
State income tax: 2.20% to 6.60%
Franchise tax: $300
Foreign qualification fee: $200
Limited liability protection: Strong
Indiana
Filing fee: $100
State income tax: 3.15%
Franchise tax: No
Foreign qualification fee: $50
Limited liability protection: Strong
| Delaware LLC | Indiana LLC |
|---|---|
| Delaware charges an initial filing fee to create an LLC, which is typically $90 depending on the type of LLC and processing speed. | Indiana also charges an initial filing fee to create an LLC. The fee is $95 for standard processing online and $100 for expedited processing by email. |
| It imposes an annual franchise tax of $300 on LLCs, which is based on the number of authorized shares or the assumed par value method. | It requires LLCs to file a Business Entity Report every two years. The filing fee for this report is $50 (if filed by mail), and $31 (if filed online). |
| Delaware requires LLCs to maintain a registered agent in the state, which can cost between $100 and $300 per year. This registered agent is responsible for receiving legal documents and official notices. | Indiana also requires LLCs to have a registered agent with a physical address in the state. The cost of a registered agent service in Indiana is similar to Delaware and typically ranges from $150 to $300 per year. |
| It imposes a 2.20% to 6.60% state income tax on LLCs. The tax rate varies based on the LLC’s taxable income. LLCs operating in Delaware are subject to this income tax. | It has a flat state income tax rate of 3.15% for individuals and 4.9% for corporations. There are no additional local income taxes for businesses. |
| Delaware is one of the few states in the U.S. that does not impose a state-level sales tax. This can be advantageous for consumers and businesses alike, as it means there are no additional sales tax costs on goods and services. | Indiana has a statewide sales tax, with a base rate of 7.00%. However, the actual tax rate may be higher in some counties due to local sales tax additions. |
| It provides limited local support, as it is primarily known for its corporate-friendly legal environment. | It offers accessible local support and resources through state agencies and chambers of commerce, aiding entrepreneurs in navigating state-specific regulations. |
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 Cost Breakdown
Formation Fees
Delaware charges an initial filing fee to create an LLC, which is typically $90 depending on the type of LLC and processing speed.
Expedited processing options are available for higher fees.
Annual Franchise Tax
Delaware imposes an annual franchise tax of $300 on LLCs, which is based on the number of authorized shares or the assumed par value method.
This tax can range from a few hundred dollars to several thousand dollars for larger businesses.
Registered Agent Fees
Delaware requires LLCs to maintain a registered agent in the state, which can cost between $100 and $300 per year.
This registered agent is responsible for receiving legal documents and official notices on behalf of the LLC.
Indiana LLC Cost Breakdown
Formation Fees
Indiana also charges an initial filing fee to create an LLC. The fee is $95 for standard processing online and $100 for expedited processing by email.
Biennial Business Entity Report
Indiana requires LLCs to file a Business Entity Report every two years. The filing fee for this report is $50 (if filed by mail), and $31 (if filed online).
Registered Agent Fees
Just like Delaware, Indiana also requires LLCs to have a registered agent with a physical address in the state.
The cost of a registered agent service in Indiana is similar to Delaware and typically ranges from $100 to $300 per year.
Related Posts:
- Delaware LLC: Cost Breakdown, Pros and Cons, Requirements
- Indiana LLC: Cost Breakdown, Pros and Cons, Requirements
Similarities Between Delaware and Indiana LLC
Limited Liability Protection
Both Delaware and Indiana offer limited liability protection to LLC members.
This means that the personal assets of the members are generally shielded from the company’s debts and liabilities, protecting their personal finances.
Operating Agreements
In both states, LLCs have the flexibility to create operating agreements. These documents outline the management structure, member roles, and operational procedures of the company.
While not always legally required, having an operating agreement is recommended in both states to clarify the internal workings of the LLC.
Registered Agent Requirement
Delaware and Indiana both mandate that LLCs have a registered agent with a physical address in the state.
The registered agent is responsible for receiving legal documents and government correspondence on behalf of the LLC.
Foreign LLC Registration
If you form an LLC in one state but plan to conduct business in another state, both Delaware and Indiana require you to register as a foreign LLC in the state where you’re doing business.
This process involves filing additional paperwork and paying the necessary fees.
Annual Reporting
While the specific requirements and fees may differ, both states require LLCs to submit annual reports or similar documentation to the state government.
These reports often include updated contact information and, in some cases, financial information.
Additional Resources:
Steps to Form LLC in Delaware
Choose a unique name for your LLC, following Delaware’s naming requirements.
Designate a registered agent with a physical address in Delaware.
File the Certificate of Formation (Articles of Organization) with the Delaware Division of Corporations, paying the filing fee.
Consider drafting an Operating Agreement, although it’s not mandatory in Delaware.
Obtain an EIN (Employer Identification Number) from the IRS for tax purposes.
File an Annual Report and pay the associated fee to maintain good standing.
Ensure compliance with any required business licenses or permits.
Pay Delaware’s annual franchise tax based on your LLC’s specific circumstances.
Operate your Delaware LLC in accordance with your Operating Agreement and applicable laws.
Steps to Form LLC in Indiana
Choose a unique name for your LLC, including “Limited Liability Company” or “LLC.”
Designate a registered agent with a physical address in Indiana.
File Articles of Organization with the Indiana Secretary of State, paying the filing fee.
Optionally, create an operating agreement to outline internal management.
Obtain an EIN from the IRS if you have multiple members or employees.
File a Biennial Business Entity Report every two years to maintain active status.
Check local requirements for permits or licenses.
Register for state taxes and relevant licenses if needed.
Keep thorough records of financial transactions and important documents.
Stay informed about any changes in regulations and compliance requirements.
Feature Comparisons Between Delaware LLC vs. Indiana LLC
Delaware LLC
Delaware has a specialized business court called the Court of Chancery, which is known for its expertise in corporate law.
This court handles most business-related disputes quickly and efficiently, making it an attractive option for LLCs seeking legal resolution.
Delaware allows for a high degree of privacy, as it does not require the public disclosure of member information in the Certificate of Formation.
Members can remain anonymous if desired.
Delaware has a long history of corporate law development, resulting in a well-established body of legal precedents.
This stability and predictability can be advantageous for LLCs facing legal challenges.
Indiana LLC
It typically has lower initial filing fees and annual reporting fees compared to Delaware, making it a cost-effective option for smaller businesses.
Indiana provides readily accessible local support and resources for businesses, making it easier for entrepreneurs to navigate state-specific regulations.
Indiana’s regulatory requirements are generally straightforward and uncomplicated, making it a favorable choice for businesses seeking simplicity in compliance.
Business Environment
Delaware LLC
Legal Precedents
Delaware is renowned for its well-established legal precedents and a comprehensive body of corporate law.
The Delaware Court of Chancery specializes in business-related disputes and is known for its expertise in corporate matters.
This legal environment provides predictability and stability, which can be advantageous for businesses facing complex legal issues.
Privacy
Delaware offers a high level of privacy for LLC members.
The state does not require the public disclosure of member names and addresses in the Certificate of Formation, allowing members to remain relatively anonymous.
Tax Benefits
Delaware does not impose sales tax on intangible assets, which can be beneficial for businesses with intellectual property holdings.
There is no state-level income tax for Delaware LLCs that do not conduct business within the state.
Related post:
30 Best Business Ideas in Delaware
Indiana LLC
Cost-Effective Formation
Indiana typically has lower initial filing fees and annual reporting fees compared to Delaware, making it a cost-effective option, particularly for small to medium-sized businesses.
Local Support and Resources
Indiana provides accessible local support and resources for businesses through state agencies and chambers of commerce.
This local support can be valuable for entrepreneurs navigating state-specific regulations.
Predictable Franchise Tax
Indiana’s franchise tax is based on the company’s gross income, which can be more predictable for businesses compared to Delaware’s method based on authorized shares.
Simplicity in Compliance
Indiana’s regulatory requirements are generally straightforward and uncomplicated, making it a favorable choice for businesses seeking simplicity in compliance.
Related post:
Delaware vs. Indiana Taxes
Delaware Taxes
State Income Tax
Delaware imposes a 2.20% to 6.60% state income tax on LLCs. The tax rate varies based on the LLC’s taxable income. LLCs operating in Delaware are subject to this income tax.
No Sales Tax
Delaware is one of the few states in the U.S. that does not impose a state-level sales tax.
This can be advantageous for consumers and businesses alike, as it means there are no additional sales tax costs on goods and services.
Corporate Income Tax
Delaware has a relatively low corporate income tax rate of 8.70% compared to many other states.
This makes it an attractive destination for businesses, including LLCs, that generate income within the state.
No State-Level Value Added Tax (VAT)
Delaware does not have a state-level value-added tax, which simplifies pricing and transactions for businesses.
Annual Franchise Tax
Delaware imposes an annual franchise tax on businesses of $300, including LLCs.
The tax amount varies based on the number of authorized shares or the assumed par value method, but it is unrelated to the company’s income.
Indiana Taxes
State Sales Tax
Indiana has a statewide sales tax, with a base rate of 7.00%. However, the actual tax rate may be higher in some counties due to local sales tax additions.
Franchise Tax
Indiana does not have an annual franchise tax like Delaware.
Instead, it imposes a Corporate Income Tax on corporations and a Gross Income Tax on pass-through entities like LLCs, with rates of 5.5% as of my last update.
State Income Tax
Indiana has a flat state income tax rate of 3.15% for individuals and 4.9% for corporations. There are no additional local income taxes for businesses.
Property Taxes
Indiana has a property tax rate of 0.84% which varies by county. Some counties offer property tax abatements and incentives for businesses located in certain areas.
Flexibility in Rules and Regulations
Delaware
Delaware is well-known for its highly developed and well-established body of corporate and business law.
This means there is a wealth of legal precedent and case law that provides guidance and predictability in various business matters.
It offers a high degree of flexibility in terms of business operations and management.
Delaware allows LLCs a great deal of freedom in creating operating agreements.
LLC members can customize their agreements to reflect their specific management structures, decision-making processes, and profit-sharing arrangements.
This flexibility is particularly appealing to complex business structures.
Delaware does not require the public disclosure of the names and addresses of LLC members in the formation documents, providing a level of member privacy.
Indiana LLC
Indiana typically has straightforward and uncomplicated regulatory requirements for LLCs.
This can be advantageous for smaller businesses or those seeking a simpler administrative process.
Indiana’s LLC formation process is generally less complex and less expensive compared to Delaware.
This can be particularly appealing to startups and small businesses with limited resources.
Indiana provides accessible local support and resources for businesses through state agencies and chambers of commerce.
This can be valuable for entrepreneurs navigating state-specific regulations.
Key Differences Between Delaware and Indiana
