How To Start an LLC In Delaware

Introduction.

If you’re looking to start a business, you might be thinking about the best structure for your company.

One of the most popular choices for new business owners is forming a Limited Liability Company, or LLC. And, if you’re considering where to register, Delaware is one of the top places to do it. Why?

Well, Delaware has some of the most business-friendly laws in the country, plus a simple and affordable process for setting up your LLC.

In this post, I’ll walk you through the whole process of starting an LLC in Delaware, and hopefully, by the end, you’ll feel ready to take that first step toward building your business.

Why Delaware?

Before jumping into the “how” part of starting an LLC, let’s take a moment to talk about why so many entrepreneurs choose Delaware. Here are a few key reasons:

Business-Friendly Laws: Delaware has a long history of being very friendly to businesses. It’s home to a court system (the Court of Chancery) that specializes in business law, so if your company ever runs into legal issues, you’ll have a team of experts to turn to.
Privacy Protection: You don’t need to list the names of the people running the LLC when you file with the state. This means a lot of privacy for business owners.
Tax Benefits: Delaware doesn’t charge sales tax, and they offer low franchise taxes, which can save you money in the long run. Plus, if your LLC doesn’t operate in Delaware, you generally won’t pay income tax there either.
Simple Process: The process to set up an LLC in Delaware is straightforward and fast, and it can be done online. You don’t need to live in Delaware to form an LLC there, which makes it easy for out-of-state entrepreneurs.

Now that you know why Delaware is so popular, let’s break down how to start your LLC step by step.

How Do I Start an LLC In Delaware?

Step 1: Choose a Name for Your LLC

The first thing you need is a name for your LLC. Keep in mind that your name must be unique—no other business can be registered under the same name.

You’ll also need to include “Limited Liability Company” or one of its abbreviations like “LLC” or “L.L.C.” at the end of the name. For example, “Smith & Co. LLC” or “Tech Solutions L.L.C.”

Here are a few quick tips for naming your LLC:

Make sure it’s easy to spell and remember.
Avoid using words that could confuse your LLC with a government agency (like “FBI” or “Treasury”).
Check for name availability by searching Delaware’s online database to see if your name is already taken.

Step 2: Choose Your Registered Agent.

Every LLC in Delaware is required to have a Registered Agent. A Registered Agent is a person or company that will be responsible for receiving legal documents and government notices on behalf of your business.

You can choose to be your Registered Agent, but it’s usually a good idea to hire a professional Registered Agent service.

This ensures you don’t miss any important legal notices, and it helps you keep your address off public records.

Step 3: File the Certificate of Formation.

This is the official document you’ll file with the Delaware Division of Corporations to form your LLC. It’s simple and can be done online, by mail, or even in person.

The Certificate of Formation includes basic information about your LLC, like:

The name of your LLC
The Registered Agent’s name and address
The LLC’s business address (this can be a different address from your Registered Agent’s)

Filing this document costs around $90, and once it’s approved, your LLC is officially formed!

Step 4: Create an Operating Agreement.

Although it’s not required by Delaware law, it’s a good idea to create an Operating Agreement for your LLC.

This document outlines how your LLC will be run, the responsibilities of the members (owners), and how profits and losses will be divided.

Having this document helps prevent misunderstandings between members and can be essential if you ever run into legal trouble.

Step 5: Apply for an EIN (Employer Identification Number).

Once your LLC is official, you’ll need an EIN from the IRS. This is like a Social Security number for your business.

It’s required for things like opening a business bank account, hiring employees, and filing taxes. You can apply for your EIN online for free through the IRS website.

Step 6: Register for Delaware State Taxes.

Depending on the nature of your business, you might need to register for state taxes. While Delaware doesn’t have a sales tax, you may still need to register for:

Delaware State Income Tax (if your business has income that’s taxable in Delaware)
Delaware Franchise Tax (this is a yearly fee based on your company’s type and size)
Other state taxes (if you have employees, you’ll need to register for unemployment insurance and other employer-related taxes)

You can handle these registrations online through the Delaware Division of Revenue website.

Step 7: Comply with Ongoing Requirements.

Once your LLC is up and running, Delaware requires some ongoing tasks to keep everything in good standing:

File an Annual Report: Every year, your LLC will need to file an annual report and pay an annual franchise tax. This is done online, and the fee is $300 (subject to change).
Keep Records Updated: Make sure your business information is always up-to-date with the state, like your Registered Agent or business address.

Additional Tips:

Get Business Licenses: Depending on your type of business and where you’re operating, you may need specific business licenses or permits. Check with the Delaware Division of Revenue or local authorities.
Open a Business Bank Account: It’s important to keep your personal and business finances separate. To open a business bank account, you’ll typically need your EIN, LLC Certificate of Formation and Operating Agreement.

FAQs

1. Do I need to live in Delaware to start an LLC there?

No, you don’t need to live in Delaware to form an LLC there. You can be based anywhere and still register your LLC in Delaware.

2. How much does it cost to start an LLC in Delaware?

The cost to file the Certificate of Formation is $90. Additional costs may include the annual franchise tax ($300), Registered Agent fees (typically between $100 and $300 per year), and any business licenses you may need.

3. Can I form an LLC in Delaware online?

Yes! You can form your LLC completely online through the Delaware Division of Corporations website, which makes the process fast and easy.

4. How long does it take to form an LLC in Delaware?

Typically, it takes around 1-3 business days for the state to process your LLC application if you file online. Expedited processing options are available if you need it sooner.

5. What’s the annual cost to maintain an LLC in Delaware?

The biggest ongoing cost is the annual franchise tax, which is $300. You also have to file an annual report with the state.

Conclusion

Starting an LLC in Delaware is a straightforward process with many benefits, including privacy protection, business-friendly laws, and tax advantages.

By following the steps I’ve outlined, you’ll be well on your way to forming your LLC and running your business with confidence.

Are you ready to take the first step toward your new LLC? Or do you still have a few questions before diving in?