How To Form An LLC In Delaware
To form an LLC in Delaware, you must file a document called the Delaware LLC Certificate of Formation with the Division of Corporations. The Certificate of Formation will cost $90 to file with the DE Division of Corporations. You can complete the certificate of formation yourself or hire us to do it for you. Regardless of how you file your Delaware LLC Certificate of Formation, you need to know that this formation process is only the first step in truly forming a Delaware LLC. To enforce your Delaware LLC as a legally viable business entity, you will need to complete the following steps:
- File the formation document called the Delaware LLC Certificate of Formation
Pay the $90 filing fee to the Delaware Division of Corporations
Wait for confirmation from the Delaware Division of Corporations that your certificate of formation has been recorded. They will send you a stamped copy of your certificate of formation.
Get an EIN Number (Federal Tax ID Number) for your Delaware LLC
Create and adopt a Delaware LLC Operating Agreement
Take these documents to the bank and open a bank account for your Delaware LLC
- If you’re operating a business in Delaware, you must register with the Delaware Department of Revenue to obtain a Delaware business license. However, if you’re simply registering your business in Delaware and are not actively engaged in commerce inside state lines, you will not need a Delaware Business License.
How to File a Delaware LLC Certificate of Formation
To complete the Delaware LLC Certificate of Formation, you must list the following information (for a more indepth description, see Certificate of Formation Requirements at the bottom of this page):
Choose a name for your new LLC
- Decide if you want to hire a registered agent service to minimize the public disclosures, then list your registered agent
- If your LLC has a specific date of dissolution, you must list it
- List any other information you want to about the company, but nothing is required.
Sign and date the certificate of formation
- The person authorized to complete the articles must sign and print their name.
If filing by mail include a check for $90 for the filing fee and mail to the Delaware Division of Corporations. If filing by fax, send to (302) 739-3812 and include a cover letter and include your credit card information.
Delaware Limited Liability Company
How Long Does It Take to Form an LLC in Delaware?
Fastest and Simplest: 1 to 2 Days
Hire us and we’ll form your LLC in Delaware online. The state doesn’t offer individuals online filing options for LLCs, but we are one of only a few companies that have online filing access with the Division of Corporations. With our Delaware LLC formation service, we also include an operating agreement, Delaware registered agent service and everything you need to get your LLC up and running.
Not Too Shabby: 4 to 5 Days
File yourself with the state by fax. Since Delaware doesn’t offer online filings to individuals, fax will be your fastest method. Download a copy of the Certificate of Formation and a cover sheet to include your credit card information. The state will send you a stamped copy of your Certificate of Formation once they’ve recorded it in the state records.
Archaic: 7 to 10 Days
File yourself with the state by mail. Due to mail times, you’ll add a few days to your wait times. You can pay by check or include a cover sheet with your credit card information. The state will mail you a stamped copy of your Certificate of Formation once they’ve recorded it in the state records.
How Much Does It Cost to Form a Delaware LLC?
The Delaware Division of Corporations charges a $90 filing fee to record your LLC Certificate of Formation.
If you hire us to form your Delaware LLC, we charge $390 total.
How Much Does an LLC in Delaware Cost Each Year?
It will cost you $300 a year to keep your Delaware LLC in good standing with the state. Each year, Delaware LLCs are required to pay an Annual Delaware LLC Tax of $300. The annual tax is due on June 1.
What is the Delaware LLC Annual Tax?
Essentially a franchise tax, the Delaware LLC Annual Tax is a flat rate tax that every LLC in Delaware must pay each year to keep its good standing with the state. You can pay the tax online on the Delaware Division of Corporations website. Due by June 1 each year, the tax has a late fee of $200 and accrues interest at 1.5% for each month late.
Are There Delaware LLC Tax Benefits?
If you’re thinking about forming an LLC in Delaware, you’re likely aware that business formations are the state’s claim to fame. Part of the reason for this is that Delaware has structured its taxes to be beneficial to businesses formed in Delaware that don’t actually do business in Delaware. That has attracted many national and small businesses alike for the following reasons:
- No Taxes On Intangible Property
This means that Delaware doesn’t have an intangible personal property tax on things like patents and trademarks. It makes Delaware an ideal place for LLCs designed to be holding companies.
- No State Income Tax
LLCs located in Delaware that don’t do business in Delaware don’t have to pay Delaware’s income tax.
- No Sales Tax
Delaware doesn’t put a sales tax on goods or services.
What Are the Delaware Income Tax Rates?
|Delaware Income Tax Rates|
There are also a lot of local income taxes with an average rate of .16%.
To learn more about Delaware tax rates, see our page on Delaware taxes.
Do I Need a Business License for My Delaware LLC?
When you form a Delaware LLC, you only need a business license if you’re actively engaged in doing business inside state lines. If you’ve formed either a business that isn’t selling goods or services in Delaware, you do not need a business license in Delaware.
If you do need a Delaware business license, you can register online with the Delaware Department of Revenue. This is a combined registration business license that will register your business with the Division of Revenue, the Division of Unemployment Insurance and the Office of Workers Compensation. To complete the form you will need an Employer Identification Number and a credit card. The fees vary based on business type. Most fees are around $75.
Do I need a Delaware registered agent?
Yes, you must list a registered agent in Delaware on your Certificate of Formation. You can list yourself as the registered agent if you live in and reside in Delaware. However, you’ll need to list your physical address on public record and be available during business hours to accept any legal notices like services of process. Many people forming an LLC in Delaware hire us to be their registered agent and use our registered office address for the principle, mailing, registered agent, registered office, members, managers, and correspondence address to show stability as their LLC grows or changes and not have to update addresses or worry about unwanted visitors at home or their office.
Do I need a Federal Tax ID Number for a Delaware LLC?
If you’re going to hire employees, elect to be taxed as an S corporation, or register for a Delaware business license, you will need a federal tax ID. Just about every bank will require you to have a EIN number if you want to open an account for your LLC. FEINs are free and easy to get online on the IRS website or you can hire Northwest Registered Agent to get you an EIN. Generally speaking, it is best to get an IRS EIN even if you don’t think you need it right now. EINs are basically your LLC’s social security number. If you run into a situation where a vendor asks for it, then you have it. A Delaware LLC EIN number will help establish credit with many of the vendors you’ll do business with and give you the option to not provide them your personal social security number.
Delaware LLC VS. Delaware Corporation
The advantages of a Delaware LLC Vs a Delaware Corporation come down to flexibility and tax preferences. Delaware corporations cost $1 less to form ($89) than LLCs, but LLCs in Delaware have far fewer corporate formalities (no resolutions, no required annual meetings, etc.) and have greater tax flexibility. Both LLCs and corporations can elect to be taxed as S corporations, but corporations can’t elect to be taxed as disregarded entities. Basically, the only reason to form a corporation is if you’re aiming to become a big business or you’ll be taking on funding from investors (giving stocks to investors tends to be more amenable for investors rather than a percentage of your LLC). Otherwise, the LLC tends to be the better option.
However, there is one special caveat in Delaware. Delaware has what’s called a Court of Chancery. This court deals specifically with businesses, and the long history of court rulings provides guidance for many corporations. If you’re concerned with potential legal ramifications of operating your business, a Delaware corporation may be attractive to you and your attorney.
Delaware LLC VS. Delaware S CORP
Tons of people are confused by the S corporation. They think that if you want an S corporation, you have to form a corporation. This is completely wrong. An S corporation is merely a tax election with the IRS, and LLCs can be taxed as an S Corp. The S Corp election, however, does put restrictions on your company and may end up actually costing you money, but if your company is actually earning a decent net profit each (somewhere around $50k or more), it could pay dividends—literally. The reason lots of people like the idea of the S Corp is because you can issue dividends at a lower tax rate than personal income. The catch, though, is this: if you’re an S Corp you have to pay yourself a salary, and if your company isn’t making any money, you’re going to lose on paying yourself what the IRS calls “reasonable compensation.” That means, you can’t just pay yourself a $1 salary and take the rest of the income as a reduced tax dividend. You’ve really got to be making decent money in order for the S Corp to be financially viable.
With an LLC, the profits just pass to you as personal income. The LLC is really the simplest of business entities equipped with asset protection. If you’re just starting out and don’t really know how much money you’ll be making, you can save yourself some headaches by just forming an LLC and then electing to be taxed as an S Corp once your business is truly viable. That’s our two cents anyway.
Does A Delaware LLC Need an Operating Agreement?
Technically, you do not need an operating agreement. There’s no office to file it with. A Delware LLC Operating Agreement is a private document, but we think it’s an important one.
For all LLCs that have multiple members or investors, you might be insane if your LLC doesn’t have an operating agreement. Even though you won’t file it with any state agency, it’s the most important document to your Delaware LLC. Even if you’re a single member LLC, it’s ideal for you to have a Texas LLC operating agreement so you get used to the lingo and technicalities. Someday you might want to invest in another LLC or bring on a partner. The more familiar you are with how an operating agreement works, the better off you’ll be. A bank will want to see your operating agreement before opening a bank account, and if you take on debt, creditors will want to see a copy of the agreement. Although your state filings you submit create the LLC, the ONLY thing that truly matters is your operating agreement.
Why is an operating agreement for my LLC important?
The LLC operating agreement is the document that shows how your LLC will function and who owns it and what you’ll do if you want to close it down or get in a fight with your investors or other members.
In creating an LLC, you’re obviously starting a venture that involves some amount of risk. You should know and understand and take a few days to digest what your Delaware LLC operating agreement actually says. Anyone can form an LLC. Something we’re proud of at Northwest, is that when you hire us to form your Delaware LLC, you get an operating agreement specific to how you decided to manage your LLC. We include this for free with all orders because it is important. We only charge $100 to form your LLC and it includes the articles (kind of worthless), resolutions (critical), operating agreement (more than critical), and initial resolutions to start a bank account.
We believe in this so much that we were the first website to hand out free LLC forms. Free operating agreements, free resolutions, and everything your LLC in Delaware will need. But unlike the rascals that have tried to copy us by putting “free” garbage documents online, we’ve spent years refining and making our free legal forms better and better.
- LLC Meeting Minutes
- LLC Membership Certificate
- LLC Membership Interest Bill of Sale
- Free LLC operating agreement
- LLC resolution to open a bank account
What Is the Delaware LLC Statute?
LLCs in Delaware are governed by Delaware Code – Title 6, Chapter 18, Limited Liability Company Act
Delaware LLC Certificate of Formation Requirements
- Company Name: The name must contain the words “limited liability company,” “limited company,” or an abbreviation of one of these phrases.
- Registered Agent and Registered Office: The registered agent can either be a business (but not your own) or an individual Texas resident. The registered office must be a physical address and will be a permanent public record for your LLC. Tip: Hire us as your registered agent and you can use our Texas address as your principle address. (Wouldn’t it be annoying if we told you to hire someone other than Northwest at this point?)
- Effective Date of Dissolution: If you want your LLC to dissolve on a certain date, you can enter it in the third section of the Certificate of Formation
- Supplemental/Provisional Information: If you have conditions you’d like to put on the LLC like duration of existence (how long the LLC will exist) or some other special restriction, you can put that information in this section. Otherwise, you can leave it blank.
- Execution: This is where the organizer signs and dates the certificate of formation. It is the last and final part of the Delaware LLC Certificate of Formation. Once you sign and date, either submit it via fax or mail it in. You’ve just formed a Delaware LLC.