How To Form An LLC In Delaware

Creating your own business requires you to follow the process that the state has set. Understand how to form an LLC in Delaware to ensure compliance.

New business owners often find it hard to understand how the process works. Most of the time, they tend to get overwhelmed by the seemingly complicated process. However, you should not let this discourage you from reaching the goal and making your dreams come true.

Limited Liability Company (LLC)

Delaware has a friendly environment for businesses. Thus, no one can blame you if you want to start your venture in this state. If you are looking for a simple business structure that offers protection, you may want to consider forming an LLC.

An LLC is a hybrid structure that offers limited personal liability. Thus, as an owner, you are not liable for the debts and obligations of your company in case something unfortunate happens. You may also find that having an option to create your tax plan, which is another characteristic of an LLC, is advantageous for a new business owner like you.

How To Form An LLC In Delaware

The first question you should ask once you have decided to create an LLC is what you should do next. Fortunately, Delaware also has a specific set of steps that you only have to follow.

Naming Your LLC

Choose a name for your company. Make sure that the name you want is not yet in use by other business entities registered in Delaware. You can check the availability of the name using the business name database of the Division of Corporations of the Department of State.

If you want to secure your company name while you are preparing the necessary documents, you can visit the website of the Delaware Division of Corporations and reserve it online. Another way of reserving a name is by mailing a completed Application for Reservation of Limited Liability Company Name to their office.

Appointing a Registered Agent

Your LLC should designate a registered agent, which is also known as an agent for service of process. Delaware requires you to do this. The agent can either be an individual or a business entity. Their role is to handle legal correspondence between you and the state. Basically, they will accept legal papers on behalf of your LLC.

To ensure that the registered agent is qualified, they should have a physical address in the state. If the office of your LLC is within Delaware, the company cannot be its own registered agent but someone within the company can be.

Filing a Certificate of Formation

The state requires you to file a Certificate of Formation of Limited Liability Company with the Division of Corporations of Delaware. You can submit it online or by mail. The certificate may require you to provide basic information about your business, such as the name of your LLC, the name and address of the company’s registered agent, and the signature of an authorized person. You also have to prepare $90 to pay for the filing fee.

Creating an Operating Agreement

Delaware is among the states that do not require LLCs to create an operating agreement. However, you will find this formational document useful. Through this, you can establish how to manage your LLC and deal with issues to avoid misunderstandings and disagreements.

If you fail to come up with an operating agreement, Delaware’s LLC law will govern the way your LLC operates.

Understanding LLCs’ Tax Obligations

Generally, LLCs are pass-through tax entities. Thus, individual LLC members have the responsibility to pay for federal income taxes. However, as an LLC in Delaware, your company should pay $300 annually for the Alternative Entity Tax. You should send your payment by June 1 to the Delaware Division of Corporations Franchise Tax Section. Do not forget the deadline as late payments will face a $200 penalty.

If you decide that your LLC will be selling products, paying gross receipts tax, or hire employees, then you will have to register with the Delaware Division of Revenue.

Other Taxes and Requirements

You may have to prepare to pay for other taxes and regulatory requirements. Make sure that you understand each of them to make sure you comply with the law.

  • Visit the website of the Internal Revenue Service (IRS) and complete the online application for an Employer Identification Number (EIN).If the LLC has multiple members, it should have an EIN. Despite its name, the EIN is not only applicable to companies that have employees. The IRS uses this identification number to identify business entities. If you choose to form a single-member LLC, you can still obtain an EIN if you plan on having employees. You can also get an EIN if you choose to be taxed as a corporation.
  • An LLC that conducts business operations in the state of Delaware has to acquire a business license. You can get this from the Delaware Division of Revenue. You can download it online through the Delaware One-Stop Licensing and Registration Service. If you choose to send it by mail, you will need a Combined Registration Application Form. Check your town, county, or city if they also require you to have a local business license.
  • If you decide that your LLC will have employees, then you will also need to pay employer taxes to the state.
  • Delaware LLCs do not have to pay for sales tax. However, the state has gross receipts tax for companies that sell goods. It would depend on the gross revenues of the company.

Make sure you follow all the steps on how to form an LLC in Delaware to avoid facing issues in the future and ensure that your company is doing its business operations legally. If you find the process a bit overwhelming or you do not have the time to focus on going through the hassle, you can opt to hire the services of a reliable and experienced company like DoMyLLC. Contact us now and find out how we can help make forming your LLC in Delaware easier.

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