Where to Incorporate: Delaware vs. Florida

Making the decision where to incorporate, whether in Delaware or Florida, can be tough. Discover how the two states differ in incorporating a company.

Is it possible to incorporate your business in one state, while you live in another? There are several states in the US that provide enough benefits for this move to be viable. Although each business is unique, there are a few states that stand out as ideal places to start a company.


Florida and Delaware, in particular, are two of the best options where you can incorporate your company. They have business, tax, and privacy laws that are beneficial for your business. 


Learn how to incorporate in these friendly states, so you can make a wiser decision in establishing your business entity. This will help guarantee that you get the most out of your incorporation.

Importance of Incorporating


The most significant advantage of incorporating your business is the security it provides for your assets. As a sole proprietor, you are liable for your company's assets. So, it means that creditors may confiscate them to pay off corporate debts.

When you incorporate into a Limited Liability Company (LLC) or a C-Corporation, any legal difficulties your company might encounter are all kept separate from you, the owner. This will restrict your liabilities to the amount you have put into the business.


Incorporating is also advantageous for taxation. Corporations and individuals pay different tax rates. Incorporating allows you to divide your business entity and corporate income taxes from your personal income taxes.

Suppose you have incorporated your business. Your tax advisor can assess your corporation tax rate and compare it to your personal income tax rate. If it's lower, incorporating will be the best option.


Even after the death of the business owners, corporations can continue to survive. The net assets of a sole proprietorship fall to its successors. As such, operating agreements and contracts are crucial to the business entity. If there's enough preparation, a corporation can survive even if the ownership changes.


Incorporating your business entails transforming your firm into a legal entity, instead of just a group of founding members.


Incorporating in Delaware vs. Florida

Incorporating in Delaware

Delaware is well-known for its incorporations. It is credited as the origin of the modern company. In the early 1900s, before Delaware changed its corporate statutes, forming a corporation required congressional approval. Delaware changed that. It was the first friendly state to allow individuals to incorporate their businesses. It is still known as America's incorporation center.


Out of all US states, forming an LLC or incorporation is the cheapest in Delaware. There is no income tax for Delaware LLCs and no capital stock tax for small businesses. The state’s pro-privacy and pro-business legislation continue to draw in business owners.


Before you incorporate in Delaware, you have to go through the following process. First, pick a name for your company. Make sure to come up with a name that fits your company's message, product, or service. Then, elect representatives (for LLCs) or directors by recruiting and appointing them (for C Corporations). After that, file the paperwork for incorporation.


Corporations must file a Certificate of Incorporation, while LLCs have to file a Certificate of Formation. Corporations must also file an Annual Franchise Tax Report in Delaware. Then, if necessary, get the required business licenses or permits. Finally, determine any other regulatory requirements or registrations. Obtaining Federal tax is an extra expense and duty you must consider for your corporation (EIN).

Incorporating in Florida

When you've decided that it's the perfect moment to incorporate in Florida, you have to submit the necessary paperwork. Whether you want to start a for-profit or nonprofit company, you need to submit paperwork like your certificate of incorporation.


To incorporate in Florida, sole owners can depend on incorporation to perform the necessary tasks. It ensures completion of all forms and accomplishment of necessary payments.


Before incorporating in Florida, you must plan for various aspects of the process.

  • First, choose a name for your organization that complies with Florida's regulations.
  • Then, with the Department of State, submit your certificate of organization.
  • Go to the IRS and get a Federal Employer Identification Number (FEIN).
  • Make sure you have all the required licenses from the city, state, and county.
  • Finally, pay any applicable fees and expenses.


It's the most preferred friendly state for forming corporations and limited liability companies. With the fourth-largest population in the US, it has a flourishing commercial community.

Incorporation Laws in Delaware vs. in Florida

Delaware

Delaware’s General Corporation Law (DGCL) rules over the connection between owners and managers (directors and officers) of an LLC or a C Corp. As such, it is a contract law that governs business managers and investors. However, DGCL doesn't cover other issues of business law, like labor, competition, securities disclosure, and a prescriptive civil code "company law." All corporations must still follow the federal and state rules for these. Delaware companies don't blend corporate governance with federal and state laws.


DGCL allows the board of directors to call a special meeting of stockholders. But, it doesn't need a corporation for a special meeting to be held.

Florida

When a holding company decides that incorporating is the best option for them, they must know how to do so. There are several stages for incorporating under Florida business corporate rules. The first one must be verifying to determine if your business name is available. If another holding company has already used the name you picked, you're not allowed to use it. Your applications will also be rejected.


A special meeting of shareholders will be summoned by the corporation's board of directors. Incorporation requires at least 10% ownership unless a higher amount is necessary.

More Information About Incorporating in Delaware vs, Florida

Costs of Incorporating in Delaware

  • The cost fee of incorporating in the state of Delaware is $89
  • Division of Corporation cost fee is $50
  • Filing fee tax is at least $15
  • County fees of $24 are all included
  • The filing fees may vary depending on the number of shares you want and their par value, as this figure is set on a corporation with 1,500 shares at no par value.
  • $90 for filling your Delaware LLC registration.
  • All non-exempt domestic corporations' fee is $50 plus taxes.
  • For Authorized Shares, the fee is $175
  • Assumed Par Value Capital process, the least tax is $350. The largest tax of $180,000 will be imposed on all corporations using either process.
  • LLCs in Delaware are not required to pay a $300 yearly tax
  • The punishment for non-payment or late fee is $200, with interest accruing at a rate of 1.5 percent per month on both the tax and the penalty.

Costs of Incorporating in Delaware

  • The cost of incorporating in Florida is $70. It involves the designation of a registered agent and also filing fees. The entire cost is determined by factors such as location and nature of business. Extra fees are accepted by the Division of Corporations of the Florida Department of State.
    • Certificate Copy - $8.75
    • Certificate of Status - $8.75
    • Foreign name renewal - $87.50
    • Non-profit reinstatement - $175.00
    • For-profit reinstatement - $600.00
    • Resignation of a registered agent for active business - $87.50
    • Resignation of a registered agent for inactive business - $35

Advantages of Incorporating in Delaware

  • Business Friendly Laws- famous for having most of the business-friendly laws in the US.
  • Efficient & Knowledgeable -they have business expertise and the ability to make quick decisions. It means you don't need to spend a lot of money on legal defense.
  • Protection on LLC - if your financial position worsens, they will protect the company.
  • Offering Tax Advantages - If you don't do business in Delaware, you don't have to pay tax and sales tax.
  • No Need to Make Your Name Public - the LLC must only list the name of the LLC and the registered agent's name and address.
  • "Series LLCs" can form - Each series has unique members, and the liabilities are distinct.
  • You Can File - In most states, filing is now quick, but it takes less than an hour on average in Delaware.

Advantages of Incorporating in Florida

  • Anonymity - small business under the cover of a corporation helps you to stay anonymous. Depending on small businesses, the services provided to the community are often valuable.
  • Liability - When a business incorporates, its owners are no longer liable for its debts. In a financial meltdown, creditors cannot seize the owner's assets to settle a debt.
  • Capital - A small business might keep itself afloat in bad times by selling its stock like a corporation. Longevity - A small business can keep itself afloat in bad times by selling its stock like a corporation. A corporation managed by stockholders and an appointed Board of Directors. They can continue to exist.
  • Taxes - A small firm that incorporates plenty of tax advantages. There are tax advantages to providing enrichment programs to employees.

Disadvantages in Incorporating in Delaware

  • Dual Registration - If you don't live or work in Delaware, you must also register in your home state.
  • Keep a Registered Agent - An LLC must have a "registered agent." Usually, this should come from the organization that formed the LLC, though it might be another agency or contact.
  • Extra Fees - If you file a lawsuit, you will have to pay for legal representation.
  • LCCs are Different - they only accept series LLCs, and most other states haven't adopted it yet.
  • Tax breaks rarely help SMBs - Small businesses rarely enjoy taxes.

Disadvantages in Incorporating in Florida

  • Paperwork - The process of converting a small firm into a corporation needs more paperwork. An incorporated business also needs to keep financial records by the business owner.
  • Legal fees - When forming a corporation in Florida, small business owners need to have a lawyer. Legal services can supervise a firm after shareholders request it.
  • Complexity - An average profit margin for a small business may not be significant to support incorporation. The act of incorporation may add to the complexity of what started.
  • Financial - Small businesses already enjoy a lot of advantages without becoming a corporation.

Whether you plan to incorporate in Delaware or in Florida, Doola can guide you. Contact us to learn where you should start and decide if your corporation will be in Delaware or in Florida. 

Pro Tip:

It is possible to convert a Florida corporation or LLC into a Delaware entity at a later time.

Corporate Action Without a Shareholder/Stockholder Meeting in Delaware vs. in Florida


What is the perfect place to start a business? People despise lawyers who say "it depends," but it does in this situation. There are advantages and disadvantages to incorporating in Florida vs. in Delaware. But, you may weigh those advantages and disadvantages based on such instances as Corporate Action without a Stockholder Meeting.

Delaware

Unless the certificate of incorporation specifies otherwise, DGCL allows corporate action without a meeting of stockholders. But, written permission from the shareholders is required to propose corporate action.

Florida

Unless otherwise provided in the articles of incorporation, the FBCA permits corporate action without a stockholder meeting, but with written consent. Unless the articles of incorporation state otherwise, the FBCA also allows corporate action without a stockholder meeting. But, it still requires written permission from the stockholders.


Special Meeting of Shareholders/Stockholders in Delaware vs. Florida


Delaware

DGCL allows the board of directors with a certificate of a corporation to call a special meeting of stockholders. It also does not need stockholders' requests for special meetings.

Florida

Under the FBCA, a special meeting of shareholders is also allowed by the corporation's board of directors, by persons authorized by the articles of incorporation, bylaws, or by holders of not less than 10%. This is unless a greater percentage not to exceed 50% is required under the articles of incorporation.


Dividends and Repurchase of Shares in Delaware vs. Florida

Delaware

DGCL does not change the concepts of the principal amount, capital, or surplus. But, it allows a corporation to declare and pay a dividend from surplus or no surplus. 


DGCL states that a corporation may exchange or get its shares only if its capital is not damaged. The repurchase or redemption won't also hurt the business's capital. "Capital" refers to the total par value of all shares outstanding of capital stock. Surplus is the difference between the fair value of the net assets and the quantity of capital.

Florida

The FBCA allows a corporation's board of directors to declare and pay distributions. This is for when the corporation could pay its debts if they become due in the ordinary course of business. Also, for instance when the corporation's total assets exceed the sum of its total liabilities. The amount needed if the corporation were to liquefy at the time of the distribution.


The FBCA allows a corporation to redeem or repurchase its shares. A corporation may reissue shares purchased. However, this is regarded as authorized but unissued shares upon acquisition unless the incorporation stipulates otherwise.


According to the FBCA Code of Conduct, indemnitees must behave in the corporation's best interests. Then, outstanding share stock of classes will usually gain preference upon distribution of the dividend.


Indemnification of Directors and Officers in Delaware vs. Florida

Delaware

Non-Derivative Permissive Indemnification. DGCL allows corporations to indemnify Indemnitees. But, an Indemnitee must meet the stipulated Code of Conduct to avoid expenditures.


Indemnification for Derivative Actions. Indemnitees may recover expenses but not a settlement, judgments, or fines. A court must determine that the Indemnitee is also entitled in all circumstances or the Indemnitee will be all held liable to the corporation.


Mandatory Indemnity. The corporation must indemnify a current or former director's reasonable charges. This should be sustained in defending any proceeding subject to DGCL’s indemnification provisions. DGCL might allow permissive indemnification if the Code of Conduct is fulfilled. Also, they may not oppose them to the corporation's best interests.


You can make the determination based on:


  • majority votes of directors are not stakeholders to such action, suit, or proceeding;


  • committee of directors assigned by majority votes of directors, even if a little over a quorum; or,


  • by impartial legal advice counsel in a written opinion when there are no such directors.

Florida

Non-Derivative Actions - Permissive Indemnification. This is when the Indemnitee fulfilled the specified Code of Conduct. Incumbents may also be indemnified for expenses incurred in connection with a proceeding.


Derivative Actions – Permissive Indemnification. A company may indemnify an Indemnitee for litigation costs but not for settlements. Besides, an indemnity is only allowed if the Indemnitee complied with the Code of Conduct. Unless this happens, no indemnification may be accepted for any claim. Also, when the court finds that the Indemnitee is true and obligated. The Indemnity, in the circumstances of the case law, is liable to the Florida corporations.


Indemnification is a legal rule that you must meet. Suppose the FBCA indemnification provisions apply to a former director or officer. They must reimburse for reasonable defense costs unless a court orders otherwise. You can grant permissive Indemnity if the Indemnitee has met the Code of Conduct.


According to the FBCA Code of Conduct, an Indemnitee must act in the best interests of the corporation. Indemnitee had no probable grounds to believe the Indemnitee's conduct was unlawful.


You can make the determination:


  • by a majority votes of directors are not parties to the suit, action, or proceeding, even if a little over a quorum; 


  • by a committee of directors assigned by a majority vote of such directors, even if a little over a quorum; 


  • when there's no independent legal advice representation in a written answer; or,


  • by the stockholders.


Incorporating with the Help of Doola


There are factors to consider while deciding whether to incorporate in Florida vs. in Delaware. Every company is different. So, seek legal advice from a business lawyer who is familiar with incorporating a company in both friendly states.


You can also reach out to Doola. We can help with every step of the incorporation process. Set up a consultation with us to know more about what we could do to help your company succeed.

FAQs About Where to Incorporate: Delaware vs Florida 

Does a Florida corporation need a Florida address?

No, a Florida corporation doesn't need to have an address in the state. However, you do need a registered agent operating here.

Who should not serve on the board of directors?

Those who are not voted by the shareholders/stockholders should not serve on the board of directors. 

What is the Delaware tax loophole?

The Delaware tax loophole is that the state allows large corporations to report their revenue where they incorporated, instead of where it was produced.

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