Delaware LLC Guide | A Comprehensive Write-up For Beginners

When it comes to business it’s better to have a clear knowledge of the one you really would like to venture into. Every business is a step by step process, it not something that you will just sit down at your home and decide what to do and it will come to pass without hard work and stress.

Every successful business you see today started somewhere and truly, some of the business owners now can really boast that their business has gone far and wide. So, you too can be like them, if you really want to make a positive change in your business.

Do you know that forming an LLC is the simplest way of structuring your business to protect your personal assets in case your business is sued?

Now, you have an idea of why you should start an LLC in Delaware.

A limited liability company (LLC) is a business entity that offers certain legal protections and rights to its owners. An LLC is either a corporation or a sole proprietorship/partnership.

Delaware LLC Information

Forming LLCs in Delaware is affordable and easy. Unlike other states, the State of Delaware has some unique LLC requirements.

Interested parties must register with the Delaware Secretary of State by filing the necessary forms, paying the necessary fees, and meeting all naming and formation requirements.

The specifications required of a Delaware LLC are:

1. Name Your Delaware LLC

Choosing a company name is the first and most important step of starting an LLC in Delaware. Be sure to choose a name that complies with Delaware naming requirements and is easily searchable by potential clients.

Follow The Naming Guidelines:

• Your name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
• Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
• Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.
• Your name must be distinguishable from any other Delaware limited liability company, corporation, partnership, or limited partnership.

2. Choose A Registered Agent In Delaware

You are required to nominate a Delaware registered agent for your LLC.

What Is A Registered Agent?

A registered agent is an individual or business entity responsible for receiving important tax forms, legal documents, a notice of lawsuits, and official government correspondence on behalf of your business. Think of your registered agent as your business’s point of contact with the state.

Who Can Be A Registered Agent?

A registered agent must be a resident of Delaware or a corporation, such as a registered agent service, authorized to transact business in Delaware. You may elect an individual within the company including yourself.

FAQ: Nominating A Delaware Registered Agent

Can I Be My Own Registered Agent In Delaware?

Yes. You or anyone else in your company can serve as the registered agent for your Delaware LLC.

Is A Registered Agent Service Worth It?

Using a professional registered agent service is an affordable way to manage government filings for your Delaware LLC. For most businesses, the advantages of using a professional service significantly outweigh the annual costs.

3. File The Delaware LLC Certificate Of Formation

To register an LLC in Delaware, you will need to file the Certificate of Formation with the Secretary of State. You can apply by mail or in-person. Some states refer to the Certificate of Formation as the Articles of Organization or Certificate of Organization.

The Certificate of Formation for an LLC (Limited Liability Company) in Delaware is a legal document to officially form your business. You’ll be expected to provide the name of your LLC, choose a registered agent, list the services your LLC will offer, and pay the state filing fee. After you file the Certificate of Formation, we recommend you obtain an Employer Identification Number (EIN) if you plan to hire employees and open a business bank account.

FAQ: Filing Delaware LLC Documents

What Is The Processing Time To Form My Delaware LLC?

Filing the Certificate of Formation takes about two weeks, but can be expedited for an additional fee.

What Is The Difference Between A Domestic LLC And Foreign LLC?

An LLC is referred to as a “domestic LLC” when it conducts business in the state where it was formed. Normally when we refer to an LLC we are actually referring to a domestic LLC. A foreign LLC must be formed when an existing LLC wishes to expand its business to another state.

4. Create Your Delaware LLC Operating Agreement

An operating agreement is not required for a Delaware LLC, but it’s a good practice to have one.

What Is An Operating Agreement?

An operating agreement is a legal document outlining the ownership and operating procedures of an LLC.

Why Are Operating Agreements Important?

A comprehensive operating agreement ensures that all business owners are on the same page and reduces the risk of future conflict.

FAQ: Creating A Delaware LLC Operating Agreement

Do I Need To File My Operating Agreement With The State Of Delaware?

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No. The operating agreement is an internal document that you should keep on file for future reference. However, many states do legally require LLCs to have an operating agreement in place.

5. Get a Delaware LLC EIN

What Is An EIN?

The Employer Identification Number (EIN), Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is a nine-digit number issued by the Internal Revenue System (IRS); an Employer ID Number is used to identify a business entity and keep track of a business’s tax reporting. It is essentially a social security number (SSN) for the company.

Why Do I Need An EIN?

An EIN is required for the following:

• To open a business bank account for the company
• For Federal and State tax purposes
• To hire employees for the company

Where Do I Get An EIN?

An EIN is obtained from the IRS (free of charge) by the business owner after forming the company. This can be done online or by mail.

NOTE

FOR INTERNATIONAL APPLICANTS: You do not need an SSN to obtain an EIN.

FAQ: Getting A Delaware LLC EIN

How Do I Get An EIN If I Don’t Have A Social Security Number?

An SSN is not required to get an EIN. You can simply fill out IRS Form SS-4 and leave section 7b blank. Then call the IRS at (267) 941-1099 to complete your application.

What Tax Structure Should I Choose For My Delaware LLC?

When you get an EIN, you will be informed of the different tax classification options that are available. Most LLCs elect the default tax status.

However, some LLCs can reduce their federal tax obligation by choosing the S corporation (S corp) status. We recommend consulting with a local accountant to find out which option is best for you.

6. Cost To Form An LLC In Delaware

To form an LLC in Delaware you will need to file a Certificate of Formation with the Delaware Secretary of State, which costs $90. You can apply by mail or in-person. The Certificate of Formation is the legal document that officially creates your Delaware Limited Liability Company.

7. Delaware LLC Annual Fee

Delaware LLCs do not pay a franchise tax or file an annual report. Instead, LLCs in Delaware must pay an annual tax (sometimes referred to as an Alternative Entity Tax). The tax is a flat, annual fee of $300.