If you want to start an LLC in Delaware, then you are in the right place, because this is exactly what we are going to teach you right now. The simple reality is that if you want to form your own business, starting a limited liability corporation is one of the best choices you could possibly make.
There are many reasons for this, with your own legal and financial liability being one of them. You see, with a limited liability company, you personally are generally not liable for any financial or legal implications of the company.
In other words, you and the company are considered a totally separate entity here, which has many benefits for you. In many cases, there are also other advantages to forming a limited liability company, such as taxation benefits.
With that being said, starting your own LLC in Delaware requires you to follow a variety of steps with great attention to detail.
If you don’t follow the steps listed below, forming your LLC may face delays. By adhering to these steps, forming your Delaware LLC should be smooth.
1. Name the Limited Liability Company
The first step to forming a LLC in Delaware is to name the business first. You cannot start this process without first naming your LLC. When naming your LLC, there are rules to follow. The name must include “limited liability company” or “LLC”. If you need help coming up with a name for your business, you can use our free business name generator.
Additionally, your LLC’s name must be unique and not match any existing business in the state. You cannot choose the name of a business that already exists. Therefore, you have to search the Delaware Secretary of State website to see if a business name is already in use or not.
Additionally, your business name can’t use terms from government agencies like FBI, CIA, or treasury. There are also some restricted words that you need to know, including credit union, attorney, lawyer, bank, and more. If you choose to include these words in your business, you must include additional documentation and obtain the proper licensing.
What you also need to be aware of is that your business name should also be available as a website domain name.
More useful topics about domains:
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Chances are almost 100% that you need to create a website for your business, but the rule of thumb here is that the business name should be the same as the website domain name. If your website domain name is different from your business name, people are going to get very confused. Therefore, we recommend doing a simple online domain check to see if that domain name is free or not. You can also use our free domain name generator, which also instantly checks for domain availability.
2. Choose Your Registered Agent
To start a limited liability company in the state of Delaware you have to choose a registered agent. A registered agent is an entity or person authorized to receive service of process, tax notifications, and other legal documents for your limited liability corporation.
For the record, the registered agent can be either a company or an individual. This can be any individual, but if you choose a company, it must be a company that offers these services.
The agent you select must have a physical address in Delaware. They should also be on-site during regular business hours to receive legal documents.
3. File a Certification of Formation for your LLC
The next step in creating a LLC in Delaware is to file your certificate of formation, which is otherwise known as the article of organization. This is the official document that establishes your limited liability company in a legal way.
You must prepare the certificate of formation and file it with the Delaware Division of Corporations. This may sound like a very difficult and lengthy task, but the forms are actually quite short, plus they are available online and can also be sent by mail if necessary.
Once the state of Delaware receives your certificate of formation, they will decide whether or not to approve. However, before you can do so, there are a few vital pieces of information that you’ll need to include on your articles of organization, which include the following:
- The name of your LLC.
- The name and address of your chosen registered agent.
- The street address of the limited liability company’s place of business.
- The signature of a person who is authorized.
Once everything is filled out and filed, the state of Delaware should then issue you a certificate that officially confirms that your limited liability corporation exists in Delaware. This is a piece of the documentation that you require to then obtain an EIN or employer identification number, as well as other important pieces of paperwork.
4. Create a Company Operating Agreement
Although the state of Delaware technically does not require a business to have an operating agreement, it is important nonetheless. An operating agreement is a piece of paperwork that outlines how various processes work. This will help you settle disputes in the event that there are any legal issues.
Furthermore, if you do not have a company operating agreement and there are legal issues to be decided, the court of Delaware will refer to its own laws, and will not do what may be best for the LLC and the members. Although you don’t have to create an operating agreement, there are various pieces of information that you may want to include on one, including the following:
- The name of the LLC.
- The principal address of the LLC.
- The name and address of the chosen registered agent.
- All necessary information concerning the articles of organization.
- The purpose of the business.
- Who the members of the business are and what their contributions are.
- How losses and profits are divided.
- How new members are admitted, and how outgoing members are handled.
- The management structure of the limited liability company.
- Liability and indemnification clauses.
5. Obtain Your EIN
Once you have formed a solid operating agreement for your limited liability company, the next step is to get your EIN or employer identification number. The IRS or Internal Revenue Service assigns all companies with an EIN for various reasons.
First and foremost, this helps to identify your limited liability company or taxation. As you probably know, your company has to pay taxes for it to remain legally compliant, but without an employer identification number, you cannot do so.
Therefore, obtaining an EIN is 100% necessary. With your EIN, you can then also open a business bank account, hire employees, and even get business loans.
6. Pay the Alternative Entity Tax
Unfortunately, for those residing in the state of Delaware, all LLC’s in the state of Delaware must pay what is known as the alternative entity tax, otherwise known as the annual tax. You have to pay this on a yearly basis, usually on June 1st of every year, and the cost is $300.
7. Additional Steps
What is convenient about creating an LLC in the state of Delaware is that these companies are not required to file any annual reports. However, if you sell goods and have employees, you may need to make quarterly tax payments.
The Benefits of Forming an LLC in Delaware
You might be wondering why you would start a limited liability company in the state of Delaware as opposed to another type of business. Therefore, let’s take a quick look at all of the advantages that you get with an LLC.
| Personal liability protection | Of course, the biggest advantage is that an LLC provides you with personal liability protection in the event that something goes wrong. |
| Very easy and low cost | As you can see from above, limited liability companies are also very easy to form, and they don’t cost much either. |
| Extremely flexible | Limited liability companies are also extremely flexible, and this is the case in terms of taxation, ownership, distribution, and management. |
| Credibility | Limited liability companies also garner a certain amount of credibility, not to mention that it’s a good form of business structure for individuals to open. |
Wrapping Up
As you can see, having a limited liability company comes with various benefits and advantages for anybody involved. This is mainly the case in terms of liability and taxation advantages, but there are others as well.
With all of that being said, you have to follow all of the steps as listed above in great detail in order for your limited liability company to be approved by the state of Delaware. Once again, this means filling out all of the forms and documentation as precisely as humanly possible.
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