California vs. Delaware LLC — Where to Form
If you operate in California, forming in Delaware does NOT avoid the $800 annual franchise tax. You must register as a foreign LLC in CA and pay the $800 regardless. The only result: dual-state compliance and higher total costs. See all comparisons.
Cost Comparison (Operating in California)
| CA Domestic | Delaware + CA Foreign | |
|---|---|---|
| Formation | $70 (CA) | $90 (DE) + $70 (CA) |
| Annual franchise tax (CA) | $800 | $800 (same — inescapable) |
| Annual franchise tax (DE) | N/A | $300 additional |
| LLC fee (CA, if >$250K) | Yes | Yes (same) |
| Agents needed | 1 | 2 (CA + DE) |
| Year 1 total | $890 | $1,260+ |
| Annual ongoing | $820+ | $1,120+ |
5-year savings of forming in CA: ~$1,500+
When Delaware Makes Sense for CA Businesses
Only: (1) raising VC (investors demand it), (2) no CA operations at all, (3) specific need for Delaware Court of Chancery.
For 95%+ of businesses operating in California: form in CA.
FAQ
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Get StartedDoes Delaware avoid California taxes?
No. If you "do business" in CA, you owe CA's $800 franchise tax, LLC fee, and income tax regardless of where you formed. Delaware formation adds costs without reducing CA obligations.