Is there a reason why I should create my LLC in Delaware instead of my home state?

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Is there a reason why I should create my LLC in Delaware instead of my home state?

I’ve been told that there are tax breaks for creating my LLC in Delaware. Wouldn’t I still pay my taxes to my home state?

Asked on February 24, 2012 under Business Law, Pennsylvania

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Taxes paid have nothing to do with state of formation of an LLC (or incorporation of a corporation). Taxes are based upon nexus, which is a fancy way of saying "connection"--a business pays taxes where it has a presence or connection. For example: you have a LLC for a computer sales, repair, and consulting business in New York, say. The business is incorporated in DE, but is located in NY and all your sales and work are in  NY, too. You will pay income and sales tax in NY.

To understand the full tax implications of your type of business and location, you should speak with a CPA.


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