Putting the question the right way round
"Incorporate in Delaware" is very common advice. It leaves out something important: where you register the company and where you operate it are two different questions, and Delaware does not answer the second.
This article does not tell you which state to choose. It shows the mechanism and names the trap that usually gets missed; the rest is decided by the law of the state you actually operate in.
What Delaware gives you
The Delaware LLC Act governs the company's internal structure: what goes in the certificate, the relationship between members and managers, how an interest transfers. Delaware states the principle itself, for LLCs organised elsewhere:
The laws of the jurisdiction under which a foreign limited liability company is organised govern its organization and internal affairs and the liability of its members and managers (§ 18-901(a)(1)).
So Delaware does not apply its own law to another state's LLC internally. Whether the state where your Delaware LLC operates applies the same principle to it is decided by that state's law, not by this section. The principle is widely followed, but it appears here only as what Delaware says about itself.
What Delaware does not give you: foreign qualification
Registering in Delaware does not excuse you from registering where you actually operate. In the US the mechanism is called foreign qualification: a company formed in one state that is "doing business" in another must register there as well.
How it works is visible in Delaware's own rules, which describe what happens when another state's LLC operates in Delaware:
- an unregistered company may not maintain any action, suit or proceeding in Delaware until it registers and pays all fees and penalties for the years it did business unregistered (§ 18-907(a));
- failing to register does not invalidate contracts and does not stop the company defending an action (§ 18-907(b));
- the fine is $200 for each year or part of a year spent doing business without registering (§ 18-907(d)).
Delaware also lists activities that do not constitute doing business: maintaining, defending or settling an action; holding members' or managers' meetings; maintaining bank accounts; selling through independent contractors; soliciting orders that require acceptance outside Delaware before becoming contracts; borrowing or lending; conducting an isolated transaction not in the course of similar ones; and doing business in interstate commerce (§ 18-912(a)). Being a member or manager is not, by itself, doing business (§ 18-912(b)).
Two traps, and both are easy to fall into.
Direction. The list above is about Delaware itself. "My Delaware LLC operates in California — what do I need there?" is answered by California's law. Delaware's list says nothing about any other state.
Tax. Section 18-912(c) says expressly that the list does not apply in determining whether a company is subject to taxation or regulation. An activity can fall outside "doing business" for registration and still create a tax obligation.
The cost appears in two places
The Delaware side is known and statutory: $70 for the certificate of formation (§ 18-1105(a)(3), in the version effective 1 August 2026), $400 of annual tax (§ 18-1107(b)), and a registered agent's fee, which is set by the market rather than by statute.
The state you operate in may have its own fees, its own annual filing and its own agent requirement. This article does not cover them. The practical conclusion is only this: forming in Delaware and operating elsewhere means maintaining two regimes, not one.
LLC or corporation: the difference the statute shows
This question is usually asked for tax reasons — and tax is exactly what this article does not cover. The governance difference, though, is written directly into the statutes.
| LLC (6 Del. C. ch. 18) | Corporation (8 Del. C.) | |
|---|---|---|
| Who runs it | However the members' agreement provides; no board required | By or under the direction of a board of directors (§ 141(a)) |
| Who may run it | No restriction | Every board member must be a natural person (§ 141(b)) |
| Where the rules live | In the LLC agreement — never filed, never public | In the certificate of incorporation and the bylaws |
The LLC's freedom is declared in the statute as a purpose: the policy of chapter 18 is to give maximum effect to the principle of freedom of contract (§ 18-1101(b)). It reaches far enough that the agreement may expand, restrict or eliminate fiduciary duties — it may not eliminate only the implied covenant of good faith and fair dealing (§ 18-1101(c)) — and liability may likewise be limited or eliminated except for a bad-faith violation of that covenant (§ 18-1101(e)).
What that means in practice: there is less "default protection" in an LLC than people expect. What protects you is the agreement itself. Delaware neither sees it nor requires it.
What this article does not settle
Said plainly, because the decision turns on exactly these:
- Tax, federal and state. The LLC-versus-corporation choice is usually made for tax reasons, and there is no answer to it here;
- what each state counts as "doing business", what it charges, and what it does to a company that skipped registration — fifty separate answers;
- what investors prefer — practice, not law.
So this article chooses neither the state nor the form for you. If the business will operate in one state, get the answer from someone advising on that state's law: choosing Delaware does not close that question, it only defers it.
Forming a Delaware LLC, what changes for a non-resident, and the annual obligations are separate articles.