Delaware vs Texas: Side-by-Side Comparison
Here's a comprehensive comparison of the two states across all key factors for non-resident LLC formation:
| Feature | Delaware | Texas |
|---|---|---|
| Income Tax | 2.2%–6.6% | None |
| Corporate Tax | 8.7% | None (margin tax >$2.47M) |
| Sales Tax | 0% | 6.25% |
| Annual Fee | $300 | $0 (most LLCs) |
| Formation Fee | $90 | $300 |
| Privacy | No member/manager disclosure | Manager/member names in public records |
| Court System | Court of Chancery (specialized) | Standard state courts |
| Asset Protection | Moderate | Moderate |
| Best For | Corporations, VC-backed startups, companies needing established case law | Businesses with US operations, entrepreneurs planning to live in Texas |
Tax Comparison
Delaware Taxes
- Personal Income Tax: 2.2%–6.6%
- Corporate Tax: 8.7%
- Sales Tax: 0%
Texas Taxes
- Personal Income Tax: None
- Corporate Tax: None (margin tax >$2.47M)
- Sales Tax: 6.25%
For non-resident entrepreneurs with single-member LLCs treated as disregarded entities, state income tax typically only applies if you have income sourced within that state. If you have no in-state operations, employees, or customers, state income tax may not apply regardless of which state you form in.
Formation & Annual Costs
| Cost | Delaware | Texas |
|---|---|---|
| Formation Fee | $90 | $300 |
| Annual Fee | $300 | $0 (most LLCs) |
| Registered Agent (est.) | $100–$300/year | $100–$300/year |
| Estimated Year 1 Total | $540 (with RA) | $450 (with RA) |
Privacy & Asset Protection
Delaware
- Privacy: No member/manager disclosure
- Asset Protection: Moderate
- Court System: Court of Chancery (specialized)
Texas
- Privacy: Manager/member names in public records
- Asset Protection: Moderate
- Court System: Standard state courts
The Verdict: Delaware or Texas?
Texas offers no income tax and zero annual fees for most LLCs, but has a higher formation fee ($300) and less privacy (member names are public). Delaware offers superior privacy, better court system, and no sales tax, but costs more annually ($300 franchise tax). Texas makes sense if you'll actually operate in Texas. Delaware is better for non-resident entrepreneurs forming a holding entity.
Our Recommendation
Texas for US-based operations; Delaware for non-resident holding entities
Remember that regardless of which state you form your LLC in, your federal tax obligations remain the same. All foreign-owned single-member LLCs must file Form 5472 and a pro forma Form 1120 annually, with a $25,000 penalty for non-compliance.
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