The Limited Liability Company (LLC) is a popular business structure for many businesses starting in Delaware. The LLC provides personal asset protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Delaware without an attorney.

Many people are drawn to Delaware LLCs as there is the state is reported to be more business-friendly and, there is no state income tax (though some businesses will be subject to the Delaware Gross Receipts Tax) for LLCs that are taxed as S corps, in addition to no sales tax.  While having no state income tax may be a benefit, your home state may still require income taxes to be paid in addition to multiple filings. 

Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting for the business owner’s personal assets.

Related: How Does an LLC Protect You?

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Forming an LLC in Delaware can be both affordable and is
simple enough for most people to do on their own.  That said, it’s not a bad idea to have a legal professional like IncFile or IncAuthority help along the way to make sure everything was done correctly.

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

The filing fee to form a Delaware Limited Liability Company is $90, and processing time typically takes 7-10 business days. 24-hour expedited processing is available for an additional $50.

HOW TO FILE THE DELEWARE CERTIFICATE OF FORMATION AND FORM A LLC

The steps for filing the Certificate of Organization (called the Articles in Organization in most states) online or by mail are mostly the same.  The screenshots show filing online.

Unlike many states, Delaware doesn’t allow online registration. So, to get started, download the Delaware LLC Certificate of Formation from the Delaware Secretary of State, Division of Corporations.

Step 1: Name the LLC

Enter the legal name you want for the LLC.   Delaware law states that each LLC must have a unique name.  Check on Delaware LLC name availability.

The name of the LLC must include one of the following designators at the end of the business name:

  • Limited Liability Company
  • LLC
  • L.L.C.

Before finalizing a company name, learn more about LLC Name Requirements in Delaware.

You may also want to see if a domain name is also available to have a matching website address.

A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

Register LLC Name in Delaware

If you aren’t quite ready to register your LLC but want to reserve the name, you can file the Name Reservation form and hold the name for up to 120 days.

Step 2: Registered Agent

In the state of Delaware, there must be a registered agent selected to act as the primary point of contact to receive service of process on behalf of the LLC. Service of process refers to the legal process of notifying a business that legal action has been taken against it.  The LLC will be sent notices such as tax documents, summons, subpoenas, and other important legal documents to a central person, so the LLC has sufficient time to prepare and respond.  

The requirements to be a registered agent are pretty simple.  They can either be an individual or business entity (such as a registered agent service) with a physical address and presence in the state and is available to receive service of process during normal business hours.

Even though any individual can be the agent (business owner, member, friend, etc.), their name and registered office address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when they are doing business from home.  Hiring a company like Northwest Registered Agent to be the Registered Agent will reduce the number of unwanted phone calls and mailings.’

Delaware LLC Registered Agent

Step 3: Sign and Date

An authorized person (typically a member, attorney, or accountant) must sign and date the Certificate of Formation.

Step 4: Sign, Pay, and File

To finish the registration process, pay and file the Certificate of Formation.

Send to:
Delaware Division of Corporations
401 Federal Street – Suite 4
Dover, DE 19901

In approximately 1-2 weeks, the LLC will be approved.

If you have questions, contact the Delaware Secretary of State, Division of Corporations.
401 Federal Street – Suite 4
Dover, DE 19901
Phone Number: 302-739-3073 or 302-739-3073
https://corp.delaware.gov/contact.shtml

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Tasks After Forming Your LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare an LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed and, more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not have a full understanding of their roles and responsibilities which could lead to costly disputes in the future.

Related: Delaware operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (sometimes referred to as the Federal Employer Identification Number, FEIN or Federal Tax Identification Number) is a unique 9-digit number for a business that is assigned by the Internal Revenue Service.  The EIN is similar to a social security number for an individual but instead identifies business entities for tax purposes.

The EIN will be needed in order to open a bank account, register for business licenses and permits, file tax returns, pay payroll taxes, and more. 

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this is referring to the way the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, LLCs receive pass through taxation status. This means instead of the LLC paying taxes on profits, the profits or losses flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can elect to be taxed as a C-corporation or an S-corporation.

Multi-member LLCs will be default be taxed like a general partnership. The members can elect to be taxed as a C-corporation or an S-corporation.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Depending on the age of the LLC, a Delaware Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC 

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be a variety of business licenses and permits to register for. Some common registrations include:

  • Business License – Every business operating in Delaware will need to obtain a state business license. In addition, several cities also require businesses to obtain licensing before they can start. 
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.

Related: What Business Licenses are Needed in Delaware?

Pay Franchise Taxes

LLCs in Delaware won’t have to file an annual report, but they are required to pay franchise taxes to Delaware Secretary of State. The annual franchise tax is due June 1st of each year at a fee of $300, regardless of business activity or income.