Step 1: Name Your Delaware LLC
The first step in forming your Delaware LLC is to choose a suitable name that complies with the state's naming requirements and is easily recognizable by your potential clients. To ensure that your desired name is available, you should conduct a Delaware Entity Search on the Department of State's website: https://icis.corp.delaware.gov/ecorp/entitysearch/namesearch.aspx
Keep in mind the following guidelines when selecting a name:
- The name must include the phrase “limited liability company” or its abbreviations (LLC or L.L.C.).
- The name must not contain any words that could imply a connection to a government agency.
- Some restricted words (e.g. Bank, Attorney, University) may require additional paperwork and the involvement of a licensed professional.
- The name must be unique and distinguishable from any other registered entity in Delaware.
By following these guidelines, you can choose a name that fits your business and helps you establish a strong online presence."
Step 2: Select a Delaware Registered Agent
When forming an LLC in Delaware, you are required to appoint a registered agent. This individual or business entity acts as the main point of contact between your company and the state. They will be responsible for receiving important tax forms, legal documents, notices of lawsuits, and official government correspondence on behalf of your business.
Who Can Serve as a Registered Agent? A registered agent must be a resident of Delaware or a corporation that is authorized to conduct business in the state. You can choose to appoint an individual within your company, including yourself, to serve as the registered agent."
Step 3: File the Delaware LLC Certificate of Formation
To officially register your Delaware LLC, you must file the Certificate of Formation with the Department of State. This document serves as the legal record of your LLC's formation. You can choose to file the certificate online or via mail. https://corpfiles.delaware.gov/LLCFormation.pdf
The filled out and signed PDF form can be submitted online using DE Division of Corporations Document Upload Service.
What to Include in the Certificate of Formation? The certificate must contain the following information:
- The LLC's name
- The name and address of the LLC's registered agent
- A signature of an authorized individual, such as the organizer or someone authorized by the organizer.
The cost of filing the certificate is $90.
Step 4: Adopt Operating Agreement
Although not legally required, it is recommended to have an operating agreement in place for your Delaware LLC.
What is an Operating Agreement? An operating agreement is a legally binding document that outlines the ownership and operating procedures of your LLC.
Why is it important? Having a detailed operating agreement in place can help ensure that all business owners have a clear understanding of their rights and responsibilities, reducing the risk of future conflicts and disputes. By having an operating agreement in place, you can safeguard your business and create a solid foundation for its future success.
Step 5: Obtain an EIN
An EIN, or Employer Identification Number, is a unique 9-digit number assigned by the IRS to identify businesses for tax purposes.
Why an EIN is Needed: An EIN is necessary to:
- Open a business bank account
- File and manage federal and state taxes
- Hire employees.
Note for Sole Proprietorship Owners: If you previously had an EIN as a sole proprietorship, the IRS requires you to obtain a new EIN when converting to an LLC.
Where to Get an EIN: You can obtain an EIN for free from the IRS. The process of obtaining an EIN can be done either online or by mail. Online: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
Mail, fax, phone, international: https://www.irs.gov/businesses/small-businesses-self-employed/how-to-apply-for-an-ein
International Applicants: You do not need a Social Security Number to get an EIN.
Step 6: Pay the Annual Tax
Although Delaware does not require an annual report from LLCs, a yearly fee of $300 must be paid by all domestic and foreign LLCs by June 1 of each year.
FAQ
- What is an LLC?
- An LLC stands for Limited Liability Company, which is a type of business structure that offers limited liability protection to its owners, known as members.
- Why form an LLC in Delaware?
- Delaware is a popular state for forming LLCs due to its favorable business laws and its position as a corporate hub. Delaware is home to over half of the publicly-traded companies in the United States and thousands of LLCs.
- How much does it cost to form a Delaware LLC?
- The cost to form a Delaware LLC is $90, which is the fee for filing the Certificate of Formation with the Delaware Department of State.
- Is it necessary to have a registered agent in Delaware?
- Yes, all Delaware LLCs are required to appoint a registered agent who is responsible for receiving important legal and tax documents on behalf of the LLC. You can change a registered agent at any time.
- How long does it take to form a Delaware LLC?
- The process of forming a Delaware LLC typically takes a week or two for normal processing. For extra $50, the state will process next business day. For extra $100, within 24 hours. I always pay the extra $50 because otherwise it can take weeks. Expedited processing if sometimes delayed, too, but only by a day or so.
- Is an operating agreement required for a Delaware LLC?
- No, an operating agreement is not legally required for a Delaware LLC. However, it is a good practice to have one as it outlines the ownership and operating procedures of the LLC.
- Do I need a separate EIN for my Delaware LLC?
- Yes, even if you already have an EIN for another business, you will need to obtain a new EIN for your Delaware LLC.
- How long does it take to form a Delaware LLC? It typically takes 1-2 business days to process a Delaware LLC Certificate of Formation if filed online, and 4-6 weeks if filed by mail.
- Can I change the name of my Delaware LLC after it has been formed? Yes, you can change the name of your Delaware LLC by filing an Amendment to the Certificate of Formation with the Department of State. The fee for the amendment is $75.
- Can I convert my LLC to a Corporation at any time? Yes, you can convert your LLC to a Corporation at any time by filing the certificate of conversion with the Delaware Department of State. The process for converting an LLC to a Corporation may vary based on the state in which your LLC is formed, so it's important to consult with an attorney or tax professional to ensure a smooth transition.
- What are the advantages of forming an LLC in Delaware? There are several advantages to forming an LLC in Delaware, including:
- Favorable business laws and regulations
- No state corporate income tax for out-of-state companies
- Strong legal system and well-established body of case law
- Privacy and confidentiality for owners and officers
- Ability to attract outside investment and access to capital markets
- Can I form an LLC if I am not a resident of Delaware? Yes, you can form an LLC in Delaware even if you are not a resident of the state. However, you will need to appoint a registered agent who is physically located in Delaware to receive important legal and tax documents on behalf of your business.
