Start an LLC in Delaware

Forming an LLC in Delaware and not sure where to start from? While you can hire an LLC formation service to do this job for you, you can always choose a DIY route. LLCs are among the most simple business structures to set up, so you can complete the whole process on your own if you are eager to. In our article, you’ll find a step-by-step guide for starting a Delaware LLC that will take you through each registration stage and make your business formation journey much less of a hassle. While we focus on launching a basic LLC, if you plan to open a Series LLC, check a Delaware Series LLC Formation Guide.

Opening an LLC in Delaware: What Should I Do?

Overall, the LLC formation process is quite comprehensible and there is nothing special about it. There are certain steps to follow, and you need to complete them in due succession to do everything quickly and in due order. So, let’s take a look at what those steps are. 

Name Your Delaware LLC

Before you initiate the registration process, you need to choose an LLC name for your future company. What is an ideal business name for an LLC in Delaware you wonder? In general, it’s the one that is easy to remember and the one somehow related to your business activity. From the legal point of view, though, this name should conform to certain state regulations. Thus, you need to check all the versions you have in mind in the Name Availability Search, which is a free governmental service. Basic rules for naming your business entity when creating an LLC in Delaware are outlined in Delaware Code § 18-102 and state the following:

  • The words indicating business type are a must: LLC, L.L.C., Limited Liability Company;
  • No confusing words or words showing reference to administrative and government entities are allowed;  
  • To use such words as a bank, trust, deposit, savings, doctor, engineer, and alike, you need to get special permission for that; 
  • The company name should be unique and distinguishable from any already registered names. Note, though, that articles, punctuation marks, capital letters, punctuation, and conjunctions don’t make any difference. 

Once the name is checked and needs no changes, you can immediately proceed to file the Articles of Organization using the desired business name. In case you are not quite ready for that yet, you can reserve your LLC name for a 120-day period so that no one else could use it. To do that, you need to submit an Application of Reservation to the Delaware Division of Corporations using one of three methods: 

Online

This is surely the fastest method. A detailed guide can be found here

Mail

You can mail the documents to the address:

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

Fax:

If you prefer fax, the number is:

(302) 739-3812

No matter what filing method you use, to put a name on hold in the state of Delaware costs $75. However, remember that a paper copy of the application form should be sent along with a filing memo.

Obtain an EIN

It’s yet another compulsory step to complete if you want to legalize your business in the US. In the eyes of the law, companies are legal persons. Hence, similar to individuals, they should have a personal tax number for taxation purposes. For business entities, it’s an Employer Identification Number or EIN. Paying taxes in Delaware, just like in any other state, is a must, so don’t put EIN registration into cold storage. More than that, an EIN is also required to open a business bank account and hire employees. To get an EIN, you need to contact the Internal Revenue Service (IRS) and file an application. . You can do this in three ways.

Online

You can file the application via their official website. This way, you’ll get your digital number the same day in case you file it on the weekday between 7 am and 10 pm.

Mail:

Mailed paper applications are processed within about 4 weeks from the date of receipt. Download the Form SS-4 and send it to

Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999   

Fax

Fax applications are processed in 4 working days.Download the above-mentioned Form and send it to

  (855) 641-6935

Draft an LLC Operating Agreement

An Operating Agreement is not on the filing must-have list, yet don’t rush into skipping or neglecting it. The document provides a solid framework for the company management and operating control. Besides, an Operating Agreement makes your business look more reliable and trustworthy in the eyes of banks, financial institutions, and potential investors, not to mention the added peace of mind it brings to LLCs with multiple co-owners since the document will strictly outline the distribution of their Delaware LLC assets.

An Operating Agreement is a sort of typical document, yet, there is no official legal form for it. So, you can write it down by yourself using one of the templates available online. Our recommendation is to get the templates from online LLC services that are normally drafted by professional legal advisors. Thus, for example, ZenBusiness makes an Operating Agreement a part of all their formation packages. 

On the other hand, if you want to rest assured the document covers all the important details while avoiding Delaware default laws forming a generic legal baseline, you can hire an attorney to create a customized Operating Agreement for you. 

Whichever drafting method you go for, the Operating Agreement is usually defined by the company owners and covers such essential points as:

  • Owners’ rights and liabilities;
  • Procedures for appointing and changing LLC members;
  • Distribution of company profits and losses;
  • Paying indemnifications;
  • Accounting procedures;
  • Voting issues;
  • Company dissolution, etc

Designate a Registered Agent

To register an LLC in Delaware, you need to appoint a Delaware registered agent that will ensure a stable and consistent company connection with the state authorities. The main registered agent’s responsibility is to obtain any important communications from the state and promptly deliver them to the business owners not to miss any deadlines or significant notifications. While convenient for business owners, the registered agent is a legal requirement regulated by the Delaware Code § 18-104

Despite the fact that the registered agent is a crucial figure in the company operation and maintenance, requirements toward the candidates are quite flexible. Thus, you can choose an individual as a registered agent in Delaware. It could be any adult beyond 18 years old with a physical address in the state. Mind, though, that this person should be accessible at that address during business hours. Normally, entrepreneurs choose lawyers, attorneys, or financial consultants for this purpose. 

Yet another option (and we think a safe and easier one) is to delegate this job to a business entity. If you pass through the LLC filing process on your own, you can find the company in the national list of Delaware registered agents. But if you choose to hire a special online formation service to take you through the business registration, most of them have Delaware registered agent service as a default or optional feature. In our opinion, Northwest Registered Agent and IncFile are among the best in this concern.

File an LLC Certificate of Formation

This is an actual formation step that will legalize your business entity and let you legally do business in Delaware. To finalize registration, you need to submit your LLC formation documents (or Delaware LLC Certificate of Formation) to the Delaware Department of State. Note that in the state of Delaware, no online applications for formation documents are allowed. So, you’ll have to deliver them on paper. First, download the hard copy application and fill it in with the following data:  

  • Your LLC name and registered business address; 
  • Your LLC purpose;
  • The company owners’ names and addresses;
  • Registered agent name, address, and signature sample;
  • Company operating managers’ names and addresses;
  • Dissolution date, if applicable.

Printed and signed Articles of Organization along with a filing memo and the filing fee ($90) payment confirmation should be delivered to the Delaware Division of Corporations.

Mail

The documents can mailed or hand-delivered to:

John G. Townsend Building
401 Federal St. Suite 4
Dover, DE  19901

Fax

Another option is to use fax:

302-739-3812.

The filing process in Delaware normally takes from 10-15 days up to 3 weeks depending on the season. However, Delaware is one of the few states that offers quite a number of expedited formation options too, varying from 24-hour filing at added $50 to one-hour filing at $1000.

What to Do Next?

When you get your Articles of Organization registered with the state, your LLC is considered a formed legal entity entitled to operate in the state of Delaware. However, for many companies, this basic formation is not enough to run business in the state and there are some maintenance requirements you need to meet. So, let’s take a look at those too. 

LLC Business Permits and Licenses in Delaware

In some states, licenses are optional and pertinent only to certain types of business activities. But to operate a Delaware LLC, any company should obtain a license. To obtain a state license, you need to file an application with the Delaware Division of Revenue. You can either do it online or mail a paper copy. For LLCs hiring employees, an online application is preferable since you can register for unemployment insurance and worker compensation at the same time. This general license or permit is issued for a single year and is then renewable for yet another year or a three-year period. 

On top of that, though, you might need some sort of professional LLC license in Delaware, so it’s advisable that you visit the Division of Professional Regulation website to check that.

LLC Bank Account

While many first-time entrepreneurs use their personal bank accounts for business purposes, it’s the wrong way to go. The LLC business form alone draws a line between business and individual assets and it’s better to split operational costs, payments, and expenses as well. For that purpose, it’s vital to get a separate LLC bank account once you set up a Delaware LLC. Normally, you just need to contact a local bank department and provide your basic formation documents for that along with the EIN, Operating Agreement, and LLC Resolution. 

Business Taxes in Delaware

Initially taxed as pass-through entities, LLCs are free from federal tax payments. Business incomes and losses are filed on personal 1040 tax returns of the company owners. The same is true for Delaware’s income taxes that are paid in a similar way. However, all LLCs are obliged to pay an annual Delaware franchise tax that is charged at a flat rate of $300 payable online and due on June 1st. 

Besides, don’t forget about additional taxes that vary by state. While Delaware has no sales tax for trade activities, the state imposes a gross receipts tax on commercial companies and employee taxes for businesses hiring workers. More data on employment taxes is available in the state Employer’s Guide.

Conclusion

Launching an LLC in Delaware as in many other US states is quite easy, hence the popularity of this business structure. Though each state has certain specific requirements, overall, the process is typical and straightforward, so a DIY route is always an option. Yet, if this multi-stage procedure looks rather intimidating to you and you want to commence a new business with as few formalities engaged as possible, doing that with the help of a business assistant is a good alternative. With a whole lot of LLC formation websites available today, we’ve compiled a list of the best online LLC services to save your time and effort on searching the web.