Starting an LLC in Delaware [A Simple Guide]
Starting an LLC in Delaware is a smart, strategic, and savvy move for a lot of entrepreneurs.
At the same time, many new to the world of business are not totally familiar with how the LLC formation process works.
Delaware streamlines things quite a bit (it's one of the most business friendly states in the US), but there are still some hurdles to clear and necessary steps that have to be tackled – in the right order, too.
Below we run through (almost) everything you need to know about starting an LLC in Delaware today!
Start with Choosing the Right Name
The very first step for establishing your LLC in Delaware is choosing the right name.
The name for your new business enterprise needs to be completely unique, cannot be deceptively like other business entities on file, and must include the words “Limited Liability Company” or the LLC abbreviation.
Entrepreneurs and business owners can check for the uniqueness and validity of their potential business name by contacting the Division of Corporations. The online business name database available through the Department of State can be helpful, too.
All business names found to be unique and valid will be held for potential registrars for up to 120 days after a $75 fee is paid. These reservations can be made through the Delaware Division of Corporations online platform or by contacting the division directly.
Registered Agents Must Be Appointed
All registered Delaware LLCs have to have a legitimate legal agent registered with the state, agreeing to accept all papers on the behalf of that LLC in the event of a legal situation.
If LLCs are physically located within the boundaries of Delaware, the LLC itself may act as its own agent. If it is to physically exist elsewhere, though, a state agent needs to be named and registered with the state government.
All Delaware registered agents are listed on the website of the Secretary of State, too. This makes it easy for legal proceedings to move forward with as little friction and hassle as possible.
Submitting a Certificate of Formation
The next step for a new LLC in Delaware is to file the Certificate of Formation established by the Secretary of State of Delaware.
This certificate is simple and straightforward, and basically just notifies the state that the new LLC is going to be formed. The information business owners must provide includes::
- The new name of the LLC
- The name and contact information for the LLC registered agent
- A signature from any authorized agent of the LLC
- And a $90 filing fee
All of this can be submitted online through the Delaware Division of Corporations.
Get an Operating Agreement Together
Operating agreements are not necessarily required to form an LLC in the state of Delaware (legally, anyway). But many in the state – including those that have already formed LLCs – recommend them all the same.
This documentation is used internally within your business. It essentially outlines how you plan to run your operation going forward.
You'll outline the rights and responsibilities of all individual LLC members. You'll also establish limited liability and preserve it by showing just how much of a separate entity this operation is.
Without this documentation the state of Delaware is legally able to govern how your LLC handles business. If you do not want to give up this autonomy directly to the state, it's a good idea to have these documents prepared ASAP.
You Won't Need to File Annual Reports
One of the more unique aspects of starting an LLC in Delaware is that you aren't beholden to any annual reporting rules.
The overwhelming majority of states across the country will require you to report annually to the government about the activities of your LLC. There are zero such laws, rules, or regulations in place for this kind of reporting in Delaware.
You'll obviously want to make sure that all of your financials and accounting practices are in order. But you won't have to worry about reporting your details to the Delaware government.
It's nice not to have to worry about this specific reporting requirement. It saves a lot of time, a lot of energy, and often a lot of expense that small business owners can focus elsewhere.
Secure Your Employer Identification Number
Solo entrepreneurs may not want to move forward with this step, but any LLC that has more than one individual member (even if there are no employees) are required to obtain Employment Identification Numbers.
These EIN details allow for business banking to take place, for companies to employ individuals, and allow LLCs to be taxed as corporations instead of a sole proprietorship.
There are a whole host of other benefits that business owners will enjoy taking advantage of the free EIN from the IRS as well. This is definitely a step that Delaware LLC owners are going to want to consider very seriously.
At the end of the day, though, the process for starting an LLC in Delaware is generally pretty simple and straightforward.
Much of this can be done 100% on your own using resources available free from the Secretary of State website (and office) as well as from the web in general.
It may not be a bad idea to speak to an attorney that specializes in establishing LLCs in Delaware as you move through the process, though. You'll want to make sure that you have gone through the process correctly, that nothing has slipped through your checklist, and that you are good to go.