There are probably two things for which Delaware is best known. The first is the convenient lack of sales tax, and the second is that the state is one of the most business-friendly locations in the entire world. Nearly 67.6% of all Fortune 500 companies are incorporated here. In addition to corporations, plenty of limited liability companies (LLCs) get their start in the “First State.”
Learn how to set up an LLC in Delaware with our helpful step-by-step guide. We’ll walk you through each step and highlight important considerations.
What To Do Before Starting an LLC in Delaware
Before filing your Delaware LLC documents, you should make sure you handle the key steps mentioned in the following sections.
Reserve Your LLC Business Name
Before attempting to file LLC papers, you should first ensure your desired business name is available. The official State of Delaware website offers a search engine to check for business entity name availability.
If the name you want is available but you don’t want to form your LLC right away, you can reserve the name for 120 days by submitting a Business Name Reservation form, either by mail or online. If mailing your paperwork, you need to download the documents and send them to the Delaware Division of Corporations at 401 Federal Street, Suite 4, Dover, DE 19901. You should include the appropriate cover memo and filing fee of $75.
Additionally, remember that your official name must include the words “limited liability company” or the abbreviation “LLC” or “L.L.C.”
Hire a Registered Agent
Your Delaware LLC will require a registered agent. The agent receives lawsuits and other legal documents on behalf of your business. If your LLC is physically located in Delaware, it can serve as its own registered agent. The registered agent can also be any Delaware resident over the age of 18 who has a physical address in the state.
You may also hire a registered agent service to act as your agent. The price range is usually between $49 and $300 annually. Do your diligence before hiring anyone to ensure you pay for quality service that keeps your LLC in good standing.
Submit Your Delaware LLC Paperwork
To form an LLC in Delaware, you must submit a Certificate of Formation to the Delaware Division of Corporations. The filing fee is $90. You can upload the document electronically or send it by mail.
If you are a foreign (out of state) entity registering to transact business in Delaware, you instead complete a Certificate of Registration and pay $200. Foreign entities must also submit a Certificate of Existence from the state or country where the LLC was formed; the document must be no more than six months older than the completed registration form.
Steps To Take After Establishing an LLC in Delaware
There are additional considerations to be aware of, even after successfully setting up your LLC. Please read the next sections for an idea of how to keep your new business in good standing.
Write Up an Operating Agreement
Operating agreements are informative documents that lay out precisely how you intend to run your LLC. For instance, an operating agreement details how the business is managed and explains each member’s financial contributions and duties.
Creating an operating agreement for your Delaware LLC is a great way to showcase your sincere long-term intentions for the business. It is also a useful guideline for owners as to how the business will function. A comprehensive operating agreement can be crucial to resolving issues among owners and keeping your LLC functioning properly.
Get an Employer Identification Number (EIN)
EINs are required for most businesses. However, single-member LLCs that have no employees can get by with the owner’s Social Security number. EINs might sometimes get called a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN). They are free and easy to obtain through the IRS website.
Pay the Annual Tax
Delaware does not require LLCs to turn in an annual report. However, LLCs must pay a yearly fee of $300. Both domestic and foreign LLCs make this payment, which is due by June 1 of every year.
Correcting Filing Mistakes
It is best to double- and triple-check your documents to avoid any errors, if at all possible. Should mistakes get made, the Delaware code states that you must file a Certificate of Correction as soon as possible. The process costs $200.
Dissolving Your Delaware LLC
Whether you wish to move on from your LLC or launch a domestic LLC in a different state, you will need to file a Certificate of Cancellation. Though there are two types of forms, one for domestic entities and one for foreign LLCs, both foreign and domestic LLCs pay $200 for dissolution.
Frequently Asked Questions
How much does it cost to file an LLC in Delaware?
Delaware charges $90 to domestic entities submitting a Certificate of Formation and $200 to foreign entities to complete a certificate of registration.
Are Delaware LLCs required to submit an annual report?
Delaware LLCs do not submit annual reports. However, the state requires LLCs to pay a yearly tax of $300.
Do Delaware LLCs pay taxes?
Every year, both domestic and foreign LLCs must pay the state $300.
Should I get a DBA for my LLC?
There are instances where it is useful and necessary for an LLC to register a doing business as (DBA). For example, an out-of-state entity may need an alternate alias if another company is already using its name in Delaware. You’ll also need a DBA if you plan to do business under a trade name that’s different than your LLC name. If you are only using your official LLC name in your business, you don’t need a DBA.
Is it possible to set up an LLC for free?
While the cost to register an LLC varies by state, there is a fee to register in every state. So, while there are some companies that advertise “free” LLC formation, what this means is that the company will fill out the LLC paperwork for you for free. But, again, you will still be responsible for the state’s filing fee.
What are the different types of LLCs to set up?
When determining how to start an LLC, there are several types of LLCs to choose from. Knowing the LLC structures available is essential for selecting a business model that most closely aligns with the nature of your company and how you intend for it to operate. These LLC structures include:
- Single-member LLC: This LLC is owned and operated by a single person. While similar to a sole proprietorship, this LLC provides additional tax benefits and liability shielding.
- Multimember LLC: Standard LLCs with more than one member, often divided into manager-managed or member-managed entities.
- L3C: These entities, also known as “low-profit liability companies,” act as a bridge between nonprofit LLCs and for-profit LLCs where the business cause remains the primary focus rather than earnings.
- Series LLC: Series LLCs are tiered business structures where the topmost LLC owns a series of lower-tiered LLCs through limitless segregation. Each LLC in the series operates mostly independently of one another; their assets are also primarily separated.
- PLLC: A specialized LLC, this business formation type is only available to certain licensed professionals.
- Restricted LLC: Restricted LLCs are not taxed during the first 10 years of formation. Likewise, they cannot make distributions to members. It must be stated in the articles of organization that the LLC will be restricted.
