Step-by-Step Guide to Forming an LLC in Delaware

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Delaware LLC Quick Facts

How much does it cost to form an LLC in Delaware?

Initial LLC State Filing Fee – $90

 

Recurring Fees – Annual Franchise Tax – $300

How long does it take to get an LLC in Delaware?

Normal processing is 1-2 weeks.

 

Expedited processing is also available for an additional fee.

Don’t want to form an LLC by yourself?

Let IncFile guide you through the LLC formation process so you know everything was done right. Only pay state fees!

Quick Reference

The Limited Liability Company (LLC) is a popular entity choice for many new Delaware businesses. The LLC provides personal liability 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.

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 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, general partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Forming an LLC in Delaware is popular due to the potential benefits of how the state statutes treat businesses. Delaware has a court system just for businesses, which is called the Court of Chancery. Cases in the Court of Chancery are argued in front of judges, not juries, which means any legal dispute has likely already been argued in court, and businesses will know whether to fight a lawsuit or settle. While this may be a benefit, understand there are additional costs because, if you form a Delaware LLC but physically operate in another state, you will need to register as a foreign LLC in your home state. In addition to the extra filing fees (a foreign LLC costs an extra $200 annually), there may be additional accounting fees as well. In most cases, you are better off creating an LLC in the state where the business activity will take place.

Delaware does offer a benefit for LLCs that are formed in the state but don’t conduct business in the state, which is not having to pay state income taxes.

The filing fee to form a Delaware LLC is $90, and approval typically takes 1-2 weeks. 24-hour expedited processing is available for an additional $50.

Steps to Form a Delaware LLC

The steps for filing online or by mail are largely 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.

Forming an LLC can be both affordable and is something most people can do themselves. Entity formation companies like IncFile or IncAuthority help guide you through the process and make sure there are no mistakes.

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

Step 1: Name the LLC

Enter the name you want for the LLC.  The name of the LLC has to differ from other entity names in the state of Delaware.  Check on the availability of Delaware LLC names. Note that even though a name may be available from the state, it does not check for trademarks.

The name of the LLC must include one of the following words or abbreviations at the end of the business name:

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

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

If you are not ready to form the LLC but want to reserve a name, the Delaware Division of Corporations allows for entity name reservations. This is not a requirement, and you will be able to reserve the name for up to 120 days at the cost of $75.

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

Step 2: Registered Agent

To have an LLC in Delaware, a Registered Agent for service of process must be identified.  A Delaware Registered Agent is an individual resident or a corporate agent such as a registered agent service who acts as the point of contact to receive legal documents, tax notices, summons, subpoenas, etc. on behalf of the LLC.  The registered office address must be a physical street address in the state as a PO Box may not be used, and the agent must be available during normal business hours.

You can act as your own registered agent in Delaware and you are not required to pay for a registered agent.

Any individual meeting the above requirements can be the agent, however, the agent’s name and 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 or still employed.  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

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

Step 4: Sign, Pay, and File

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 Department of State, Division of Corporations.
401 Federal Street – Suite 4
Dover, DE 19901
Ph: 302-739-3073
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 fully understand 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 (also called a Federal Employer Identification Number, FEIN or Federal Tax Identification Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file tax returns, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the major benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the business 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 refers to how the LLC is taxed, not the legal structure. Consider talking with an accounting professional as some tax elections come with potential downsides such as double-taxation (C-corp).

Open an LLC Bank Account

Opening a bank account for your Delaware Limited Liability Company 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 LLC formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Depending on the LLC age, 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 various business licenses and permits to register for. Some common registrations include:

  • Business License – Every business operating in the state will need to obtain a state of Delaware business license from the Delaware Division of Revenue.  The business license combines licensing from the Division of Revenue, the Division of Unemployment Insurance, and the Office of Workers Compensation. Also, several cities 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?

Annual Taxes

LLCs file an annual report in many states, but LLCs in Delaware instead pay a $300 annual franchise tax to the Delaware Secretary of State. The franchise tax is not a tax on franchises but for the privilege of doing business in the state. Franchise taxes are due by June 1st, starting after the first year of formation.

Additionally, Delaware has a Gross Receipts Tax. Although Delaware doesn’t impose a sales tax, the Gross Receipts Tax is a tax on the total gross revenues, regardless of the source.

 

Common Questions When Starting An LLC

You can act as your own registered agent, provide you are a resident of the state and are generally available during normal business hours. 

It’s sometimes thought that the LLC and business license are the same, which they aren’t.  Business license requirements vary by location and the type of business being operated. 

An out-of-state LLC wanting to do business in another state will have to register as a foreign LLC with the new state’s Secretary of State.

Businesses that require state licensing and offer professional services such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc. often must file as a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to that of the LLC.

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