How to Start an LLC in Delaware (May 2024 Update)

With its business-friendly tax policies, flexible corporate laws, and specialized business court system, Delaware has long been considered one of the best states in the country for starting and operating a business. Over 66% of Fortune 500 companies are incorporated there. So if you’re planning to form a limited liability company (LLC), Delaware is likely an excellent choice.

An LLC is a popular business structure that offers personal liability protection to its owners while providing the tax flexibility of a partnership. Forming an LLC in any state is relatively straightforward, typically only requiring a few key filings. But there are some important steps specific to Delaware LLCs that entrepreneurs should understand before getting started.

In this comprehensive guide, we’ll walk through the entire process of how to start an LLC in Delaware.

Benefits of Launching a Delaware LLC

Before going through the nuts and bolts of forming an LLC in Delaware, let’s look at some of the advantages this state offers for LLCs:

• No state income tax on pass-through earnings. Unlike corporations, LLC income passes through to the personal returns of LLC members, avoiding double taxation. Delaware does not tax this pass-through income for LLCs doing business out of state.
• Minimal reporting requirements compared to other states. For example, Delaware does not require LLCs to file annual reports.
• Flexible corporate laws that provide LLCs with more options in crafting internal rules and protections. Delaware makes it easy to form entities like series LLCs as well.
• Respected and specialized Court of Chancery for fast resolution of corporate disputes and precedents for business case law.
• Credibility with investors and partners for being based in a state known for business formation.

The drawbacks of starting a Delaware LLC primarily revolve around the various taxes and fees involved, especially the $300 per year franchise tax. But for most small businesses, the benefits clearly outweigh the costs.

Step 1: Choose and Reserve a Business Name

The first step in how to form an LLC in Delaware or any state is selecting an official name and checking for availability.

There are a few key rules around naming a Delaware LLC:

• The name must end in a designation like “Limited Liability Company,” “LLC,” or “L.L.C.”
• You cannot use words that might falsely imply the LLC is a nonprofit, bank, or government agency.
• The name cannot be the same as or deceptively similar to an existing business entity registered in Delaware.

You can search for name availability on the Delaware Division of Corporations website. If the LLC name you want is available, you can choose to reserve it for 120 days for a $75 fee. Doing so guarantees no one else can take that name before you finish organizing your LLC.

If you'll be doing business under a different name than your LLC's official name, you'll also need to file a "doing business as" name or DBA in Delaware. Each county charges $25 to register a DBA.

Step 2. Designate a Registered Agent

All LLCs formed in Delaware must appoint a registered agent, which is an individual or company designated to receive official mail and legal correspondence on behalf of the LLC. This agent must have an address within Delaware.

If your LLC will have a physical presence within the state, it can designate one of its members or managers as the registered agent using their Delaware address. Alternatively, you can hire a registered agent service for $50-300 per year. This keeps your personal address private and ensures you have someone available during business hours to accept legal documents.

Step 3. File a Certificate of Formation

To formally create your LLC, you must file articles of organization, referred to in Delaware as a Certificate of Formation, with the Secretary of State. This registration documents the basic information about your LLC:

• Official company name
• Registered agent’s name and address
• Name and signature of the organizer completing the form

You file by mail or electronically through Delaware’s one-stop business registration system. Filings fees are $90, or $200 for foreign LLCs registering to transact business in Delaware.

The state will send you back a stamped Certificate of Formation once your LLC registration is approved, usually within 1-2 weeks. This certificate formally establishes your active LLC.

Step 4. Draft an Operating Agreement

One unique requirement in Delaware is that all multi-member LLCs need to adopt an LLC operating agreement. Single-member LLCs are not required to have one, but it’s still highly recommended.

This important document lays out all the governance rules and financial rights regarding your LLC, including:

• Member responsibilities
• Profit/loss distribution
• Voting procedures
• Rules for transferring or divesting ownership
• Processes for dissolution

Having clear operating agreement terms prevents disputes down the road and gives your LLC more legal protections. A business lawyer can help craft an agreement if you have a complex ownership structure.

Step 5. Obtain an EIN from the IRS

Most new LLCs will need their own Employer Identification Number (EIN), which serves like an SSN for tax and identification purposes. Apply online for free on the IRS website anytime after officially forming your LLC.

Single-member LLCs can simply use the owner’s SSN if they have no employees. But getting an EIN adds an extra layer of personal asset protection, even if you don’t have staff or business partners.

Step 6. Stay Compliant with State Requirements

While Delaware excels in offering flexibility and privacy for LLCs, you do still need to stay compliant with a few key state requirements on an ongoing basis:

Pay the $300 annual tax for your LLC every year by June 1. You can submit this franchise tax electronically.

Obtain a business license if you open a Delaware office location or have inventory, employees, or persistent business operations within the state. Fees range from $50-$450.

There are no annual report filings required. But you must proactively notify the state if you change registered agents or update your LLC’s official contact information.

With employees, you need worker’s compensation insurance, unemployment insurance, and to handle various payroll tax requirements.

Be aware of industry-specific permits and regulations if your LLC provides licensed professional services in fields like healthcare, accounting, legal services, etc.

Following these rules ensures your LLC remains compliant and retains its liability protections. Consider connecting with a small business attorney or accountant to stay up to speed on legal and tax compliance.

How Much Does It Cost to Start a Delaware LLC?

Government filing fees make up the bulk of starting an LLC in Delaware:

• $90 for the Certificate of Formation
• $50-$175 for certified copies of documents
• $75 for optional name reservation
• $200 to dissolve the LLC later

You may see other charges like:

• $50-300 annually for a registered agent
• $25 per county to file a DBA
• $50-100 for expedited document filing
• $50-450 for a state business license

There are also the typical costs that come with starting any business—licenses, permits, attorney fees, accounting software, website development, etc. But the state fees listed above are what you need to budget for Delaware LLC formation itself.

3 Routes for Starting Your Delaware LLC

When ready to make your LLC official, you have three main options:

1. DIY Filing

You can save money by filing the Certificate of Formation yourself through Delaware’s expedited online filing system. The Division of Corporations websites provides all the instructions and forms you need.

The drawback to DIY filing is that any mistakes can lead to processing delays and extra fees to correct. You also still need to put in work handling operating agreements, tax registrations, banking, etc.

2. Use an LLC Formation Service

For those seeking speed and simplicity, an online LLC service handles all the state paperwork and filings for you. Most also provide complimentary registered agent services, operating agreement templates, and email/phone support. Expect to pay $49-200+ depending on what packages and extras you select.

3. Hire a Business Lawyer

While pricier, an experienced corporate attorney can customize all the necessary LLC documents and ensure everything meets Delaware codes. Having one-on-one guidance gives you the best chance of error-free filing and a strong business foundation. Just be prepared for billable hourly rates ranging from $200 to over $1,000.

Key Takeaways: How to Start an LLC in Delaware

That wraps up our guide to launching a limited liability company in the First State. Here are some final takeaways:

• Check names for availability before filing and consider reserving your top choice for 120 days. Remember the naming requirements around using a designated LLC term.
• Appoint a registered agent in Delaware to handle state communications and legal documents on your LLC's behalf.
• Submit a Certificate of Formation and $90 fee electronically to legally register your LLC with the state.
• Draft an operating agreement to establish rules and protections for your LLC, especially if you have multiple members.
• Apply online for free to get an EIN from the IRS, which handles tax reporting for your LLC entity.
• Keep up with annual franchise tax payments, licensing, and formalities to keep your LLC compliant and active.

While no means impossible to tackle on your own, most new entrepreneurs find it beneficial to at least consult with a lawyer or accountant when starting a Delaware LLC. Their expertise can help you avoid costly mistakes and put your business on the soundest legal and financial footing from day one.