How to Create a Delaware LLC: The Ultimate Step by Step Guide
For liability protection, tax advantages, and management flexibility, an LLC (Limited Liability Company) is a common choice, especially among small business owners. Learn how to set up a Delaware LLC!
For liability protection, tax advantages, and management flexibility, an LLC (Limited Liability Company) is a common choice, especially among small business owners. An LLC protects personal assets from being vulnerable if your business is sued.
It is easier to form anLLC, but some compliance-related and administrative tasks need to be done.Follow the below easy steps to form a Delaware LLC successfully.
1. Choose Company Name
One of the essential parts of an LLC is choosing the name as it will be your identity. Delaware requires that the new LLC name must not be too similar to any existing DelawareLLC's.
The name must be unique,and in some cases, separate state agencies are also involved in the review process. For example, theEducation Division will be involved if your name includes the word 'academy.'
Check out https://icis.corp.delaware.gov/ecorp/entitysearch/namesearch.aspx for the Delaware LLC name search.
2. Contact a Registered Agent
A registered agent is an entity or someone who accepts the process service and the official mail on behalf of your company. A registered agent must have a physical address in your state and must have Monday-Friday working days with 9-5 business hours.
- You, your family member, or friend can be a registered agent.
- You can also choose a registered commercial agent, which is the best option. They can provide their business address as the company's principal mailing to help you protect privacy.
3. File Certificate of Formation
The Certificate of Formation is the document that creates your Delaware LLC once approved by the Division of Corporations. For applying, you will have to file your certificate of formation and cover letter.
You can use mail or fax to file a Formation certification as Delaware doesn't provide filing online. The filing fee is $90, and it usually takes 1 week for approval. You can pay the filing fee with a credit card or a check.
If the state is busy, it can take up to 3 weeks. For faster approval, like for 24-hour expedited processing, you can pay $50.
Visit https://corpfiles.delaware.gov/LLCFormation.pdf to download the certificate of formation form.
Visit https://corpfiles.delaware.gov/updatedfilingmemoandinstructionsOct717.pdf to download the cover letter.
Send the filled Certificate of Formation and Cover Letter with your payment to:
Delaware Division of Corporations
401 Federal Street – Suite 4
Dover, DE 19901
You file by mail; the state will send back the documents by mail. After the approval of your LLC, you will receive a copy of your Certificate of Formation and a receipt of purchase.
4. LLC Operating Agreement
In this agreement, you list all the owners (members) of the LLC. The document also mentions the ownership division among the members of your Limited Liable Company.
- Having an operating agreement is essential even if there is only a single member. It works as proof that you are correctly running your LLC.
- On the other hand, in multi-memberLLC, you designate the ownership percentage amongst the LLC members and have them signed the agreement.
- An operating agreement is an internal document.' You don't need to share it with IRS, Delaware, or anyone else. The document only determines how the LLC will be managed both operationally and financially.
5. Tax Identification Number (EIN)
Let's touch on a few common questions regarding EINs!
What is an EIN Number, and what is an EIN Number for?
It is a Federal Tax IDi ssued by the IRS that recognizes a business for tax and filing purposes. EIN works for many functions for business operations, such as applying for licenses and permits that business needs, paying taxes, and opening a bank account.
You only receive the EIN after creating LLC and after when Delaware approves it. It costs $0 to apply for EIN for your Delaware LLC.
Note that Employer Identification Number doesn’t mean you have to have employees.
How do I apply for an EIN Number?
You cannot get your EIN online (unless you have a US SSN) and will need to fax or mail Form SS-4 to the IRS. The IRS will send the LLC’s mail and correspondence to your EIN Responsible Party (a person that files with the IRS).
The IRS will take 4 to 8 business weeks to mail your EIN Confirmation Letter and 4 to 7 business days to fax you back your EIN Confirmation Letter*
*Note: You can see real-time processing times for EINs at this page, which take into account COVID-19 related delays: https://www.startpack.io/how-long-will-it-take-to-get-an-ein
If you don’t have an SSNor ITIN, you can still get an EIN!
6. Pay Delaware LLC Annual Tax
It is also known as Annual FranchiseTax, and Delaware's requirement from LLCs is to file annually regardless of business activity or income.
You need to pay a flat-rate $300 annual tax for forming LLC in Delaware to keep your LLC in compliance with the state.
How To File?
You can only pay for Annual franchise Tax online and not by mail. You can use a credit card or checking account for making a payment.
You must pay the Annual Franchise Tax by June 1st every year.
7. Business License/Permits
Complying with local and state license and permit requirements is mandatory to avoid fines, penalties and run business in the state. The license determines where your business is located in the state and to which industry it belongs.
Visit Business Licenses and Permits to find out which permits and licenses you need for your LLC.
You can get your business license online, by mail, or use Delaware One-Stop Business Licensing and Registration Service.
Visit http://revenue.delaware.gov/services/current_bt/cra.pdfto register by mail.
Visit https://onestop.delaware.gov/osbrlpublic/ for an online application with OneStep.
8. Delaware Taxes
Note: Taxes depending vary on the business, and Delaware follows federal taxation regulation.
State Tax: No sales tax is imposed by Delaware.
Annual Franchise Tax: Flat-rate $300 yearly tax.
Business Services + Tax Forms:
Individual Services + Tax Forms
Gross Receipts Tax
9. Bank Account for LLC
Once your LLC is formed, the nextstep is to create a bank account. To protect your assets from liability andmake accounting and bookkeeping easier, you need a bank account. To open a bankaccount for your LLC, you need articles of organization, an EIN Number, and anID.
Mostly, the bank requiresthe owner to be present in person to get your sign for the bank account.
10. Business Phone Number
If you use your number it will be inundated with business content + contacts.
Therefore, a business phone number is a must!
StartPack can help you get a US Phone Line + A Utility Bill for Proof of Address! Learn more here: https://www.startpack.io/blog/us-phone-number-with-utility-bill-proof
Save Yourself the Hassle
Creating a Delaware LLC is quite complicated but not with StartPack.
We provide complete services, including filling out and filing all those complicated forms, sorting out your EIN and a US address, and providing a free USTax consultation; we do it all so you can focus on doing hat you do best: making your business a success 🚀
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