LLCs in Delaware are affordable and easy to form. As with other states, the State of Delaware has some unique LLC requirements.
Interested parties must register with the Division of Corporations by filing the necessary forms, paying the necessary fees and meeting all naming and formation requirements.
The specifications required of LLCs in Delaware are:
Registration. LLCs are required to file their Certificate of Formation with the Division of Corporations. The documents may be submitted electronically. Be sure to include the following information when you submit:
- LLC name
- Registered agent’s name and address
- An effective date, if other than the date filed
- The authorized entity’s name and dated signature
All forms must be submitted with the necessary fee for filing an LLC.
Forms and fees. LLC registrants are required to submit their Certificate of Formation to the Division of Corporations. There is a filing fee that must be paid upon submission of the documents.
Timeline. In general, the processing time for documents takes between 10 to 15 business days. However, during peak periods, which usually occur in the months of March, June and December, processing time can extend up to about three or four weeks. There are expedited services available for an additional fee, depending on the turnaround time needed.
Naming requirements. LLC naming requirements can be confusing. However, the easiest way to make sure that your LLC name will be approved is to make sure that it is distinguishable from other LLCs and includes specific words required of LLCs. You may opt to have a preferred name checked for availability before filing your LLC formation documents.
Formation requirements. To form an LLC, a registrant must first file their Certificate of Formation with the Division of Corporations. All documents must be submitted with the required filing fee.
Next, an LLC with more than one member is strongly advised to have a limited liability operating agreement among its members. This operating agreement contains the terms entered into by the members of the LLC and governs such critical items as the roles of each member, voting rights, who manages the LLC, how members are admitted or removed, dissolution of the LLC and procedures for amending the LLC operating agreement itself.
Please take note that LLCs offering a specific professional service are obligated to contact the necessary licensing boards as mandated by state law.
Starting an LLC in Delaware
Before deciding to form an LLC in Delaware, you must understand what an LLC is and if it is a viable business structure for your company. To begin, an LLC is a business structure that has flexible organization, is privy to tax efficiencies, and provides limited liability for its members. Members may include individuals, corporations, other LLCs and foreign entities. One benefit of an LLC is that there is no maximum number of members. An LLC is also known as a ”hybrid” business structure in the sense that it brings together elements of a corporation and limited liability partnerships.
Here are some tips to help you put together what you need to begin the registration process:
1. Decide on a name for your business. You can choose any name as long as it ends with “Limited Liability Company” or any variation of its abbreviation—e.g., L.L.C. or LLC.
Names may be reserved for up to 120 days. You may file a name reservation application, along with the required filing fee, online with the Division of Corporations. Be sure to include in the application the name to be reserved and the applicant’s name, address and dated signature.
Prior to filing a name reservation application, you may have the preferred name checked for availability.
2. Assign an agent for service of process (also referred to as the resident agent). Registered agents are individuals or corporations authorized to do business in the state and which have permanent addresses in Delaware. Registered agents accept legal documents on behalf of the LLC and make sure its members are notified.
3. Get an Employer Identification Number (EIN) from the IRS. If there are two or more members in your LLC, your company will need to obtain an EIN from the IRS, for tax purposes.
4. Create an operating agreement. Although LLCs in Delaware are not required to have a limited liability company operating agreement, it is wise to have one in place with other members should your LLC have more than one member. The State of Delaware recognizes limited liability company operating agreements as governing documents.
5. LLCs in Delaware are required by state law to pay an Alternative Entity Tax. This tax must be paid every year on or before June 1. Notices are sent to registered agents every December. LLCs operating in Delaware are required to pay the tax. There is a penalty for late and non-payments, and interest is accrued every month that the tax is not paid.
6. Familiarize yourself with the LLC’s continuing legal obligations. LLCs are no longer required to file annual reports.
Filing an LLC and Taxes
Following are the forms and fees that are required when starting a Delaware LLC:
1. Forms. Those looking to form an LLC in Delaware will have to file their Certificate of Formation with the Division of Corporations. The Certificate of Formation must be submitted with the required filing fee.
2. Limited liability company operating agreement. Although the LLC operating agreement is not filed with the Secretary of State, it is a good idea to have one in place for LLCs that have more than one member. This agreement should be kept on file by the registered agent.
3. Taxes. LLCs in Delaware are treated as corporations, limited liability partnerships or single-member LLCs and are subject to federal income tax classifications. Depending on the type of taxation you opt to have for your LLC, the tax responsibilities are as follows:
a) LLC treated as a limited liability partnership. These LLCs are required to file Form 1065, U.S. Return of Partnership Income, and to show equal distribution of profits, losses and credit on a Schedule K-1 with the IRS.
b) An LLC treated as a C corporation for federal tax purposes. These LLCs are required to file Form 8832, Entity Classification Election, and must opt to be taxed as a corporation. Next, they must file Form 1120, U.S. Corporation Income Tax Return, with the IRS.
c) An LLC treated as an S corporation. These LLCs are required to file Form 1120S, U.S. Corporation Income Tax Return, accompanied by a report from each owner expressing the equal distribution of profits, losses and credit with the IRS.
d) An LLC treated as a sole proprietorship. These LLCs must report all business income and expenses via the sole proprietor’s personal income tax returns, Schedule C (Form 1040), Profit or Loss from Business, with the IRS.
You should always make sure to acquaint yourself with the state laws regarding taxation. Your Delaware LLC may be subject to other taxes depending on the kind of services your LLC may offer.
This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.