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Ultimate Guide to Starting an LLC in Delaware: Step-by-Step Process

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Starting a Limited Liability Company (LLC) in Delaware has become a popular choice for many entrepreneurs, and for good reason. Delaware is known for its business-friendly laws and flexible LLC structures, making it an attractive location for starting a business. 

If you’re considering forming an LLC but need clarification on the process, this guide is for you. We’ll walk you through each step. Let’s get into how you can start your LLC in Delaware.

 

Step 1: Choose a Name for Your LLC

Picking the right name for your LLC is the first and one of the most crucial steps. In Delaware, your LLC’s name must be unique and not too similar to other businesses registered in the state. It must include “Limited Liability Company” or its abbreviation (LLC).

How to Check Name Availability

Before settling on a name, use the Delaware Secretary of State‘s website to perform a name search. This ensures your chosen name is available and meets Delaware’s naming guidelines. Choosing a distinguishable and compliant name is essential for a smooth registration process, or do a quick, free name check online to see if your name is available. If you consider getting a website name that matches your business name, you can find good deals for website domain names on Namecheap. This step ensures your business name doesn’t conflict with existing entities and meets Delaware’s naming requirements.

Step 2: Appoint a Registered Agent

A registered agent is essential for an LLC in Delaware. This person or business entity agrees to accept legal documents for your LLC. The registered office is the official business address of your LLC. It can be your home, your office, or even the address of the Resident Agent. It could be yourself or a friend, or you can hire a professional service. Alternatively, you can use a legal service specializing in this area, services to Complete the Formation Process. You can bypass the steps using a third-party service such as Bizee or Northwest Registered Agent

Check out our blog: ‘Is a Registered Agent Necessary? Your Guide to Finding an Affordable Option

Step 3: File a Certificate of Formation with the Delaware Department of State

It’s time to make your LLC official in Delaware! You must file the Certificate of Formation with the Delaware Department of State to legally establish your LLC. This critical document is what officially registers your LLC in Delaware.

How Much It Costs:

The filing fee for the Certificate of Formation in Delaware is $90. This is the standard fee for starting your LLC, although additional services or expedited processing may incur extra costs.

How to Send Your Form:

  • Online: For the fastest processing, you can file the Certificate of Formation online through the Delaware Division of Corporations website. This method is straightforward and provides immediate confirmation of your filing.
  • By Mail: You can also file by mail if you prefer. Complete the Certificate of Formation, include the appropriate fee and any additional documentation required, and mail it to the Division of Corporations, P.O. Box 898, Dover, DE 19903. 
  • In-Person: If you’d like to file in person, you can bring your completed Certificate of Formation to the Division of Corporations at 401 Federal Street, Suite 4, Dover, DE 19901. This option is good if you’re local and want to interact with the Division’s staff.

 

Refer to the Delaware Division of Corporations website for the most current information, forms, and instructions to ensure a smooth filing process.

Step 4: Making an Operating Agreement for Your Business

Let’s discuss setting up some ground rules for your business. This is where an Operating Agreement comes in. Think of it as a handbook that explains how your business runs. It’s important because it helps everyone understand their role and what’s expected in your LLC.

Here’s what an Operating Agreement usually includes:

  • Ownership: This part talks about who owns what percentage of the business. 
  • Member’s Rights and Responsibilities: Here, you’ll write down what each person in the LLC can and cannot do and what they’re responsible for. It’s like a job description for each member.
  • Joining & Leaving: This section covers how new people can enter your business and what happens if someone decides to leave. It’s good to have this figured out so there are no surprises later.
  • Dissolution: This might sound a bit gloomy, but it’s practical. It’s about how to close down the LLC if you ever need to. It includes the steps to take and how to handle everything when wrapping up the business.

Creating an Operating Agreement is a smart move. It keeps things clear and organized so everyone knows what to expect, and it can save you a lot of headaches! 

Step 5: Getting Your EIN from the IRS

Your business needs a number called an EIN from the IRS. It’s like an ID number for your business. This number will help you as an identification number when getting bank accounts and credit accounts, filing taxes, and hiring employees.

It’s free, and you can get it from the IRS website at https://www.irs.gov/businesses/small

Delaware LLC Tax Requirements and Annual Report Filing

Employer Taxes and Tax Requirements in Delaware

Once your LLC is established in Delaware, it’s essential to understand and manage your tax obligations, especially if you’re planning to hire employees.

Employer Taxes: 

Suppose you have employees in Delaware and own an LLC. In that case, you must register to pay Unemployment Insurance Tax and Employee Withholding Tax with the Delaware Division of Unemployment Insurance and the Delaware Division of Revenue, respectively. This is important to comply with state employment laws.

Tax Requirements: 

You may also be required to pay various state taxes based on the nature of your business. Most LLCs in Delaware are treated as pass-through entities for federal tax purposes, meaning the LLC does not pay income taxes. Instead, profits and losses are reported on the individual member’s tax returns. However, LLCs can be taxed as corporations if it suits their financial goals.

  • Regardless of tax status, obtaining an Employer Identification Number (EIN) from the IRS is essential for tax purposes, hiring employees, and other business needs.

 

Annual Report Filing in Delaware

Delaware requires all LLCs to file an Annual Franchise Tax Report, which is distinct from the practices in some other states. This report is critical for maintaining your LLC’s good standing with the state.

  • Filing the Annual Report: The Annual Franchise Tax Report for LLCs in Delaware is due by June 1st of each year. The report can be filed online through the Delaware Division of Corporations website. As part of this filing, LLCs must pay an annual Franchise Tax, currently $300 for most LLCs.
  • Importance of Timely Filing: Late filings can incur penalties and interest, and failing to file can jeopardize your LLC’s good standing in Delaware. Therefore, it’s critical to mark this deadline in your calendar and ensure that your report is filed on time.

 

Delaware is a great place to do business, but if you’re running an LLC, there are state tax laws and filing requirements you need to follow. It’s essential to understand your tax obligations, including employer taxes if you have employees, and keep up with your Annual Franchise Tax Report filings. 

New 2024 Reporting Requirements (BOI)

Effective from January 1, 2024

Big news! Starting January 1, 2024, there are new reporting requirements for both domestic and foreign reporting companies. This includes LLCs, corporations, and other entities. Here’s what you need to know:

First Report Deadlines:

  • Existing Entities: If your LLC was already around before 2024, you’ve got until January 1, 2025, to submit your first report.
  • New Entities: If you’re forming your LLC in 2024, you must file your report within 90 days of your company’s creation.

Who Needs to Report:

  • Domestic Reporting Companies: This includes LLCs and similar entities within the U.S.
  • Foreign Reporting Companies: Entities registered foreign entities must also adhere to these new rules.

Exceptions to Reporting:

  • For specific exceptions, you’ll want to refer to the Beneficial Ownership Information Reporting Regulations at 31 CFR § 1010.380(c)(2) and the Small Entity Compliance Guide.

What Must Be Reported

What you need to report is all about transparency. The exact details can be found in the compliance guide, but it generally involves information about your LLC’s ownership and control.

When Must Reporting File Reports

Remember, if you’re an existing entity, your deadline is January 1, 2025. For new LLCs formed in 2024, it’s within 90 days of creation.

Filing Reports & Noncompliance Penalties

Starting January 1, 2024, all BOI reports must be filed electronically. Here are some critical points:

  • Filing Before the Date: You must file on January 1, 2024.
  • Accuracy: Filer certification of accuracy is mandatory – you need to double-check that everything you report is correct and accurate.

Penalties for Noncompliance:

  • False Information: Providing false information or failing to report accurately is a big no-no.
  • Penalties: If you slip up here, you could face a fine of up to $10,000 or even imprisonment for up to 2 years.
  • FinCEN’s Approach: The Financial Crimes Enforcement Network (FinCEN) focuses on education and outreach to ensure compliance. They’re not trying to trip you up; they want to help you get it right.
  • Safe Harbor Rule: Did you make a mistake? If you discover inaccuracies in your initial report, you have a 90-day grace period to submit a corrected report.

If you need more information or specific guidance, please visit the FinCEN website for all the details.

What to Do After You’ve Started an LLC 

  1. Open a Separate Business Bank Account: Keeping your personal and business money apart is super important. Mixing them up can cause significant problems, like losing the protection of having an LLC. This mix-up is sometimes called “piercing the corporate veil,” it can put your stuff, like your car or house, at risk if your business runs into trouble. To open a business bank account, you’ll need:
  • Your LLC’s Articles of Organization.
  • Your Operating Agreement.
  • Your Employer Identification Number (EIN).

When picking a bank for your business, consider the fees, minimum deposits, and benefits (like earning interest) they offer. Look for features that help your business, like using a debit card to pay for things. 

Get a Business Credit Card

A business credit card is an excellent tool for handling business purchases and can help build your company’s credit history. Just like with personal credit, a good business credit score can make it easier to get loans and may qualify you for better terms. Visit our website to see our favorite business cards review.  

Check out our blog: Novo Review: The Best Business Banking Account in 2024.

  1. Set Up Your Finances Right: Use good habits to track your money. This means not mixing your cash with your business’s. Good record-keeping makes tax time less stressful and helps avoid problems with the rules. You should use a program like QuickBooks to track your money, inventory, payroll, and sales. Talking to professionals like accountants or business lawyers is also intelligent, especially when understanding your LLC state’s tax rules. Find experts who know a lot about the area where your business is.

 

  1. Create a Professional Website: Having a website makes your business look legit. WordPress is a great tool to build your site. You can check out SiteGround or Hostinger for web hosting. They’re both good options to get your site up and running.

 

  1. Announce Your Business with a Press Release: A press release is a fantastic way to promote your new business and attract customers.

Starting an LLC in Delaware might seem daunting, but breaking it down into these manageable steps can simplify the process. By following this guide, you’ll navigate the setup process smoothly, ensuring your LLC is correctly formed and compliant with Delaware laws.

Bizee Overview

Bizee LLC handles the paperwork and legal stuff needed to get your business. Think of it as having a personal assistant for your business setup, ensuring you don’t trip over any legal hurdles or paperwork nightmares.

Why Choose Bizee?

Now, you might wonder, “Why go with Bizee?” First off, they save you a ton of time. We all know how precious time is, especially when you’re trying to get your business rolling. Bizee takes care of the tedious and complex stuff, like filing documents with the state, so you can focus on the fun parts of running your business.

Another big plus is how they help you avoid mistakes. Let’s be honest: filling out government forms can be confusing, and one small error can set you back big time. Bizee knows their way around these forms like the back of their hand, ensuring everything is done right the first time.

Bizee Core Services

  • Business Formation: They’ll help you officially start your business by filing it with the state. This includes setting up LLCs, corporations, and more.
  • Compliance: Bizee ensures your business stays in good standing with the state by managing annual reports and other legal requirements.

These services are the backbone of Bizee, ensuring your business is set up correctly and remains compliant with state laws.

Bizee Additional Services

  • Registered Agent Service: This is a must-have for keeping your business legit. Bizee will be your official contact for legal documents, ensuring you get all the necessary info.
  • EIN Acquisition: Think of an EIN as a social security number for your business. Bizee can get this number for you, which you’ll need to open bank accounts and hire employees.

Starting a business is exciting, but the paperwork and legal stuff can drag. That’s where Bizee LLC takes the hassle out of the equation. I recommend getting the gold/platinum plan for 99% of business owners. It’s the one I’ve used many times in the past, and it saves you so much time and ensures that there are no filing mistakes when it comes to your business.

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