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For new companies, forming as an LLC is often the best option as it is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Additionally, LLCs often enjoy a lower tax rate than corporations. However, forming an LLC can be a little complicated, and each U.S. state has a unique checklist for starting an LLC with minor procedural variations.
Forming an LLC in Delaware follows more or less the standard procedure as it does in other states. However, there are advantages to starting an LLC in Delaware, including business-friendly laws and lenient tax code.
To avoid a misstep in the filing process, follow these steps to start an LLC in Delaware, and refer to the checklist at the bottom of the post to familiarize yourself with the legal and financial requirements for LLCs in the state.
Starting an LLC in Delaware step-by-step
1. Select a name for your Delaware LLC
Follow naming requirements
There are 2 major guidelines to follow when naming your LLC in the state of Delaware:
- Your LLC name must be distinguishable from the names of existing business entities on file with the Delaware Division of Corporations.
- Your LLC name must contain the words “Limited Liability Company”, or one of the abbreviations, “L.L.C.” or “LLC”.
Reserve your LLC name with the Secretary of State
After selecting a name for your LLC, you may reserve it with the Delaware Division of Corporations. Search the Delaware Division of Corporations’ business name database to confirm that your chosen LLC name is available. If the name is free to use, you can reserve it online for up to 120 days. The filing fee is $75.
An alternative is to print out and complete an Application for Reservation of Limited Liability Company Name and mail it to the Division of Corporations.
Fictitious Business Name Option
LLCs in Delaware are legally entitled to use an alternative name to do business instead of the one listed in its Certificate of Formation. However, in order to do so, you are required to register your fictitious business name in the Delaware county where your LLC is active. This is done by filing a Registration of Trade, Business & Fictitious Name Certificate with a Superior Court Clerk and pay the $25 filing fee.
2. Designate a registered agent
As in every U.S. state, forming an LLC in Delaware requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf.
The registered agent must either be a state resident or business entity with a street address in Delaware. For help finding a Delaware registered agent, browse this list of registered agents provided by the Delaware Division of Corporations.
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3. File a Certificate of Formation
After reserving an LLC name and appointing a registered agent, you can form your LLC by filing a Certificate of Formation with the Delaware Division of Corporations. The certificate must be filed by fax or postal mail and the filing fee is $90.
Your Certificate of Formation must provide the following details:
- LLC name
- LLC address
- Registered agent name and address
- LLC organizer(s) signature(s)
LLCs formed outside of Delaware that intend to do business in the state must register with the Delaware Division of Corporations.
Foreign LLCs must complete the following steps in order to legally operate in Delaware:
- Comply with Delaware LLC naming guidelines and confirm that your LLC name is available for use in the state.
- Appoint a Delaware-based registered agent to handle service of process.
- File a Certificate of Registration of Foreign Limited Liability Company with the Delaware Division of Corporations. The filing fee is $200.
- Along with the Certificate of Registration, your LLC must also file a Certificate of Existence from the state in which the LLC was formed. The Certificate of Existence must be dated within 6 months prior to the Certificate of Registration.
4. Draft an operating agreement
Although not a legally mandated step for forming an LLC in Delaware, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies.
The operating agreement should do the following:
- Describe the LLC’s business structure
- Establish the individual responsibilities and obligations of LLC members
- Detail how the LLC will be run
Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.
5. Obtain an IRS Employer Identification Number (EIN)
All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs).
The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and to perform many other important functions.
You can apply for an EIN online on the IRS website without paying a filing fee.
6. Fulfill your Delaware LLC’s additional legal obligations
Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.
Alternative Entity Tax
Each year, Delaware LLCs and foreign LLCs doing business in Delaware are obligated to pay an annual $300 Alternative Entity Tax to the Delaware Division of Corporations Franchise Tax Section. The tax is due each year by June 1.
Register to Pay State Taxes
Certain LLCs, including those that collect sales tax and those that have employees, must register with the Delaware Division of Revenue. The registration process varies depending on an LLC’s tax obligations.
LLCs that do business in Delaware are required to obtain a state business license from the Delaware Division of Revenue. The Delaware business license can be acquired by registering online with the Delaware One Stop Licensing and Registration Service or by printing a Combined Registration Application Form and mailing the completed form to the Division of Revenue.
Additional licenses, permits, or certifications may be required at the local level. Consult with a city clerk in the city where your LLC is based for information on local licensing requirements.
Delaware LLC checklist
A Delaware LLC’s name must obey the following guidelines:
- Be distinguishable from the names of existing business entities already on file with the Delaware Division of Corporations.
- Contain the words “Limited Liability Company”, or one of the abbreviations, “L.L.C.” or “LLC”.
Required formation documents and filing fees:
- Reservation of Limited Liability Company Name – $75 filing fee
- Certificate of Formation – $90 filing fee
- An LLC is formed in Delaware through the filing of a Certificate of Formation with the Delaware Division of Corporations.
Additional legal obligations:
- Alternative Entity Tax – Delaware LLCs and foreign LLCs doing business must pay $300 annually by June 1.
- Additional State Taxes – Required for certain LLCs depending on the nature of their business.
- Delaware Business License – Required of all businesses active in Delaware.