If you’re looking for a reliable DIY guide for starting an LLC in Delaware, look no further. Below you’ll find all the information you need to launch your business and handle any associated costs. Follow each step carefully and your LLC will be established and ready to hit the ground running.
That said, the process can be complex, with various filings and costs, so if at any point you need help, you can hire a good LLC service – they’ll take care of the paperwork so you can spend more time growing your business.
Recommended: Compare the Top LLC Services
If you’re new to the process of starting an LLC, you might also be unfamiliar with the LLC formation services that are reliable and offer great value – like ZenBusiness. As a reference point we compared them to the two most well known LLC formation services, IncFile and LegalZoom. See our comparison guides for more information:
Step 1: Name Your LLC
What’s in a name? Quite a bit, actually. Your business name is your Delaware LLC’s identity, its personality, its reputation. Find a name that sticks in customers’ minds – while conveying your brand qualities – and you’ve struck gold. A unique, memorable name can draw in new customers and keep existing ones coming back.
Your LLC name is going to appear everywhere: business cards, marketing collateral, websites, legal contracts, bank accounts, invoices, directories, and much more. So be sure that it conveys your product, service, brand, and values.
While you can (and should) be creative with your business name, there are certain state requirements that it must follow.
When you’ve settled on a name, make sure that it includes language that indicates its business type, like “Limited Liability Company,” “L.L.C.,” or “LLC.” And it should not include any terms that would imply a different business type, like “Incorporated,” “Corporation,” “Inc.,” “Corp.,” “LP,” etc. or any form of “bank,” “university,” or “college.” Check out Delaware Code § 18-102 for more details.
Got all that? Great. But even if you follow these directions carefully, your name still won’t be valid if someone else already claimed it. It must be completely distinguishable from all other names on record with the Department of State.
If you discover that your desired name is unavailable, don’t panic. There are ways to distinguish it without losing the name entirely. Adding, removing, changing, or rearranging the name’s key words will do the trick. Sometimes using unique spellings or suffixes/prefixes can work too.
However, making changes to the following components will NOT be enough:
- Punctuation and spacing
- Capitalization and symbols
- Articles (“a,” “an,” and “the”)
- Conjunctions like “and,” “but,” and “or”
- Business type designators like “LLC” or “Limited Liability Company”
Consider this: your friend Fanny wants to open a flower shop in Dover, Delaware. The name she wants, Flowers by Fanny, LLC is already in use. So she comes up with a new one: Fanny’s Florals and Design, LLC. This name is similar to the original but includes new words, distinguishing it in the Department of State’s records.
Determine the Name is Available
Of course, you will only need to make distinguishable changes if your name is already taken. Don’t make the mistake of ordering business cards, creating advertisements, and using a name on documents like the Certificate of Formation without first confirming it’s available. Use the Department of State’s Name Availability Search to see if there’s an existing business using your desired name.
Maybe you pegged a distinguishable name right away, or maybe it took some modifications, but either way, once you have a unique name, you can lock it down by filing a name reservation.
Optional: Name Reservation
You may have fallen in love with a particular name, but still have some preparation and paperwork to sort out before starting your LLC, and you’re worried that someone will swipe it in the meantime. To calm your nerves, you can apply for a renewable 120-day name reservation.
Think about Fanny. After making her name distinguishable, she’s ready to make it official, but if she’s waiting on some paperwork to start her LLC, she can place a hold through Delaware’s online name reservation page or by mailing/hand-delivering an Application for Reservation to:
Delaware Division of Corporations
401 Federal Street – Suite 4
Dover, DE 19901
Or, fax it to (302) 739-3812.
Whether filing electronically or via hard copy, your name reservation will cost $75. Any paper form must be accompanied by a filing memo.
Step 2: Choose a Registered Agent
Fanny’s LLC is quickly taking shape, and if it’s going to operate in Delaware, she’ll need a go-between for state and legal communications. This is called the registered agent.
A registered agent is a key component of your budding LLC, handling all of its sensitive communication with the state so you don’t have to. According to the Delaware Division of Corporations website, an agent’s job is to “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.”
Taxes, lawsuits, maintenance requirements, and more – the registered agent takes care of it all. If you had to do this yourself, it would pile additional tasks onto your already-full plate. Plus, your agent makes your business available to receive documents even when you’re out of town or away from the office. This is especially important if your physical office is outside Delaware.
But maintaining an agent isn’t just a convenience, it’s required. Just take it from Delaware Code § 18-104, which says “Each limited liability company shall have and maintain in the State of Delaware: (1) A registered office, which may but need not be a place of its business in the State of Delaware; and(2) A registered agent for service of process on the limited liability company.”
You have two options for who can serve as a registered agent: an individual or a company.
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
You may think that an individual registered agent would need specialized training or experience, but this isn’t the case. Anyone can serve as your registered agent, as long as they are a Delaware resident with a physical address in the state and are more than 18 years old.
Many LLC owners appoint a friend, family member, or LLC manager as their registered agent, and these are all viable options. Although sometimes it can be helpful to use an attorney, consultant, or another business professional who understands the finer points of maintaining an LLC.
Registered Agent Service
It can be a lot easier, though, to use an LLC formation service like IncFile or Northwest Registered Agent, so we highly recommend it. Not only will they take care of business formation requirements, but they’ll also include a free registered agent service. Or, if you’d rather start your Delaware LLC on your own, you can use a national registered agent service to cover your agent duties.
During the life of your LLC, you may, at some point, need to change your registered agent. Perhaps you want to switch from an individual to a professional service, or maybe your existing registered agent resigns. Either way, you’ll want to make the change as soon as possible because operating without an agent on file can lead to administrative dissolution.
Step 3: File the Formation Documents with the State
This is where the LLC formation process kicks into high gear. Let’s check back in with Fanny.
She’s reserved her unique business name, designated a registered agent, and she’s ready to get her LLC off the ground. It’s time for Fanny to take on the most important LLC document: the Certificate of Formation. This filing creates a record for Fanny’s Florals and Design, LLC with the Delaware Department of State, giving it the authorization to commence business in the state.
The Delaware Department of State offers online filing for some forms, like the name reservation, but the Certificate of Formation must be filed on paper.
Download the hard copy application here. You will also need to include a filing memo. And don’t forget your payment! The Certificate of Formation carries a $90 filling fee, payable by check or credit/debit card. When you’ve finished and compiled your materials, mail or hand-deliver them to:
Delaware Division of Corporations
John G. Townsend Building
401 Federal St. Suite 4
Dover, DE 19901
Or, dust off that fax machine and send your documents to 302-739-3812.
Standard processing time is 10-15 business days, although it can take up to three or four weeks during peak filing periods. That’s a long time to wait, so if you’re in a hurry, you can request one of four different expedited processing options:
- 24-hour service for $50
- Same-day service for $100
- Two-hour service for $500
- One-hour service for $1,000
When it’s all said and done, you’ll receive a stamped copy of your Certificate of Formation, and you can request an extra certified copy for $50.
Step 4: Create an Operating Agreement
The operating agreement is the framework that holds up an LLC, the vital underpinning that establishes processes for its procedures, activities, and conduct. Essentially, it serves as your company’s bylaws.
Your LLC is not technically required to adopt an operating agreement, but don’t let this fool you into thinking it’s not important. On the contrary, this agreement is one of the most important documents for your business. Not only does it entrench your procedures and optimize efficiency, but it also protects your personal assets and legitimizes your LLC in the eyes of courts, banks, government agencies, other businesses, and more.
Let’s say our friend Fanny sells a percentage of her company to two other owners. Her operating agreement could stipulate how the LLC’s assets would be distributed among them in the case of dissolution. But if she decides to maintain sole ownership, the agreement could be used in court as evidence that the LLC’s assets are separate from her personal ones. These are just two examples, but the operating agreement governs everything from member duties to tax structure.
If you’ve decided to draft an agreement, there are two ways to go about it:
- Write it yourself. Don’t be intimidated by this option. There are plenty of free online templates that serve as helpful guides. You can create an effective document from most of the templates out there, but we recommend getting one through ZenBusiness, which includes a free LLC operating agreement with every package. This will save you a lot of time and money.
- Hire an attorney. If you want to be absolutely sure that you don’t miss any important details, an attorney can write or review the agreement for you, ensuring that it complies with state law, includes all necessary information, and avoids the state’s default laws.
What are default laws?
Each state has its own set of generic, baseline laws for how LLCs should operate. These laws, however, only govern matters not included in your operating agreement. Take dissolution, for example. If your LLC ever dissolves, your operating agreement would determine what happens to its remaining assets and debts. But if you fail to include it in the agreement, the state will make that decision for you.
Because default laws are broad and not tailored to your specific business, they often aren’t in your LLC’s best interest, so it’s best to avoid them by being as comprehensive as possible in your agreement.
Step 5: Get an EIN
There’s simply no way to avoid taxes. In fact, it’s illegal to try, so don’t do it.
Federally, LLCs are classified as “pass-through” entities, businesses that don’t file corporate tax returns, but whose owners include income and losses on their individual returns. Still, there are certain circumstances that require LLCs to pay federal taxes, like classifying as a corporation or partnership, hiring employees, or selling merchandise. So, in Fanny’s case, if she plans on hiring additional florists and selling bouquets, she will need to apply for an EIN.
The Employer Identification Number (EIN) is a nine-digit number that the IRS will use to identify your company’s tax accounts, so if you pay any business taxes, it’s extremely important to have one. Click the “Do I need an EIN?” link on this page to see if you fall into this category. If so, apply for an EIN one of three ways:
Need to get this done quick? File online – it’s by far the most efficient method. You can only complete the process between 7 a.m. and 10 p.m. EST, Monday through Friday, but you’ll receive your number immediately upon finishing the digital form. Keep in mind that you will need to provide a valid individual taxpayer number (like a Social Security Number) as part of the process.
You might prefer the feel and security of a paper form. In this case, download Form SS-4, complete it and fax it to (855) 641-6935. You will receive your EIN within four business days.
Or, there’s always trusty postal mail. However, this is the slowest option, as processing typically takes around four weeks. If that doesn’t deter you, fill out Form SS-4 and send it to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Okay, so you’ve filed the Certificate of Organization, designated a registered agent, adopted an operating agreement, and filed for an EIN. Time to start doing business, right? Sorry, there are a couple of additional steps you may need to take first. But don’t worry, you’re almost there!
Step 6: Taxes, Licensing & Income Reporting
For all intents and purposes, most LLCs will be official after completing all the prior steps. Still, it’s important for business owners like Fanny to keep looking ahead, as there are certain maintenance requirements to keep a Delaware LLC running smoothly and in good standing with the state.
Before you start doing business, create a plan for the following potential LLC requirements:
As mentioned earlier, LLCs are almost always classified as “pass-through” entities, which means that they don’t pay income taxes directly to the federal government. That responsibility falls instead on the owners, who must include business income and losses on their personal 1040 tax returns and/or Schedule C. LLCs are flexible with tax structure, so you can choose to have yours taxed like a corporation instead. In this case, it would need to file a separate corporate tax return.
Delaware’s income taxes a treated like federal ones: owners report income and losses on their personal returns rather than a separate corporate return.
However, every Delaware LLC must pay a $300 annual tax online by June 1 each year. Mark this due date on your calendar, in your phone, or wherever else you won’t miss it because late payments incur a $200 penalty plus 1.5% interest per month.
Plus, there are a few circumstantial business taxes your LLC might owe if it meets certain conditions. Delaware doesn’t have a sales tax for businesses that sell merchandise, but it does impose a gross receipts tax. And if you hire employees, your LLC will be responsible for withholding employee taxes and paying an Unemployment Insurance Tax. Check out the state’s Employer’s Guide for more information.
The Certificate of Organization may have already made your business legitimate, but your LLC will still need to apply for a business license. The Division of Revenue states that “any person or entity conducting trade or business in the state of Delaware” must obtain a business license. The application is available online or on paper. If your LLC is an employer, you may want to take the online route, which will allow you to register your business with the Division of Revenue, the Division of Unemployment Insurance, and the Office of Workers Compensation at the same time.
Or, you can mail a paper application to:
Division of Revenue
P.O. Box 8750
Wilmington, DE 19899-8750
Licensure costs depend on your business category, and you can find a complete list of fees on the application itself. Your initial license is active for one year, after which you can file either a one- or three-year renewal.
Your LLC may also require certain professional licenses before it can open its doors in Delaware. Pay the Division of Professional Regulation website a visit to find out.
On top of all that, certain cities and counties require their own specific licenses, so you should also check with your local government.
Many states require LLCs to update their information each year on an Annual Report, but Delaware is not one of them.
And we’ve come to the end. It’s a long process, and not always easy, but the reward is well worth it. If you’ve made it this far, congratulations! Your Delaware LLC is ready for takeoff. So go ahead and start with that big sale, promotional campaign, or business deal. Maybe you’ll see Fanny out there in the business world, selling her beautiful floral creations.
Need Help Creating Your LLC?
If you even skimmed this guide to look over the steps, you likely got a sense of how many moving parts there are when starting an LLC. Can you do it all yourself? Absolutely. We have complete confidence in you.
But if you’d rather hand it off to someone else and not have to worry about it again, we recommend using an LLC formation service. This way, you can go about your other business responsibilities with the confidence that everything will be submitted correctly and punctually.
Plus, an LLC formation service can handle maintenance items like Annual Reports, so you can take them off your to-do list. And on top of that, many services also provide a registered agent.
Sound good? Whether you know that you’ll need an LLC service or you’re just exploring your options, take a look at IncFile and Northwest Registered Agent. These are two of the top services available. And you can take our word for it because we’ve done a whole lot of research on the topic.