Out of State LLC's in Delaware

[Zacher Bayonne]

Hi everyone, 

I live in Maryland, but want to set up my LLC in Delaware. Has anyone ever done this? If so, has it been worth it? For some perspective, I live about an hour from the border of Delaware.

[Jenifer Levini]

Hi All, I'm a lawyer in California who has set up many start-up companies as c-corporations in Delaware. Here's the scoop. @Chris K. is pretty right on about Corporations wanting to form in Delaware. The laws in Delaware favor corporations, whereas the laws in California have not been tested as much. This applies to C-corps whose source of funding is venture capital or other investors who will become share-holders when their investments are converted to stock.

This has nothing to do with real estate, and is especially not applicable if you are a small-time investor (i.e. your investments are worth under $10M). 
Real estate investors hold their property in entities called LLCs for many reasons. A big one is that LLCs require a lot less corporate formalities, which means that you are not paying your lawyer to create a corporate resolution every time you make a business decision.

Another big issue is corporate taxes. You are taxed twice if you form a C-corporation. In LLCs you can pass your income through to your personal taxes so you are only taxed once.

In California, if you form an entity in another state, such as forming a Delaware Corp, you still have to pay California state taxes (min $800/year) if you are doing any of the business from California. So it doesnt save any money to form in another state. This may not be true of all states.

If you live in a state that allows series LLCs, you are very lucky. Form your entity(ies) there.