Key Takeaways
- Delaware’s LLC tax is rising from $300 to $400, but its broader business advantages remain.
- The increase takes effect in 2026, with the first $400 payment due June 1, 2027.
- Delaware’s established laws and Court of Chancery continue to offer legal predictability.
- Flexible company structures and global recognition remain key reasons to choose Delaware.
- Some qualifying corporations may offer a lower annual state cost than an LLC.
- For international founders, Delaware remains a compelling option beyond the annual fee.
For foreign founders looking to establish a US business, Delaware has long been an easy state to put at the top of the list. Its appeal is not simply about what it costs to maintain an entity, but what founders get in return: a mature body of business law, a specialized court system and company structures that offer considerable flexibility.
House Bill 400 changes part of that calculation. Delaware’s annual LLC tax has increased from $300 to $400, adding $100 to the yearly cost of maintaining a Delaware LLC. That may prompt some founders to reconsider their options, but it does not erase the reasons Delaware became a preferred jurisdiction in the first place.
In fact, the change raises a more interesting question. If the annual cost is no longer the only number worth comparing, what does Delaware still offer, and could a corporation make more sense for certain businesses?
What House Bill 400 Changed for Delaware LLCs
House Bill 400 increased Delaware’s annual tax for LLCs from $300 to $400. The increase took effect January 1, 2026, and applies to the 2026 tax year. The first $400 annual tax payment for that year is due June 1, 2027.
The increase is straightforward. Delaware LLC owners now pay $100 more per year to maintain the entity than they did under the previous $300 rate.
For international founders comparing jurisdictions, that additional expense is worth considering. But the annual tax is only one part of the equation.
Delaware’s appeal has traditionally rested on its broader corporate and commercial legal infrastructure, rather than simply on having the lowest possible annual entity fee.
Why Foreign Founders Still Choose Delaware
The $100 increase does not change the underlying features that have made Delaware a popular choice for businesses. For foreign founders and international entrepreneurs, those advantages include:
1. Established Business Law
Delaware has spent decades developing laws specifically around business entities and commercial disputes. Its Delaware General Corporation Law and Limited Liability Company Act are widely used and frequently updated, while the state’s courts have developed an extensive body of business-law precedent.
2. A Specialized Business Court
The Court of Chancery handles many corporate and commercial disputes and has developed substantial expertise in matters involving businesses, fiduciary duties and entity governance. That specialization can provide greater predictability when companies need to resolve legal disputes.
3. Flexible Company Structures
Delaware’s LLC framework gives founders substantial freedom to determine how an LLC will be managed and how members’ rights and obligations will be defined. Operating agreements can establish management arrangements, allocate economic and voting rights and address ownership transfers.
4. Predictable Legal Framework
The depth of Delaware’s business-law precedent gives founders, investors and advisers a familiar framework for structuring companies and navigating commercial relationships.
5. Global Recognition
Delaware business entities are well known to banks, investors, professional advisers and international business partners. For a foreign founder establishing a US business presence, working with an entity structure that these parties already understand can be a practical advantage.
These benefits remain in place after HB 400.
Flexible Company Structures Remain Part of Delaware’s Appeal
Delaware’s LLC framework gives founders considerable freedom to structure their companies around their specific needs.
An LLC agreement can establish management arrangements, allocate economic and voting rights, address transfers of ownership and include other provisions suited to the business. That flexibility can be particularly useful for international businesses whose ownership arrangements or investor relationships may change over time.
A single-member LLC is also permitted, allowing an individual founder to establish an LLC without bringing in additional members solely to satisfy an ownership requirement.
The Corporation Option Deserves a Closer Look
HB 400 did not change Delaware’s existing corporate franchise-tax rates, creating another option for founders weighing the new $400 LLC tax.
Under the Authorized Shares Method, a corporation with 5,000 authorized shares or fewer may qualify for the $175 minimum franchise tax. A non-exempt domestic corporation also pays a $50 annual report filing fee, creating a potential combined annual state cost of $225 for certain straightforward structures.
That is $175 less than the new $400 LLC annual tax, but the comparison has limits. Not every corporation pays $225, and a corporation is not automatically a better choice than an LLC. The final cost depends on the company’s structure, while the right entity depends on factors such as ownership, taxation, governance and fundraising plans.
How the Corporate Franchise Tax Is Calculated
Delaware corporations can calculate franchise tax using either the Authorized Shares Method or the Assumed Par Value Capital Method, generally using the method that produces the lower tax.
The Authorized Shares Method is relatively straightforward for corporations with a small number of authorized shares. Those with 5,000 authorized shares or fewer have a $175 minimum franchise tax under that method.
The Assumed Par Value Capital Method is more involved. The calculation uses factors including the corporation’s issued shares and total gross assets to determine its assumed par value capital.
It should not be described simply as charging $400 for every $1 million of company market value. The calculation follows a statutory formula based on the corporation’s issued shares and gross assets, rather than its market valuation.
For founders considering incorporation, the $225 figure is therefore a useful comparison for certain simple structures, not a universal corporate cost.
The LLC Still Has Reasons to Win
The new corporate comparison does not mean founders should automatically move away from LLCs. For many businesses, the LLC structure continues to offer meaningful advantages.
1. Contractual Flexibility
LLCs allow owners to customize management arrangements, economic rights and other provisions through the operating agreement.
2. Flexible Ownership
An LLC can accommodate a single founder or multiple members, making the structure adaptable as a business grows or brings in new owners.
3. Customized Management
Founders can structure how the company is managed rather than adopting a one-size-fits-all corporate governance model.
4. Potential Tax Advantages
LLCs can offer tax treatment commonly associated with pass-through entities, although foreign owners should consider how the US structure interacts with tax rules in their home countries and other jurisdictions.
5. A Strong Fit for Many Private Businesses
For founders who value flexibility and do not need the particular characteristics of a corporation, an LLC can remain a practical choice even with the higher annual tax.
The $225-versus-$400 comparison is therefore a starting point, not a universal answer.
Delaware’s Value Is Bigger Than the Annual Filing Fee
The increase to $400 makes Delaware LLCs a bit more expensive, but the annual fee is only one part of the decision. Delaware’s established business laws, specialized courts, flexible entity structures and familiarity among investors, banks and advisers continue to give the state strong appeal.
For foreign founders, choosing the right entity can be just as important as choosing the right state. If you are considering a Delaware LLC, contact an LLC formation consultant specializing in Delaware to compare your options and determine which structure best fits your business.
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