Starting a business in Delaware can be an exciting time. Before selling your product or service though, the nuts and bolts of licenses, registrations, and taxes must be completed.
The guide below will show you the DIY process of forming an LLC in Delaware. However, you can also use an online LLC service handle the paperwork for you. We reviewed and ranked the 7 best available.
The Top 2 Worth Considering:
- Northwest Registered Agent is a great option if you are looking for premium customer support.
- IncFile is ideal if you are looking for the best pricing with excellent features.
Step 1: Name Your LLC
Selecting a name for your Delaware LLC is a first step, yet a very important one. A name that is unique and easy to remember is helpful in finding potential clients or retaining customers.
The name should indicate the product or service. It should also follow guidelines set forth by the state of Delaware.
The name of an LLC will likely appear on business cards and stationary, marketing materials, a website, legal contracts, business bank accounts, invoices and/or a building directory.
Delaware law requires that the business name includes the words, “Limited Liability Company,” “LLC,” or “L.L.C.” Also, it cannot use the words “bank,” “university,” “college,” “corporation,” or “incorporated.”
It must be different than other names already registered. Distinguishing features might include the following:
- A key word is different.
- The same keywords are used but not in the same order or with a unique spelling.
- If the key words are numbers, they are communicated differently: as numerals, Roman numerals, or written words.
Let’s imagine that someone is considering opening a flower shop in Dover, Delaware. The name she is considering, Flowers by Fanny, is already in use. Instead, she decides to legally name her business Fanny’s Florals, LLC.
Determine the Name is Available
Following the selection of a name but before filing the Certificate of Formation, check to ensure that your name is unique on the Name Search Database on the State of Delaware website. Searching in other places, such as online, is also a good idea.
After you have determined that your chosen name is “distinguishable,” the name can be registered in order that you have exclusive rights for 120 days.
Optional: Name Reservation
Sometimes a situation may arise where an individual wants a particular name but needs time to organize his/her company before filing paperwork to create an LLC. In this case, a name can be reserved for 120 days in the state of Delaware.
The downside is that it does cost $75 for the reservation. A name reservation application can be filed either online, which will process immediately, or through a hard copy which can be delivered by mail, fax, or in person. (See information below.) A cover memo is required to be submitted with the application.
Payment can be made by credit, check (payable to Delaware Secretary of State) or through electronic banking. An invoice and copy of the application will be returned for your records.
Mail or In Person
Delaware Division of Corporations
401 Federal St. Suite 4
Dover, DE 19901
Step 2: Choose a Registered Agent
Every LLC in Delaware is required to have a registered agent. This agent can be an individual or a company.
The role of the registered agent is that of a contact person between the LLC and the state. As stated on the Delaware Division of Corporations website, the registered agent must “accept service of process and other communications directed to the legal entity for which it serves as registered agent and forward same to the legal entity to which the service or communication is directed.”
Simply put, the process agent receives communications or documents from the state involving such things as taxes or lawsuits and communicates them to the LLC.
Some may wonder why a Delaware registered agent is necessary. The importance of the agent is to ensure that someone is always available to receive important documents even if the business owner leaves the office, goes on vacation, or is otherwise away. Also, having a registered agent is especially important if a physical office does not exist in Delaware.
The owner of the LLC can designate a registered agent on the Certificate of Formation application.
LLC as Registered Agent
Unlike many other states, in Delaware, an LLC can act as its own registered agent. The LLC must have a physical and mailing address in Delaware.
Individual as Registered Agent
Most importantly, the individual must be a resident of the state of Delaware. Using a third party ensures that nothing falls through the cracks. The third party can be an accountant, an attorney, or even a friend. The agent must have a physical and mailing address in Delaware.
Registered Agent Service
If using a service, the registered agent must be a business or professional. We recommend either using an LLC formation service (like Incfile or Northwest Registered Agent) which gives you a free registered agent or ordering a registered agent service by yourself if you choose to DIY your Alaska LLC formation.
Step 3: File the Formation Documents with State
Let’s assume that fictional Fanny has selected both the name for her LLC and the registered agent. She is ready to complete the paperwork (called the Certificate of Formation) that actually creates Fanny’s Florals, LLC in Delaware.
The Certificate of Formation application must be accompanied by a cover sheet that includes a name or entity name, address, and phone number. The filing fee is $90. For expedited service, the following fees apply:
- $50 24-hour fee
- $100 Same day fee
- $500 two-hour service
- $1,000 one-hour service
The application, cover letter, and payment can be sent or delivered in person to the following address:
Delaware Division of Corporations
John G. Townsend Building
401 Federal St. Suite 4
Dover, DE 19901
It can also be faxed to the following number: 302-739-3812
Delaware does not offer online filing.
Processing times vary. You can expect standard processing of 10 to 15 business days. However, during heavy filing periods (March, June and December) processing can take an additional three or four weeks. Following the processing, an applicant can expect to receive a stamped copy of the submitted document. A certified copy can be provided for a $50 fee.
Step 4: Create an Operating Agreement
An operating agreement in the state of Delaware is recommended though not required. The agreement is a contract that defines the operations of the LLC, includes terms and conditions, states the responsibilities of its members, and ensures legal protections of its members.
All owners of the LLC must be in agreement of the terms in the agreement and sign before a notary public.
The operating agreement is useful for both multi-member and single-owner LLCs. In both cases, the agreement provides protections.
For example, in the case of the multi-owner LLC, the terms can stipulate what should happen if a death or divorce occurs among one of its members. In the case of the single-owner LLC, the agreement could be used in court as evidence that the LLC is separate from the individual owner.
The operating agreement can be created in two ways. Some individuals may choose to write the agreement on their own, using an online template. In this case, forms are available that are specific to state. Be sure to use the correct multi-member or single-member form.
The alternative is hiring an attorney to create the document. The benefits of using an attorney are ensuring the document doesn’t exclude any important information, adheres to state law, and invalidates default provisions that may not be what you wish.
Step 5: Get an EIN
An EIN is an Employer Identification Number. Anyone who runs their business as a corporation or partnership must file for this 9-digit number in order to identify the tax accounts of a business. The number can be applied for in one of the following three ways:
Applying online is the quickest method. The process can be completed between 7 a.m. and 10 p.m. EST, Monday through Friday. When the form is completed, the information will be immediately validated and a number issued while you are still online. In order to apply online, a valid individual taxpayer number, such as a Social Security number, is required.
Form SS-4 can be downloaded, completed and faxed to 855-641-6935, twenty-four hours, seven days per week. The EIN will be provided within four business days.
If either of the above methods are unavailable, Form SS-4 can be mailed, though processing will take approximately four weeks. The form can be mailed to the following address:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Think you’re ready to open up shop now? Guess again!
Step 6: Taxes, Licensing & Income Reporting
Businesses like Fanny’s Florals, LLC may be official after completing the above steps, but it is important not to overlook a few critical details.
On the federal level, most LLCs do not pay taxes directly to the government. Instead, they report income and losses on the owner’s personal 1040 tax returns. Schedule C is often used for reporting. Unless the LLC chooses to be taxed as a corporation, a single-member LLC is taxed as a Sole Proprietorship and a multi-member LLC is taxed as a Partnership.
In the state of Delaware, LLCs are required to pay a $300 annual tax.The tax must be paid online and the taxes for the previous year are due on or before June 1. Note that a penalty of $200 plus 1.5% interest per month on the tax and penalty will be assessed if paid after the deadline.
Delaware is one of a few states that does not have a sales tax; however, it does have a gross receipts tax, which is a tax on the sellers of goods. For more information, visit the Delaware Division of Revenue. (DOR)
If your LLC is an employer, it will also be responsible for withholding and paying state income taxes as well as unemployment insurance taxes. The DOR provides an Employer’s Guide that provides instructions for payment.
A business license is required for “any person or entity conducting trade or business in the state of Delaware.” The application is available online or through hard copy. If your LLC is an employer, you may want to consider the online method as you will be able to register your business with the Division of Revenue, the Division of Unemployment Insurance, and the Office of Workers Compensation at the same time. If applying by hard copy, send to the following address:
Division of Revenue
P.O. Box 8750
Wilmington, DE 19899-8750
The cost of the business license varies according to the business category. A list of fess is provided on the application. The initial license is active for one year. Business owners have the option of a one-year or three-year renewal. Keep in mind that some cities and counties may also require a business license.
In some cases, a professional license is also needed before a business can begin operations. Information is available on the Delaware Division of Professional Regulation website. Requirements and fees vary according to the license.
LLCs are not required to file an annual report in the state of Delaware.
When all of the mechanics of setting up an LLC in Delaware have been completed, someone like Fanny can get down to the business of setting up a website, creating a logo…or purchasing flowers!
Need Help Creating Your LLC?
We recommend LLC formation services because it allows you to knock off an important thing off your checklist so you can focus all your energy on actually starting a business.
Can you do it yourself? Absolutely.
However, a service that forms an LLC for you will help with ongoing maintenance and keep you notified of any requirements you should adhere to.
As we mentioned earlier, IncFile and Northwest Registered Agent are the top LLC services available. If you’re not familiar with them, as a point-of-reference many of our readers like to compare them to the most well known LLC service, LegalZoom.