If you want to form a limited liability company (LLC) in Delaware, you will have to complete the registration process. It requires the submission of formal paperwork and payment of corresponding fees. Before you get started, make sure you familiarize yourself with the steps to avoid any problems in the future.
Why Choose Delaware
Among all states in the country, Delaware is considered the most business-friendly. Aside from the asset protection and tax advantages, LLCs in Delaware are simple to manage and offer flexible choices.
Here are some of them:
- Delaware does not require a lot of information in the formation documents, which include the Articles of Organization for LLC. So, you can keep the identity and personal information of members secure.
- Delaware LLCs do not have to file annual reports but they must pay a yearly franchise tax fee of $300.
- Delaware does not impose taxes on intangible income, such as patent and trademark leases.
- LLCs formed in Delaware but do not plan on conducting its operations within the state get incentives. For instance, you do not have to pay income taxes as long as you do not operate in Delaware.
- You can choose pass-through taxation. LLCs in Delaware are also taxed only once.
- The business laws in Delaware are well-established, so you may save time and money on legal fees in case your LLC runs into legal problems.
- If you plan on not operating in Delaware, your company does not have to acquire a business license. You are also not required to register with the Department of Revenue or pay gross receipts taxes in Delaware.
Understanding Delaware Articles of Organization for LLC
As stated earlier, forming an LLC in Delaware requires you to submit the Articles of Organization for LLC. The state calls it the Certificate of Formation. File the completed form with the Division of Corporations by mail, in-person, or online. You can download a copy of the form from the official website of the Department of State. The filing comes with a $90 fee.
If you choose to file by mail or in person, submit it to the following address:
Delaware Division of Corporations
401 Federal Street
Dover, Delaware 19901
Before submitting the Certificate of Formation, your LLC has to complete certain steps. You may need to provide certain pieces of information, including the following:
- LLC Name – Aside from choosing a name that best represents your company, you also have to make sure that it is distinguishable. So, you may need to do a business entity name availability search to see if no other Delaware company uses the name that you want. You can reserve a company name with the Secretary of State. Doing this will protect the name for 120 days. It comes with a $75 filing fee.Additionally, you also have to make sure that your LLC name follows the naming guidelines of Delaware.
- It has to have the phrase limited liability company or any of its abbreviations.
- You cannot use a term that could confuse your company with a government agency.
- You cannot include the word bank or any variation unless you are authorized to transact as a bank. You can also use it if the context does not refer to a banking business or will not mislead the public.
- You can use the words Company, Association, Club, Fund, Foundation, Institute, Union, Society, Syndicate, Public Benefit, Trust, and Limited.
- Name and Address of your Delaware Registered Agent – Delaware LLCs need to nominate a registered agent that will serve as the point of contact between the LLC and state. The registered agent will receive all legal correspondence and service of process on behalf of the company. You can appoint an individual resident, who is at least 18 years old, or a third-party organization like DoMyLLC. The agent should have a physical street address and maintain regular business hours. If you choose a commercial registered agent, make sure that it is authorized to transact in Delaware.
- Date of Dissolution – If the existence of your LLC is not eternal, you can include the effective date of the dissolution of the company.
- Provisional Information – Unlike other states, Delaware allows LLCs to include specific conditions and special restrictions in their formation documents. If your LLC does not have supplemental information, just leave the section in the form blank.
- Organizer – The form requires the name and signature of the authorized representative who organized the LLC. It refers to the person who prepares and files the form on behalf of the LLC. You can designate a member of the LLC or hire a company to handle the filing for you.
Completing the Process
After submitting your Certificate of Formation, you may need to create the operating agreement of your LLC. While it is not a requirement, having one can help protect your LLC from disagreements in the future. With this document, you can set the rights and duties of members. You can put in detail the ownership interest of each owner, how the profits and losses will be distributed, and the voting requirement to dissolve the business. Think of this document as your guide for the operational procedures of the company.
You may also need to secure an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). You will use this nine-digit number for tax filing purposes, hiring employees, and opening business bank accounts.
If you plan on operating within the state, you may need to secure a business license. For example, you have to register with the Department of Revenue if you plan on selling goods and services to people living in the state. Your LLC will also have to pay Delaware taxes. The annual tax cost is $300. You need to pay this every June 1 to the Division of Corporations. Failure to pay on time will lead to a $200 penalty, which will accrue interest at a 1.5% rate for every month that you are late.
If you want to learn more about forming a business in Delaware, contact DoMyLLC.
Business Filing Section