Should You Form an LLC in Your Home State or Delaware?

Ask around about where to form your LLC, and you’ll hear one name over and over: Delaware. It’s practically legendary in the startup world. But if you’re a small business owner, freelancer, or solo entrepreneur, does forming in Delaware make sense for you?

Short answer? Not always.

While Delaware offers benefits for certain types of businesses, most new entrepreneurs are better off forming their LLC in their home state. Here we walk through what makes Delaware special, when it’s worth considering, and when your local state is the smarter—and cheaper—choice.

1. Why Delaware Is So Popular for Business Formation

Delaware has built a reputation as a business-friendly state. Big companies and investors love it for a few key reasons:

• Well-established corporate law: Delaware’s Court of Chancery is known for handling business cases quickly and predictably
• Privacy protection: Delaware doesn’t require names of LLC members to be disclosed publicly
• Flexible structure: LLCs have lots of freedom to organize themselves internally
• No state income tax on out-of-state income: This benefits companies that operate nationally or globally

These are great perks—if you’re running a high-growth startup or plan to raise venture capital. But if you’re running a small service-based business or freelancing online? The extra cost and paperwork might not be worth it.

2. The Hidden Costs of Forming in Delaware

Forming your LLC in Delaware when you live elsewhere can sound savvy—until you get into the logistics. Here’s what most people don’t realize:

If you form in Delaware but live and work elsewhere:

• You still have to register as a foreign LLC in your home state
• You’ll likely pay two sets of filing fees and annual reports
• You’ll need a registered agent in both states (Delaware requires one)
• You’ll deal with extra paperwork and compliance tasks every year

Instead of saving money or adding credibility, this setup often just adds overhead—especially for solo founders or small teams who don’t need multi-state protection or investor relationships (yet).

3. When It Makes Sense to Form Your LLC in Your Home State

For most entrepreneurs, your home state is the best place to start. It’s easier, more affordable, and totally sufficient for the majority of business types.

Benefits of forming in your home state:

• Simple compliance: Fewer hoops to jump through with local taxes and business licenses
• Lower cost: Only one state’s fees to manage
• Cleaner record-keeping: Your taxes and filings stay centralized
• Location alignment: If you operate primarily in your home state, that’s where you’re legally conducting business anyway

States like Texas, California, Florida, and New York all have straightforward LLC filing systems—and they expect you to register locally if you’re doing business there. Forming in Delaware doesn’t exempt you from that requirement.

4. When Delaware (or Another State) Might Be Worth It

While it’s not the best move for everyone, there are situations where choosing Delaware—or another business-friendly state—can be beneficial:

You might consider Delaware if:

• You’re planning to raise venture capital or take on investors
• You have multiple co-founders in different states
• You’re building a tech startup or SaaS company targeting a national or international market
• You’ll be forming a C-Corp and want to take advantage of Delaware’s corporate law

In these cases, the long-term advantages of Delaware’s legal system and reputation with investors can outweigh the initial complexity.

5. What About States Like Wyoming or Nevada?

Some entrepreneurs look at states like Wyoming or Nevada because of low fees or strong privacy laws. These states can be appealing, but similar rules apply: if you live or operate your business elsewhere, you’ll still need to register in your home state and maintain compliance in both.

Unless you’re a digital nomad with no fixed base or are working on something large-scale, the added complexity rarely pays off.

6. How to Choose the Right State for Your LLC

If you’re unsure where to file, here’s a simple framework to guide your decision:

• Do you live and run your business in one state? → File there.
• Are you raising capital or have a national business strategy? → Consider Delaware.
• Are you a solo freelancer, coach, or service provider? → Home state is almost always best.
• Do you want to keep things lean and easy? → Avoid double-state setups.

Clarity and simplicity beat trendy advice every time. Most LLC owners don’t need Delaware. They need a straightforward path to legal structure and protection—starting right where they are.

Make It Easy to Get Started

Delaware may be the “cool kid” of business states, but that doesn’t mean it’s the best choice for you. Where you form your LLC should support your goals—not add confusion or cost.

If you’re launching a small business, side hustle, or freelancing career, forming your LLC in your home state is usually the smartest, most affordable move. You’ll stay compliant, simplify your setup, and avoid unnecessary complications as you grow.