Forming a Limited Liability Company LLC in Delaware is a popular choice for entrepreneurs and businesses due to its business-friendly legal environment, flexibility, and strong asset protection laws. Whether you are a startup, small business owner, or expanding company, Delaware provides advantages that make it an appealing option. However, the process involves several crucial steps. Here are the essential tips for a smooth start when forming an LLC in Delaware.
Choose a Unique LLC Name
The first step in forming your LLC in Delaware is selecting a unique and distinguishable name. Delaware law requires that the name of your LLC include Limited Liability Company or one of its abbreviations, such as LLC or L.L.C. To avoid rejection, conduct a name search on the Delaware Division of Corporations website to ensure your desired name is not already taken. It is also wise to verify if the domain name is available for your business’s online presence.
Appoint a Registered Agent
Delaware requires all LLCs to have a registered agent to receive legal documents and official government correspondence on behalf of the business. The registered agent must have a physical address in Delaware, making it necessary to appoint one even if you are not physically located in the state. You can either choose an individual such as yourself or an employee or hire a professional registered agent service. Many businesses opt for a professional service to ensure compliance and reliability.
File a Certificate of Formation
The Certificate of Formation is the key document that officially creates your LLC in Delaware. You will need to file this with the Delaware Division of Corporations either online or by mail. The filing fee is currently 90, but additional fees may apply if you choose expedited processing. The Certificate of Formation typically includes the LLC’s name, the registered agent’s name and address, and any other necessary information.
Create an Operating Agreement
Though not required by Delaware law, it is highly recommended to draft an operating agreement for your LLC. This internal document outlines how your LLC will be managed, including the roles and responsibilities of members, decision-making processes, and how profits and losses will be distributed. Even if you are a single-member LLC, an operating agreement helps clarify the business’s structure and can provide valuable legal protection in the event of disputes.
Obtain an EIN
An Employer Identification Number EIN is necessary for tax purposes and to open a business bank account. You can apply for an EIN for free through the IRS website. Even if your LLC does not have employees, obtaining an EIN is essential to separate your personal and business finances and comply with tax reporting requirements.
Stay Compliant with Delaware’s Ongoing Requirements
Once your LLC is formed, there are ongoing compliance requirements you need to be aware of to keep your business in good standing. Delaware LLCs are required to pay an annual franchise tax, which is currently a flat fee of 300. This is due by June 1 each year. You will also need to file an annual report if your LLC is classified as a corporation. It is important to stay on top of these deadlines to avoid late fees and penalties.