If I live in New Jersey and create an LLC in Delaware, will I or my business be taxed both in NJ and DE?

The short answer is yes, your Delaware LLC will be subject to a Delaware franchise tax each year and you will be subject to New Jersey taxes on your income earned from the LLC. Therefore, you will be paying a “double tax.”

This double tax could be avoided by simply incorporating in New Jersey instead of Delaware. But, ultimately, it will depend on what type of business you are creating and what you want your LLC to accomplish going forward. In theory, creating your LLC in Delaware could be worth the extra money spent on double taxation because you also have the advantages of being registered in Delaware. Also, there are ways to reduce the impact of the double tax on your LLC.

So, while the short answer to the question is yes, that may be misleading. In a vacuum, paying more in taxes is bad for your LLC. But, in the real world, there are many more factors to be considered. A strategy should be developed and your decision on where to incorporate should reflect this strategy. Of course, to pick the right place of incorporation, you must also understand the consequences of choosing between different options. This is where you should get help. You should consult with an attorney that has experience navigating these decisions and developing strategies.

If you are trying to decide where to incorporate your business, you should check out LawTrades where we match experienced attorneys with business owners who have questions. The initial consultation is free and you will be matched with a quality attorney who has experience making these types of decisions.