As I mentioned in a post last month, limited liability company laws vary significantly from state to state. Depending on your particular circumstances, one state could have significant advantages over another.
Here are a few reasons why Delaware is one of the best states to form a limited liability company from an asset protection standpoint:
- Formation is relatively convenient and inexpensive compared to many other states.
- The applicable Delaware statute clearly makes a charging order the exclusive remedy of a creditor.
- Certain other creditor remedies are expressly barred.
- Delaware law allows various provisions in the LLC Operating Agreement that could be favorable from an asset protection standpoint.
- Delaware has a more developed body of case law than many other states; and the Delaware Chancery Court is a very sophisticated court from a business standpoint.
If you form your LLC in Delaware but it does business in another state, you will have to file additional papers in that other state to qualify to do business.
Ohio LLCs may provide significant protection; but they are currently not as solid as the protection offered by Delaware law. I am now generally forming Delaware LLCs even when one of my clients will be doing business in Ohio.
Each situation should always be examined on an individual basis. As I have mentioned many times before, there is no magic asset protection formula that will be appropriate in all situations. But in situations where a limited liability company is appropriate, Delaware is currently a very reasonable choice.