How to Start an LLC in Delaware [Formation Guide]
You can start a Delaware LLC in a few easy steps. Your LLC will be officially created once your Certificate of Formation has been approved by the Delaware Secretary of State.
Many business owners across Delaware choose an LLC instead of alternate business structures because of the tax benefits that an LLC provides.
This guide will explain how you can create your own limited liability company in the state of Delaware.
Name your Delaware LLC
Your Delaware LLC must be given a name since this helps to distinguish it from other companies. Naming is also a legal requirement and your LLC's name will need to be included when you're filing your Certificate of Formation.
Your LLC name must be distinguishable from existing company names in Delaware.
It must also contain LLC or a similar approved identifier at the end. Under the law, pluralization, punctuation, and identifiers do not make names unique.
For example, Kim's Kid Clothes LLC, Kim's Kid Clothing LLC, and Kim's Kid Clothes Limited are all considered the same name.
Delaware LLC Business Name Reservation
You can pay $75 to reserve a name for up to 120 days, ensuring that another company will not be able to register it during that period.
You can do this via the Delaware Division of Corporations' website or by printing the Application for Reservation of Limited Liability Company Name form, completing it and mailing it in.
Delaware Business Name Search
If a company with a business name similar to yours already exists, filing your Certificate of Formation is likely to result in delays.
It is better to do a Delaware Business Entity search before you give your LLC a name so that your filing could be approved without problems.
Appoint a Registered Agent
Many entrepreneurs in Delaware do not want their personal contact information to be a matter of public record but there must be a way for them to receive legal papers.
To solve this issue, your Delaware LLC must have a registered agent. Your registered agent can be a business entity that has its primary place of business in the state. A resident of Delaware can also accept legal documents on your behalf.
The business or individual who is appointed for service of process will need to have a physical address in Delaware.
A PO-box or a similar alternative is not allowed. If you are sued, they are authorized to accept these documents for you and may also send correspondence for the LLC.
If your LLC is physically located in Delaware, you won't need to appoint an external registered agent, since the business can act as its own registered agent.
File the Certificate of Formation
To form an LLC in Delaware you'll be required to file a Certificate of Formation with the Department of State, which will include details about your company. Your Certificate of Formation applies to LLCs and should not be confused with a Certificate of Incorporation, which applies to corporations.
Once this document is approved by the Delaware Department of State, your company will officially be formed and can start doing business in the state. The state will email you a black and white copy of this document once your filing has been approved.
Your new copy will contain both a timestamp and a date stamp, indicating that it has been approved by the Delaware Department of State. You do not have to list the names of the members of your LLC on your certificate.
The Certificate of Formation must provide details on the name of your registered agent, the registered office of the LLC and the name of the LLC.
The signature of an authorized person such as the organizer must be attached to the document. You can send in the Certificate of Formation by fax, by mail, or by applying online.
How Much Does it Cost to Form an LLC in Delaware?
LLC filing costs $90 and the formation document (Certificate of Formation) must be submitted to the Delaware Division of Corporations.
Prepare an Operating Agreement
Your Delaware LLC does not need to have an operating agreement, but it is beneficial for you to create one as soon as your LLC has been formed.
You can even write it while you are preparing your Certificate of Formation, although you don't have to submit it when you are filing.
It contains information such as the names of the members, their shareholdings, the responsibilities of each member, and their rights.
Your operating agreement also says who owns the business. When there are several members in an LLC, sometimes only one may own the company and this should be stated clearly in the operating agreement.
You should also say how your LLC will be managed, whether all the members will have an equal part to play, or you will hire an external manager to manage the daily tasks associated with running the business successfully.
Get an Employer Identification Number (EIN)
The IRS uses an EIN to keep track of the federal tax payments that are made by each Delaware LLC If your LLC only has one member and you also don't hire anyone to assist with your business, you won't need an EIN.
You can use your SSN for tax purposes instead. If your LLC has more than one member, you'll have to apply for an EIN for the business.
If you are the only member but you have a few employees, you'll also require an EIN. You can apply for your EIN for free by vising the IRS.gov website.
There's no cost attached to getting your EIN and it can be used for other business purposes, such as paying business taxes and opening a business account.
Annual Reports and Business Taxes
Unlike some states, Delaware does not require LLCs to file annual reports. This alleviates some of the stress of running a business but you should ensure that your LLC has its own internal process of review.
There is a Delaware business tax, known as the Alternative Entity Tax, which must be paid by all LLCs in Delaware.
This must be paid to the Delaware Division of Corporations by June 1 of each year and is equal to $300.