Forming an LLC in Delaware
By Catherine Hodder, Esq. | Legally reviewed by Ally Marshall, Esq. | Last reviewed November 18, 2022
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A limited liability company ("LLC") is a popular business structure for small business startups, and Delaware LLCs offer a few advantages over other states. You can form a series LLC, an anonymous LLC, and benefit from Delaware's Court of Chancery. You can start an LLC in Delaware with the step-by-step guide below.
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Steps to Form an LLC in Delaware
Name Your LLC
Before you can formally create your LLC, you need to have a name that you can use for your LLC. According to the Delaware Limited Liability Company Act, your Delaware LLC name must:
- Be distinctive: The name must differ from any other business name registered with the Delaware Secretary of State.
- Have a proper LLC ending: Your name must contain the words "Limited Liability Company". If you prefer, you can use the approved abbreviations: "L.L.C." or "LLC".
- Not contain restricted words: For example, you should not use any variation of the word "bank" in your LLC name.
- Not be confusing: In other words, do not use any words to confuse the business with a government agency.
Search for LLC Business Name
You can run a business name search to determine if your name is available in Delaware. The Delaware Division of Corporations provides a searchable database to make this easy. You will need to find a new company name if there are any exact (or deceptively similar) matches.
Next, you should search for the name on the internet. Using an internet search engine helps to quickly determine whether any businesses are already using your desired name. To avoid legal trouble for trademark infringement, you should not use a name trademarked by another business. You can check the United States Patent and Trademark Office (USPTO) for any trademarks of your name. The USPTO has a database of all United States registered trademarks for this purpose.
Protect Your LLC Business Name
Now that you know your name is available, you may want to protect it so others can't use it. You can register for an internet domain name and trademark your name.
To register for a domain name, search the internet to see if your name is available. If so, you can register your name with a domain name registration company found on the internet.
You can trademark a business name with a federal patent through the USPTO or the State of Delaware. The state has an Application for Registration of Trademark or Service Mark. The application filing fee is $25. The certificate of registration, issued by the state, costs $10. The state trademark is effective for ten years, and you can file a renewal six months before the trademark expiration date.
Reserve Your LLC Name
If you have your name but are not yet ready to file the certificate of formation, you can reserve the name at the Delaware Division of Corporation's website. Or you can complete the Application for Reservation of Limited Liability Company Name and mail it to the Delaware Division of Corporations. The name reservation fee is $75. This reservation holds your name for 120 days.
Get a Registered Agent
All Delaware LLCs need a registered agent as the contact point with the Division of Corporations. A registered agent is a person or entity who accepts legal documents for your LLC. If someone sues your business, the service of process goes to the registered agent. Under Delaware law, your registered agent can be:
- Your LLC itself
- A Delaware business
- An individual who resides in Delaware
The registered agent must have a physical address in Delaware, meaning a street address (not a P.O. Box). Many business owners want to form LLCs in Delaware, even if Delaware is not their home state. In that case, they use a professional registered agent to represent their company.
File Your Certificate of Formation
To create your Delaware LLC, you must file a certificate of formation with the Delaware Division of Corporations. The certificate of formation is a charter that formally establishes your LLC as a legal entity. To complete your certificate of formation, you will need the following:
- Your LLC name
- The name and address of the registered agent located in Delaware
- Any other information you would like to add
- The $90 state fee
There are four ways to file your LLC certificate of formation:
- The Delaware Division of Corporations provides a Certificate of Formation form. You can complete it online and submit it using the Delaware Division of Corporation's Document Upload Service.
- You can download the certificate of formation and mail it to the Delaware Division of Corporations, 401 Federal Street, Suite 4, Dover, DE, 19901. If registering your LLC by mail or courier service, you must include a cover memo with the certificate of formation.
- There is now an option to set up your LLC online with the Division of Corporations using their OneStop portal. You have to create a user account to access the portal.
- Use a registered agent service company to draft and file the paperwork for you.
If you would like to expedite your LLC registration, you can pay $100 for same-day service or $50 for 24-hour service. And if you want a certified copy of your LLC registration, there is a $50 fee.
Draft an Operating Agreement
Delaware does not require an operating agreement as part of the Delaware LLC formation process. However, an LLC operating agreement is a key company document that every LLC should have. An operating agreement forms a contract among members on how the company should be run, including:
- Management structure
- Members' rights and responsibilities
- A profit and loss allocation plan
- Ownership percentages
- Voting rights
- Procedures for removing or adding members
- Dissolution procedures
- Any other agreements among members
Get an EIN
If your LLC will have more than one member or hire employees, you will need an Employer Identification Number (EIN). An EIN is a unique federal tax identifying number that the Internal Revenue Service (IRS) issues. The IRS uses it to distinguish between businesses for tax purposes. In this way, it's like a Social Security Number for business. Applying for an EIN is easy and free. You can apply by mail, fax, or online.
You will use your EIN for the following:
- Employee payroll
- Tax returns
- Opening a business bank account
- Applying for a company credit card
Visit the IRS Small Business and Self-Employed Tax Center to learn more about your federal business tax requirements.
Set Up Business and Tax Accounts
Once your LLC is up and running, it's essential to follow all tax and licensing rules. These will vary depending on your location and the nature of your business.
At the Delaware Division of Revenue OneStop portal, you can begin your business registration, apply for those licenses, and register as an employer. The portal offers more information about starting a Delaware business too.
You may need city or county licenses based on the type of business you run. Delaware's Business Licenses and Registration's Business First Steps website provides licensing information for Delaware cities and counties.
Business and Tax Requirements in Delaware
When you open any business, you must set up federal, state, and local tax accounts. And if you have employees, you must set up employer withholding accounts.
State Business Tax
There is no state business tax for LLCs. However, LLCs must pay a $300 annual tax (sometimes referred to as a business entity or franchise tax). If the LLC opts for treatment as a corporation for tax purposes, the LLC pays a flat corporate state tax of 8.7% of federal taxable income.
State Employer Tax
If you have employees – even if they are also LLC members, you must register for an employer account. Delaware has a OneStop website where you can set up an account to:
- Register as an employer with the Delaware Division of Unemployment Insurance
- Register with the Delaware Division of Worker's Compensation if you have one or more employees
- Register for a withholding tax account
Sales and Use Taxes
Delaware is one of the few states that does not charge sales tax. But you may need to pay gross receipts tax if you sell goods or services in the state.
Business Licenses and Permits
If you operate a business in Delaware, you need a Delaware business license. Register for business licenses at the Division of Revenue's OneStop portal. Depending on your business, you may also require local licenses and permits. Check what agency regulates your business on the Business First Steps page.
Registration in Other States
If you want to do business in another state, contact that secretary of state's office to register as a foreign LLC. They may request a certificate of good standing for proof your LLC is compliant with Delaware corporate laws. You can order a certificate of good standing by written request. The short form certificate includes the LLC's name and the current status. The certificate costs $50.
Annual Requirements in Delaware
There is only annual requirement to keep your LLC compliant in the state of Delaware.
Unlike corporations, in Delaware, LLCs do not have to file annual reports.
Pay Business Entity Tax
Your LLC will need to pay a business entity tax of $300 each year after the year of your LLC's creation. The tax is due before June 1st of each year.
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FAQs About Delaware LLC Formation
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