Delaware is a popular formation state even for businesses with no physical presence there — a reputation built on its specialized business court system and well-developed body of corporate law, not tax advantages alone.
The Court of Chancery is the real draw
Delaware's Court of Chancery specializes in business disputes and is staffed by judges rather than juries, producing a large, predictable body of case law that sophisticated investors and larger companies often prefer when disputes arise.
Foreign qualification is still required elsewhere
Forming in Delaware doesn't exempt a business from registering as a "foreign" LLC in whatever state it actually operates in — meaning many Delaware LLCs end up paying formation and franchise fees in two states, not one.
Delaware's franchise tax and annual requirements
Delaware LLCs owe an annual flat franchise tax regardless of income or activity, plus registered agent fees — a predictable but real ongoing cost that should be weighed against the benefits for a smaller business.
Whether it's actually worth it for your business
For a small, single-state business with no plans to raise institutional investment, forming in your home state is often simpler and cheaper. Delaware's advantages matter most for businesses anticipating investors, multi-state operations, or disputes sophisticated enough to benefit from its specialized court system.