Think about your LLC a year from now: raking in profits and taking Delaware by storm. You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees – before you sell a single product, there are startup costs associated with launching an LLC in Delaware.
While you’re making plans and dreaming big, make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Delaware startup fees here.
Quick Note: If you’d like to keep your costs of starting an LLC as simple and low as possible, consider hiring ZenBusiness – a reliable business formation service. To get a better idea of the value they offer and how it works, we compared them to the two most well known services:
Bare Minimum Cost to Start an LLC in Delaware
Optional: LLC Name Reservation Fee
- $75 for either an online or paper application
Required: Certificate of Formation Fee
- $90 for a hard copy filing
Required: Business Licenses
- Cost varies depending on location and license type
Overall Delaware LLC Formation Costs
LLC Name Reservation Fee
The Delaware Secretary of State doesn’t require a name reservation to start an LLC. However, you may have a great name that you’d prefer to keep to yourself while you sort out your formation paperwork. In that case, reserving it could be a good move. Name reservation, either online or by mail, will place a 120-day hold on your name for $75. After your reservation expires, you can renew it for another $75. But if you’re ready to start your business, it saves time and money to jump right to the Certificate of Formation, which will officially register your name.
Certificate of Formation Fee
This is the big one, the most important form that you’ll file to start your Delaware LLC. Your business isn’t authenticated until the Secretary of State accepts and files your Certificate of Formation, but it’s going to cost you a $90 fee. Plus, if you want expedited processing, the S.O.S. offers four options ranging from $50-1,000. Once you file your Certificate of Formation, your business will be legitimate and you won’t have to pay this fee again.
Every entity conducting business in Delaware is required to apply for a business license online or using this form. Depending on your location and the type of business you do, your LLC may need multiple licesnses. For example, an electrician is also required to seek licensure from the Delaware Board of Electrical Examiners. And there are local licensure laws for different cities. Fees vary based on the type of license. To find out which business licenses you might need, visit the Delaware Division of Professional Regulation website.
LLC Formation Service
Starting an LLC can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for an LLC formation service. These services take care of the registration process for you, so you don’t have to spend the time on research, paperwork, and filings.
Most of these services (like ZenBusiness and Northwest) offer basic LLC formation service like Articles of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, Operating Agreements, and expedited filing.
Registered Agent Service
Appointing a registered agent is an important part of your LLC formation process. Your registered agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with Delaware business law. In short, you need an agent you can trust.
While you can be the registered agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional. A registered agent service ensures that your annual reports and other forms are filed efficiently and on-time, saving you from the penalties of delinquent filings and the stress of having to do it yourself.
Not all registered agent services are equal, so you’ll need to be careful in choosing one. Fortunately, we’ve done some research for you, and we recommend Northwest Registered Agent. In addition to registered agent services, Northwest also handles LLC formation — and they’ll include a registered agent free for one year when you form your business with them. We think they’re the most reliable choice, but if you’d like to evaluate all your options, check out our Best Registered Agent Services guide.
If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind.
Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that. On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2000.
Cost variations depend on the experience and location of the lawyer, and there are plenty of options, so you should take some time to compare different lawyers’ specialties, rates, location, and experience. When doing your research, utilize sites like Avvo, that offer attorney databases that allow you to find the best Delaware business attorney for you.
Foreign Qualification Fee
This only applies if your LLC was formed in another state and is now expanding into Delaware. To gain authorization for doing business in Delaware, you’ll need to submit a “Certificate of Registration,” which takes the place of the Certificate of Formation.
All foreign business entities are required to foreign qualify in Delaware, or they could incur some pretty severe penalties. But to file the Certificate of Registration, you’ll need to shell out some money, $200 to be exact. Fortunately, like the Certificate of Formation, this is a one-time fee, so you won’t have to worry about it again down the line.
LLC Annual Fees
Delaware makes annual reporting simple for LLCs – they don’t require it! Often, states will require LLCs to file annual or biennial reports to keep their information up-to-date, but Delaware doesn’t, so check that one off your to-do list. However, they do subject LLCs to an annual franchise tax. See below for details.
They might not require an annual reporting fee, but Delaware does have a somewhat hefty franchise tax. All LLCs must pay $300 per year before June 1st. This is a recurring tax, so make sure to include it in your annual budget.
Other taxes that might apply to your LLC are employer taxes (if you hire employees) or gross receipts tax (if you sell merchandise).
Otherwise, LLCs are typically classified as “pass-through” entities, so they don’t have to file corporate tax returns. But if you’ve deliberately set up your LLC to be taxed like a corporation, it will be subject to the corporate income tax of 8.7%.
What If I Don’t Pay?
Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
Fail to pay your franchise taxes will result in a $200 fee, plus 1.5% interest per month your payment is outstanding. Plus, your LLC will be rendered “void.” If you fail to maintain a valid registered agent, your LLC will be labeled “forfeited.” Both of these statuses mean that your company has fallen out of good standing with the state, and without good standing, you will be unable to foreign qualify in other states, apply for business loans, renew business licenses, and make other certain transactions.
Don’t put off reconciling with the state if your business has gone “void” or “forfeited.” Fail to make the necessary payments and filings and the Secretary of State will cancel your LLC.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Delaware.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees – like registered agent updates and franchise taxes – so your business doesn’t fall out of good standing.