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The state of Delaware is a beacon for entrepreneurs with its lack of sales tax, business-friendly laws and court system, diversified economy, and access to a highly skilled workforce. Even though it’s the United States' second-smallest state, many of the most recognized brands, like Apple and Amazon, were actually incorporated in Delaware, and it’s home to over 2 million business entities.
But it’s not just Fortune 500 companies that choose to incorporate here, small businesses make up the largest portion of business entity formations. In 2024, more than 70% were limited liability companies (LLCs).
Discover more about LLCs, from their key features to the costs of business formation and more, to determine if it’s the right legal entity for your needs. Whether you aspire to run a solo venture or a family business, this guide will set you up for success.
What you will learn in this Delaware LLC guide
- The "what" and "why": We'll explain what a limited liability company (LLC) is, its key features, and why Delaware has become the premier state for entrepreneurs to form one.
- A complete road map to forming a Delaware LLC: Get a clear, step-by-step breakdown of the entire Delaware LLC formation process, including filing requirements and a transparent look at associated costs.
- Ongoing obligations and compliance: Learn about the recurring requirements for having a Delaware LLC, including annual taxes, industry and general business licenses, and post-formation obligations to keep your company in good standing.
- Unique Delaware formations: We'll cover specialized types of LLCs available in Delaware, such as the series LLC, to help you determine which structure is right for you.
- More LLC resources: A comprehensive FAQ section will address common concerns, and a resources section will provide links to official state websites for further information.
What is an LLC, and what are its key features?
A limited liability company (LLC) is a legal business entity that is recognized in all states and gives business owners the limited liability protection of a corporation without as many restrictions or formal legal requirements. Key features include:
- Personal asset protection. A cornerstone benefit, limited liability protection creates a separation between personal assets and business debts and legal disputes. This means that if there are business debts, creditors generally can’t go after an LLC owner’s house—because their personal assets are safeguarded.
- Pass-through taxation. With an LLC, profits and losses "pass through" to the owners' personal tax returns, avoiding double taxation. Single-member LLCs are automatically taxed as sole proprietorships, and multiple-member LLCs are automatically taxed as partnerships. LLCs can also elect to be taxed as an S corp or C corp if they meet Internal Revenue Service (IRS) requirements.
- Management flexibility. LLCs have freedom in the company’s internal operations. They can choose two types of structures: member-managed (where the owners handle management) or manager-managed (where the owners hire an outside person to manage daily operations).
Why create a Delaware LLC?
Delaware is commonly considered a great state to form an LLC due to its business-friendly laws, focused corporate courts, privacy, favorable tax environment, and more. But as with any state, there are pros and cons to consider before you make a decision.
Advantages of a Delaware LLC
- Business-friendly legal environment. One of the unique offerings of Delaware is its Court of Chancery, a trial court that specializes in corporate, trust, and real estate law. Chancellors are experts in Delaware corporate law, forgoing the need for juries to weigh in. This provides businesses with predictable, speedy, fair trials. Additionally, Delaware is well-known for its stable and forward-thinking business law, with LLCs being governed by the Delaware LLC Act.
- Favorable tax environment. If a business doesn't operate within Delaware, it doesn't pay the state income tax, making it a powerful choice for out-of-state businesses. Additionally, Delaware has no state or local sales taxes.
- Positive reputation with investors. Delaware's reputation as a corporate-friendly hub can enhance credibility with banks, venture capitalists, and other investors.
- Privacy and anonymity. In contrast with many other states, Delaware does not require the names of members or managers to be listed on the public certificate of formation.
- Asset protection. Delaware law provides robust asset protection, not only for members’ personal assets but also for other members’ debts. If an LLC creditor wants to collect the debts owed by the LLC, it can obtain a so-called "charging order" from the Delaware courts, which gives the LLC creditor the right to receive any profit distributions made by the LLC, but does not permit the creditor to assume any managerial control or force the sale of any LLC assets. This arrangement helps to ensure that the LLC’s operations may continue largely unaffected.
Potential drawbacks of a Delaware LLC
- Tax requirements. Delaware institutes a franchise tax on all formal business entities. LLCs must pay an annual $300 flat fee, regardless of business activity. Plus, they must pay annual gross receipts tax on the total revenue of the business, which ranges from 0.0945% to 0.7468%, depending on the business activity.
- Potential dual registration. If your business operates in a different state, it will likely need to register as a foreign LLC in that state, leading to two sets of filings and fees. This is common among states but is still an important consideration.
Types of LLCs in Delaware
As with many states, Delaware accepts two main types of LLC business structures: single-member and multiple-member. Single-member LLCs consist of only one member (owner) and are automatically taxed as sole proprietorships. Multiple-member LLCs have two or more members (owners); by default, they’re taxed as partnerships.
Delaware also recognizes series LLCs, where a parent LLC has several LLCs under it. This is a great option for real estate owners with multiple properties. LLC owners can either choose a protected series LLC, which doesn’t have to be registered with the state, or the more formal registered Delaware series LLC, which requires a Registered Series Formation document to be submitted to the Delaware Division of Corporations.
How to start an LLC in Delaware: The step-by-step process
Forming an LLC in the Small Wonder state requires a strategic approach. Use our steps to establish a strong footing.
Step 1: Choose your LLC name
You'll need to choose a name to include in your articles before you can register your LLC. All legal business entities in Delaware (including limited liability companies) need to adhere to the state's business naming guidelines.
As per Delaware's Limited Liability Company Act (6 Delaware Code § 18-102), an LLC name:
- Must include the words "limited liability company," "LLC," or "L.L.C."
- Cannot contain words used to name a government agency (i.e., State Department, CIA, FBI, Treasury, etc.)
- Cannot contain words from certain regulated industries (such as bank, lawyer, attorney, credit union, etc.) without additional documentation and approval
- Cannot contain the words "incorporated" or "Inc."
- Must be different from an existing business in the state. You can perform a Delaware LLC search on the Secretary of State's website to determine if a particular business name is in use.
If you aren't ready to register your LLC but are concerned your desired business name might be taken by someone else, you can reserve the name for 120 days with the Delaware Division of Corporations for $75.
Step 2: Appoint a Delaware registered agent
A registered agent is the person or entity authorized to accept service of process and other official legal documents and notices on behalf of your LLC. Delaware requires you to appoint a registered agent for your LLC formation—there's no way to bypass this requirement.
A registered agent can be a person (including yourself or an employee of your LLC), another entity (like another LLC, a corporation, trust, or foreign entity authorized to transact business in Delaware), or a business that offers a registered agent service.
A Delaware registered agent must meet the following criteria:
- The agent must have a physical address in Delaware.
- The agent must be on-site and available to accept documents during regular business hours (9 a.m.–5 p.m.).
- The agent, if an individual, must be above the age 18.
While Delaware allows you to be your own registered agent, the additional administrative paperwork and time commitment easily overshadow the cost savings. LegalZoom, which complies with the state's agency regulations, can serve as your Delaware registered agent for just $249/year.
Step 3: Prepare and file the Delaware certificate of formation
The Delaware certificate of formation (commonly called articles of organization in other states) is a document that officially establishes your LLC by laying out basic information about it.
To prepare your certificate of formation and file it with the Delaware Division of Corporations, you will need the following information:
- The legal name of your Delaware LLC
- The name and address of the LLC's registered agent
- The date of formation of the LLC
- The name and signature of the organizer
Submit the completed certificate of formation online using the state's Document Filing and Certificate Request service. The filing fee for domestic Delaware LLCs is $110, and $200 for foreign LLCs (those incorporated in another state and seeking to do business in Delaware). If you wish your paperwork to be processed the same day, you will need to pay an additional $100.
Once you file your certificate of formation, the Delaware Division of Corporations will review the filing. If the certificate is approved, the LLC becomes a legal new business entity. The state will issue you a certificate that confirms the LLC formally exists. This certificate will allow the LLC to obtain an employer identification number (EIN), local and state business licenses, and a business bank account.
Building a business is enough work as it is. We'll help you start your LLC with confidence.
Step 4: Create an operating agreement
The Delaware Secretary of State does not require an operating agreement, but it’s an important component of your business. Having a readily accessible, written operating agreement is helpful for various reasons, including settling disputes and laying the framework for how your business will operate. Without an agreement in place, the courts make determinations based on state law when settling disputes, and do not necessarily consider what is in the best interest of the LLC and its members.
The operating agreement can include, but is not limited to, the following:
- Purpose of the business
- Members and their contribution
- The way profits and losses will be divided
- Procedures for admitting new members, as well as offboarding outgoing members
- Management of the LLC
- Indemnification and liability clauses
Many small businesses gravitate towards using an operating agreement template as a way to save costs and simplify agreement drafting. However, for more complex operating agreements, it’s wise to consult an attorney. LegalZoom's operating agreement drafting service can help you draft a tailored plan, or our network of licensed business lawyers in Delaware can help you draft an agreement that goes into even more detail.
Step 5: Obtain an EIN
This nine-digit federal identification number assigned by the IRS allows you to do the following:
- File and manage taxes at the state and federal level
- Open a business bank account
- Hire employees
A Delaware LLC owner can opt to use their Social Security number for tax purposes, if they wish, but securing a separate EIN draws a more distinct line between your business and your personal finances.
Step 6: Register for state taxes and licenses
This will allow you to officially operate in the state and withhold the proper taxes. Registering with the state for licenses and taxes can be done through the state's One Stop Business Registration and Licensing Portal. General Delaware business license fees vary by business activity and are laid out in the Delaware Code.
Delaware LLC costs and requirements
It can cost anywhere from $110–$2,000 to create an LLC in Delaware. Let's take a closer look at all of the LLC formation costs.
- Name reservation. You can reserve a business name with the Delaware Division of Corporations for 120 days for a fee of $75.
- Doing business as (DBA) certificate. You need to pay $25 to register a DBA through the Division of Revenue’s One Stop portal.
- Certificate of formation. Delaware LLCs have to pay a minimum filing fee of $110. Expedited service adds an additional $50–$100.
- Registered agent. A professional Delaware registered agent can cost between $50–$300 per year.
- Annual tax. All Delaware LLCs have to pay an annual tax of $300 regardless of their business size or industry.
- Insurance. There’s no one-size-fits-all when it comes to insurance in Delaware. Costs vary depending on your industry and size, but general liability insurance can be as low as $19 for a low-risk small business. You can get a quick quote through our recommended partner, NEXT Insurance.
- Certified forms. There is a $50 charge to receive a certified copy of any official government form.
Tax obligations for your Delaware LLC
Anyone forming an LLC in Delaware should keep the following tax information in mind.
Federal and state taxes
Every business owner needs to understand and fulfill their tax obligations. In Delaware, you have to consider the following:
- Gross receipts tax. Delaware LLCs aren't subject to state or local sales tax, but they do need to pay gross receipts tax if you sell goods and have employees. The rate ranges from 0.0945% to 1.9914%.
- Self-employment taxes. All LLC owners must pay the federal self-employment tax of 15.3%.
- Income tax. LLC owners who are Delaware residents must pay income tax on their business earnings (which can be reported on their personal tax forms). Income tax ranges between 2.2%–6.6%.
Local taxes
Most cities in Delaware don’t institute their own business taxes, but one in particular, Wilmington, does require businesses operating in the city to pay a local net profits tax. Research the cities in which your LLC operates to understand if there are any local taxes.
Is a Delaware LLC right for you? Weighing your options
We’ve rounded up reasons why Delaware may be the best state for your business and why it might not. But don't just take it from us: We interviewed Delaware Secretary of State Charuni Patibanda-Sanchez about what makes Delaware a great place to do business.
When a Delaware LLC is the best choice
An LLC in Delaware may be a good choice if you:
- Value privacy on formation documents
- Are considering forming a series LLC
- Are forming a standard LLC in Delaware but operating in another state
- Want limited liability protection
- Prefer a state with business-friendly legal and tax environments
When another state might be better
If Delaware is not the best state for your LLC, you may be interested in forming an LLC in the following states.
- Florida: No personal income tax and less overall costs of formation compared to Delaware
- Arizona: No annual report requirements, no annual franchise tax, and affordable formation fees
- Nevada: No state income tax and privacy on formation documents
- The state where you plan to operate: If you plan to operate in only one state, it may be beneficial to register your business there, so you don’t incur more fees when you register as a foreign LLC in the state where you operate.
Find the right state to form an LLC
Find the right state to form an LLC
Every state has different rules, costs, and considerations for LLC formation.
Next steps after forming your Delaware LLC
Registering your LLC gives you a legal foundation to conduct business, but there are a few more housekeeping items that will help your Delaware LLC thrive.
Get necessary licenses and permits
In addition to a state general business license, your business may require additional state and local licenses and permits. This can include health department permits, zoning permits, home occupation permits, professional licenses, and more. You can check the need for local and county-based licenses by contacting your local county office or working with a license lookup service like LegalZoom.
Certain professionals, like accountants and engineers, must register with the state's Division of Professional Regulations.
Register a domain name
Build credibility and online visibility by creating a small business website. Just remember to register a domain name that aligns with your LLC's name. It will make it easier for customers to find you. You can register an available domain name through a domain service or a website builder like Wix.
Maintain compliance
Most states require businesses to regularly confirm and update important information, often through a mandatory annual report or periodic report. Fortunately, Delaware LLCs are exempt from filing annual reports. Delaware LLCs are also not required to pay a franchise tax. However, they do have to pay an annual tax of $300. The deadline to pay this tax is June 1, and an online payment option is available.
Obtain a certificate of good standing
A certificate of good standing or certificate of status shows the world that you're a responsible business owner legally authorized to conduct business in the state. Investors, vendors, and clients may request your certificate before they choose to do business with you. A certificate of good standing is also necessary for expanding your business beyond Delaware's state borders.
You can request a certificate of status online or via mail. A short-form certificate (which only includes entity name and status) is $50. A more detailed, long-form certificate costs $175.
Consider a foreign LLC
Your LLC requires permission—called foreign authorization—in every state outside of Delaware where it wishes to conduct business. Foreign authorization gives you legal authority to operate in the new state. The process and cost of filing as a foreign LLC varies by state, but you can get help from a business formation service to navigate the filing requirements and fees.
Why choose LegalZoom to form a Delaware LLC
Starting an LLC in Delaware may seem straightforward, but a few missteps (like forgetting to list a registered agent) can hinder your entrepreneurial endeavor. Let LegalZoom handle the details of your business formation, from Delaware LLC registration to crafting an operating agreement and getting an EIN.
LegalZoom can help you file your state's formation paperwork for as little as $0 + state filing fees.
FAQs about Delaware LLCs
What are the benefits of a Delaware limited liability company?
Delaware is known to have the most sophisticated business court system in the United States. Combine that with its diverse economy, highly skilled workforce, and proximity to major ports, and you will see why most companies decide to form their business in the state. Another plus is that one doesn't need to be a Delaware resident or U.S. citizen to form and operate an LLC in Delaware.
Do I need a business license for my Delaware LLC?
Yes, Delaware requires you to get a state-level business license to officially conduct business in the state. Depending on your location and business type, you may also need a local business license. Register and license your business through the state’s OneStop portal.
How long does it take to form an LLC in Delaware?
The state of Delaware is pretty efficient in processing LLC formation documents. With expedited service, you can receive your confirmed LLC paperwork the same day if it is filled out accurately.
How do I correct filing errors in DE?
To amend any filing errors, like a misspelled name or address, you need to submit a certificate of correction and a cover letter to the Secretary of State's office. The filing fee for this form is $220.
How do I dissolve a Delaware LLC?
If it’s time to close down your LLC, you’ll need to inform the state about your dissolution by filing a certificate of cancellation and paying the $220 processing fee. If you don't inform the state of your decision to close, you'll still be liable for paying applicable state taxes and the annual tax of $300. LegalZoom can handle your company's exit smoothly and correctly.
Rudri Bhatt Patel and Swara Ahluwalia contributed to this article.
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