Are you considering setting up an LLC in Delaware? BetterLegal has developed a complete yet concise guide to help you through the process through our years of experience. The five critical steps to properly set up an LLC in Delaware in order are:
Prepare by choosing a Name and Registered Agent
File Certificate of Formation with the State of Delaware
Apply for an EIN with the IRS
Obtain an Operating Agreement
Handle Ongoing Delaware Compliance and Maintenance
An LLC (Limited Liability Company) is a fairly new business structure which combines the best aspects of two older structures.Corporationshave existed since before the US existed, but require heavy maintenance such as quarterly meetings with officially recorded minutes, board approval and distribution of ownership, and more. On the other side of the spectrum is a sole proprietorship (or partnership if more than one person) that possesses tax benefits, but doesn't provide the owners with liability protection.
Combining the liability protection of a corporation and the tax benefits of a partnership, LLCs were created and slowly adopted by all 50 states between 1977-1998. This means that, as the owner of an LLC, you are not personally liable for any debts or obligations of the business. This can be a crucial safeguard for a sole proprietor, as transitioning to an LLC protects your personal assets, such as your home or savings, in the event that the business is sued or faces financial difficulties.
In addition to liability protection, an LLC helps establish credibility for your business. When you officially register your business as an LLC, you are signaling to the public that you are a professional and legitimate operation. This is especially important for a sole owner of a business as customers have more options than ever and are more likely to choose a company that feels more trustworthy. Any credibility you can build with your future customers is extremely important.
The first step in setting up an LLC in Delaware is choosing a name for your business. The name you choose will represent your company and be used on all official documents, so it's essential to take the time to carefully consider your options.
It may seem tempting to have a very specialized name like "Irene's Delaware Ice Cream." However, if you're still iterating on your business offering or may expand, a somewhat generalized name may work in your favor. Don't fret too much as you can always change a Delaware LLC's name or use a nickname by filing a Delaware DBA. More on those post-formation options can be found underStep 5: Changes and Maintenance.
It's important to choose a name that is unique and not already in use by another business. You can use theDelaware Secretary of State's name check serviceto verify the availability of your desired LLC name. If you are having trouble accessing the name check service, you can also call the Delaware Secretary of State. ** Call 302-739-3073 for assistance**.
When choosing a name for your LLC, it's important to keep the following guidelines in mind: The LLC name must contain suffixes Limited Liability Company, LLC, L.L.C, if the name includes words in a foreign language, a translation must accompany the application for filing the formation. Prohibited words are the following: bank or any variation thereof (if you want to use this, obtain approval from Delaware Banking Commission), medical terms that may mislead the public into thinking you're a medical facility, lewd, racist, or objectionable words, word "incorporation" or any other similar terms.
When choosing a name, it's also important to consider available domain names and social handles. One of our early customers ownedaustineventcollective.comas well asaustineventcollectiveacross every social platform. Unfortunately, someone in Texas already had a registered "Austin Event Collective LLC" and rejected her filing.
If you’re not ready to file, it is possible toreserve your Delaware LLC's namebefore officially registering your LLC with the Delaware Secretary of State. Please note that this is an additional and separate cost from officially filing your LLC and only holds the name, so you have to decide whether reserving a name for a few months is a better option than simply setting your Effective Start Date for the future (more on this in Step 2).
The next step in setting up an LLC in Delaware is choosing aregistered agent. This person or entity will be responsible for receiving official mail from the State of Delaware and legal documents on behalf of your business.
The Registered Agent for your LLC in Delaware must have a physical street address in Delaware. PO Box address can be used as a mailing address and must be in Delaware.
It's worth noting that thisinformation is considered a public recordand may be accessed by anyone. This means that anyone can view the names and addresses of themanagers or membersof your LLC by requesting a copy of your Certificate of Formation from the Delaware Secretary of State. If you are concerned about privacy, you may want to consider using a third party to act as a registered agent for your LLC rather than using your own personal information. This step helps protect youroperator's and owner'sprivacy and shield your personal information from public view.
There are countless options for Registered Agent Service, but we believe BetterLegal provides the best value.Click here to sign up.
Some additional guidelines in Delaware for Registered Agents: The Registered Agent may be an individual or a registered entity in DE
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Once you have chosen a name and registered agent for your LLC, you'll need to file the Certificate of Formation with the Delaware Secretary of State for a fee of $90 which is and provide a digital, scanned, or wet signature of the organizer and registered agent.
Online - (a) Download and draft the Certificate of Formation herehttps://corpfiles.delaware.gov/LLCFormation.pdf(b) Go to this linkhttps://icis.corp.delaware.gov/ecorp2/services/e-filing, and upload to Document Upload Service
Mail (a) Download, draft, and print the Certificate of Formationhttps://corpfiles.delaware.gov/LLCFormation.pdf(b) Download the Filing Memohttps://corpfiles.delaware.gov/updatedfilingmemoandinstructionsOct22.pdf— if paying through a credit card or ACH, this is not needed (c) Mail to: Division of Corporations John G. Townsend Building 401 Federal Street – Suite 4 – Dover, DE 19901
If filing online, you may use a credit card or ACH.
If filing by mail, you may use a check.
The turnaround time for LLC formation in Delaware is advertised by the Secretary of State as seven (7) to ten (10) business days from the date of submission, but it might be longer depending on the selected return method. Keep in mind that this can take longer based on state examiner’s workload at the time of filing. BetterLegal's internal experience with Delaware is twelve (12) to fifteen (15) business days, as long as the filing request was received during BetterLegal's operating hours (Monday to Friday from 9 a.m. to 7 p.m. EST). Note that for the State of Delaware, the entity becomes active on the state website within twenty-four hours from the time of filing. A copy of document, however, takes around twelve (12) to fifteen (15) business days to be sent to the mailing address. Expedited processes are available and there are three options:
- Two Business Days - $100
- Same Day - $250
- One Hour - $1000
Please note that the Secretary of State's office in Delaware is closed on weekends and state holidays. The office is open from 8:00am to 5:00pm, Monday through Friday.
Also note, that you should not apply for an EIN (Step 3) until Delaware has approved and delivered your Certificate of Formation in case your LLC's name is rejected.
If you want to set a future "start date" for your LLC, this the date when you submitted your LLC application or a future effective date that may not be more than one hundred eighty (180) days from the date of filing. in the State of Delaware.
In Delaware, you're required to provide Registered Agent Address If you want your address information to be private rather than public record, make sure your Registered Agent allows for all addresses. BetterLegal's $90/year service provides full privacy.
State's Mailing Address:Mailing Address is the Registered Agents address
The Manager's Information section of your LLC's Certificate of Formation may include the names and addresses of the managers or members of your LLC. Here is extra information Delaware will want to know about your Managers: Only organizer's name and signature is required
After the Certificate of Formation has been filed and accepted by the Delaware Secretary of State, the LLC is officially formed. Here's what Delaware will provide back to you based on your method of submission:
The official deliverables will include: the following document:
- Three-page document, which consists of the Filing Receipt, a plain copy of the approved Certificate of Formation, and Feedback Form.
You should keep a copy of the Certificate of Formation for your records and use it to open a bank account, apply for business licenses, and conduct other business.
If your filing is rejected, you'll receive information from the Delaware Secretary of State explaining the reason for the rejection. You can then make the necessary corrections and resubmit your documents. **If filed online, DE notifies through email
- Read rejection letter
- edit the initial Certificate of Formation
- Email the form back to the DE SOS employee's email address indicated on the rejection letter
If NOT filed online, DE mails back the filing. Follow the instructions on the rejection letter.**
Obtaining an Employer Identification Number (EIN) is a crucial step in starting an LLC in Delaware because banks require it to open a business bank account and the IRS requires it to pay taxes. So if you plan on making money, you'll need one. You don't need to employ anyone to need an EIN, it's simply a poor name choice by the IRS for what is essentially your LLC's Social Security Number or Tax ID.
An EIN is a unique nine-digit number assigned by the Internal Revenue Service (IRS)to identify a business for tax purposes and formatted as 12-3456789. EINs are free to get from the Internal Revenue Service's website, but can be tricky if you're not careful when answering their questions.
An EIN is a Tax ID for the federal government, it is not your Tax ID for the State of Delaware.
Here are some key points to keep in mind when obtaining an EIN for your LLC:
- A Sole Proprietorship'sEIN cannot be transferredto your Delaware LLC.
- A Manager or Member must provide their personal information to link the EIN to your Delaware LLC.
- You cannot use an existing business' information for an EIN since a business doesn't have a Social Security Number.
- If you're not a US citizen that is in possession of an SSN, you will need to first obtain an ITIN before applying for an EIN through a paper filing.
- Once the EIN is obtained, it must be included on all federal tax returns and other documents that require the business's tax identification number.
- Keep a copy of the EIN confirmation letter for your records.
It's important to note that the EIN is for tax purposes only and does not give any rights or privileges to the holder.
The turnaround time for an EIN is instant and the fee is $0. However, the IRS’ website that generates EINs only works normal business hours EST, so it’s a good idea to plan ahead if getting this item is time sensitive. Also note,that you should not apply for an EIN until Delaware has approved and delivered your Certificate of Formation in case your desired business name is rejected.
An operating agreement is an important document for any LLC, as it lays out the rights and responsibilities of the members (owners), as well as the management structure of the LLC. It's not a mandatory document filed with the State of Delaware, but it's highly recommended to have notarized as it can help prevent disputes and misunderstandings among members later on.
While it's your preference to decide whether the Delaware LLC is manager-managed or member-managed, BetterLegal prefers to set up LLCs as manager-managed since an individual can be both a manager and a member. If a manager/member wants to become passive at a later stage of the company and the Operating Agreement is set up as member-managed, then it opens up a can of worms that could have been avoided by retaining the separation of duties from the beginning.
Here are some key points to keep in mind when creating an Operating Agreement for your LLC:
- Identify the members of the LLC and their respective ownership percentages.
- Outline the decision-making procedures, such as how many members must be present for a meeting to be considered quorate and how many votes are required to pass a resolution.
- Specify the process for admitting new members or removing existing members.
- Include information about how profits and losses will be distributed among members.
- Set out the procedures for amending the Operating Agreement and dissolving the Delaware LLC.
This is an important document for a Delaware Limited Liability Company and is too often overlooked or skimped on. If setting up a single-member LLC, be wary of professionals that charge hundreds or thousands of dollars for a single-page document. We have seen attorneys charge $3500 for a simple document providing zero ability for supporting multiple owners in the future. While you may start as a sole owner, that may not always be the case. It's best to plan ahead during these early phases before the grind of entrepreneurship sets in.
We've also seen instances where an individual helping with the business early on later claims ownership upon the business' later success.Never refer to someone paid or unpaid as a "partner" in public, especially if you don't have a signed and notarized Operating Agreement in place.
If you're setting up your Delaware LLC on your own and need an Operating Agreement, BetterLegal can provide one for a reasonable fee.
The Operating Agreement should be reviewed periodically and updated to ensure that it accurately reflects the current state of the Delaware LLC.
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As an LLC in Delaware, you'll need to comply with certain Delaware regulations.
This includes, but not limited to:
Can I file an LLC in Delaware myself?
You can file an LLC in Delaware yourself by visiting the Delaware Secretary of State's website and submitting the necessary paperwork and fees. The process involves filling out the Certificate of Formation and paying a filing fee. Additionally, you will need to choose a unique name for your LLC and appoint a registered agent for your business. Once you have completed the necessary steps and paid the filing fee, you can submit your application to the state for review and approval.
How much does it cost to file an LLC in Delaware?
The cost to file an LLC in Delaware is $90. This fee is for filing the Certificate of Formation with the state and is . You may also need to pay additional fees for obtaining a registered agent or for expediting the processing of your application.
Can you file an LLC in Delaware for free?
No, there is a fee to file an LLC in Delaware. The fee for filing an LLC is $90 and is . You may also need to pay additional fees for obtaining a registered agent or for expediting the processing of your application.
How fast can you get an LLC in Delaware?
The turnaround time for LLC formation in Delaware is advertised by the Secretary of State as seven (7) to ten (10) business days from the date of submission, but it might be longer depending on the selected return method. . This turnaround can take longer based on state examiner’s workload at the time of filing.
Can I file for an LLC in Delaware Online?
Yes, you can file for an LLC in Delaware online through the Delaware Secretary of State's website. The process involves filling out the Certificate of Formation, choosing a unique name for your LLC, and appointing a registered agent. Once you have completed the necessary steps and paid the filing fee, you can submit your application to the state for review and approval.
What is the minimum number of members in a Delaware LLC?
The minimum number of members in an LLC is one. An LLC can have any number of members, and the members can be individuals or other entities such as corporations or other LLCs.
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