Cost to Form an LLC in Delaware
How much does it cost to form an LLC in Delaware? Get a full rundown in our guide.
Entrepreneurs are well known for charting their courses and doing business at their own pace.
When it comes to organizing your business, you might have come across many options that offer better advantages and benefits over other business entities.
As a business owner, many questions linger in your mind. What could minimize your tax burden and protect your assets? Which business structure could be more advantageous and beneficial for your company?
Whether it be to raise seed capital for your small business area or to shield intellectual property, Limited Liability Company (LLC) is, hands down, the best and most popular option to structure your business legally.
With a favorable pass-through tax status, dual-liability protection, and flexible management, LLC combines limited liability with the flexibility and lack of formalities provided by a partnership/sole proprietorship.
Let’s talk about the procedures and the cost to start an LLC in Delaware.
Basics About Forming an LLC in Delaware
Delaware has always been a leading hub for many sectors, including healthcare, banking, technology, and retail.
With 50% of all US publicly traded companies and 63% of the Fortune 500 companies incorporated in Delaware, it’s a well-known fact that the legal precedents in the state strongly protect the businesses contained within the state.
With that said, one of the fastest and easiest ways to launch a business in the state is by creating a Delaware LLC. Let’s now look into the set of formalities and costs involved in creating an LLC in Delaware.
LLC in Delaware
In simpler terms, a limited liability company (LLC) is a type of business structure that provides the company with limited liability and is easier to establish and maintain.
By creating an LLC in Delaware for your business, your business gets the advantages, protections, and benefits of larger Delaware corporations with a more straightforward set of rules and regulations.
LLC’s incorporated in Delaware range within a myriad of sectors such as:
- Healthcare and Pharmaceuticals
- Real estate
Once you’ve officially formed an LLC in Delaware, you’ll need to create an LLC operating agreement.
The sole purpose of an operating agreement is to authenticate the responsibilities and rights of every member of the LLC. The agreement should also provide for the voting power, management responsibilities, and percentage interests of every member in the business.
Following is the list of crucial information which must be included in every operation agreement of an LLC in Delaware.
- The personal details of every member
- Every member’s ownership interest in the company
- Electing and voting procedures
- LLC’s purpose, including services and products, offered
- Dissolution process
Even though it is mandatory to adopt an operating agreement as per Delaware law, you’re not required to file it with the state. Hence, you may simply store it with other business documents of high priority.
Managing an LLC
Delaware Law allows the members to define the duties and responsibilities of their management team.
Since neither a member nor a third-party manager will be responsible for the company’s liabilities or obligations, the members of the LLC can manage the company for themselves or appoint managers to do it for them.
This unmatched degree of flexibility offered by Delaware for LLCs in the state proves why it’s the favored destination for business tycoons of every single sector in the US.
Ease of LLC Formation
The seamless set of creation procedures and even more effortless maintenance of an LLC is what makes Delaware popular for any new business being incorporated within the state.
For incorporating your business in Delaware, you may need the following documents:
- A company agreement of the founding members
- A certificate of formation of file with the state
Your LLC is official once the formation certificate is filed.
The formation certificate mentions the registered agent’s name along with the LLC name. It’s up to the members to add additional information if necessary.
The company agreement isn't a public document; instead, it's a private contract for LLC members only. Legally, information regarding an LLC's managers and members can stay confidential.
For LLCs, there's no minimum investment of capital required.
Costs to Form an LLC in Delaware
The Delaware LLC cost varies depending on many factors, such as the optional services selected by you as the business owner and the speed at which you want to have your LLC created.
But here are the possible costs you could expect before and after creating your Limited Liability Company (LLC).
Certificate of Formation
The certificate of formation for your company is required to be filed with the Delaware Department of the state.
While Delaware’s state filing fee (online) is $90, there might be additional charges based on how fast you’d like to receive the evidence of formation for the LLC.
Certified Copy of Delaware LLC filing
To open a business bank account for your LLC, certain banks would require you to submit a certified copy of your Delaware LLC filing. This costs $99 ($50 state fee + $49 processing fee).
Certificate of Good Standing
This document states that the LLC has a “Good Standing” status and has cleared all the required fees to the secretary of the state of Delaware.
The costs are as follows:
- $99 for a short-form certificate that states the business name and good standing status of your company ($50 state fee plus $49 processing fee)
- $224 for a long-form certificate ($175 state fee plus $49 processing fee)
This document can be ordered subsequently or during the period of the initial filing.
Costs of LLC After its Formed in Delaware
Even though an LLC created in Delaware is easier to maintain with regulations that are not too stringent, it does have its arena of expenditures even after the incorporation with the state.
Let’s look at the LLC Delaware costs involved with each of those procedures.
Delaware Franchise Tax
Also known as the annual franchise tax. This is paid to maintain a good standing status. This is similar to paying annual fees to stay in the “Delaware LLC club.”
The state requires every LLC incorporated in Delaware to pay this tax amount, regardless of any business activity or lack of income. This is done to keep your LLC in compliance with the state. The cost is about $300.
This LLC tax amount will be due on or before June 1st of every year after the business formation. The state charges a $200 fine + Interest for all late payments.
Delaware Registered Agent Fee
Every LLC is required to have a registered agent as per the laws of the state of Delaware.
The agent must have a registered street address in the state of Delaware and would be responsible for receiving/forwarding tax notices and legal notices from the state of Delaware on your LLC’s behalf.
The average fee for a registered agent and their services in Delaware ranges from $50 to $300 per year.
There are a lot of things you need to comply with when forming an LLC in Delaware. StartPack can assist you and make sure you won’t miss a thing including the necessary fees you have to pay and formation documents you need to submit.
FAQs About the Costs to Form an LLC in Delaware
How do I pay myself from my LLC?
You pay yourself from your LLC by making an owner’s draw. Your single-member LLC is considered a disregarded entity.
This means that your company’s turnover and your income are the same. You could pay yourself by transferring the amount from your business account to your account.
Does LLC pay more taxes than sole proprietorship?
Sole proprietorships and LLCs are both “pass-through” entities, which means both don’t pay taxes at the business level. Instead, profits and losses from their total turnover pass through to the founder’s personal income tax return.
Therefore, from a tax-wise perspective, they’re about equals. The real advantage of forming an LLC instead of a sole proprietorship is the legal liability protection.
What happens if my LLC does not earn money?
Even if your LLC lacks any business activity or doesn’t generate any income, it’s still mandatory for your company to file a federal tax return.
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