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Delaware is considered an excellent state to form your LLC. Here’s how the Delaware division of corporations phrase it:
“Businesses choose Delaware, not for one single reason, but because we provide a complete package of business entity services.”
Sounds great, but what does that mean for you and your LLC?
Well, for starters, Delaware offers low LLC startup and maintenance costs. The state also has limited filing fees and tax obligations, and affordable franchise tax. In addition, Delaware doesn’t charge foreign LLCs tax on out-of-state income, which means if you don’t reside in Delaware, you don’t pay tax on your shares. And, it has a separate Chancery court set up specifically for LLC cases.
So, if you’re thinking about starting your LLC in Delaware, you’re making a good decision.
Below, I’ll walk you through how to successfully start your Delaware LLC, including the steps you need to take, every decision you should make, and the forms you require to get it done today.
It only takes 6 steps to form your LLC in Delaware:
Below, you’ll find a detailed explanation to walk you through each step.
The first step to forming your LLC in Delaware is choosing and registering your unique LLC business name.
Delaware is a pretty easygoing state to form an LLC in, but you must follow its requirements when choosing your name.
We can break it down into 3 parts:
1. What you must include in your LLC name. Your business name must contain “Limited Liability Company,” or one of the following abbreviations: “L.L.C.” or “LLC”.
2. What you can include in your LLC name:
3. What you cannot include in your LLC name:
And to avoid confusing the Delaware public, your LLC name must be unique and distinguishable from any other registered Delaware corporation, LLC, limited partnership, or partnership.
After that, you’ll want to see if your chosen business name is available in Delaware. You can check this by using the Delaware Division of Corporation’s name availability search tool.
If your business name is available and you’d like to reserve it, go to the Delaware Division of Corporation’s website, where you can reserve it online for up to 120 days.
The reservation fee is $75.00. You can pay using a Mastercard, Visa, Discovery Card, or American Express.
You can also download, print, and mail your application for reservation of a Limited Liability Company name.
If you have questions, you can contact the Delaware Division of Corporations by phone at 302-739-3073.
Note: When applying by mail, you must include this cover memo.
Suppose you’d like to run your Delaware LLC using a fictitious business name, a name different from your registered LLC name. In that case, you can file a DBA (doing business as).
To use a DBA, you must complete the Registration of Trade/Business & Fictitious Name Certificate form, and return it to the county Superior Court clerk by mail or in-person in every Delaware county you’ll be doing business.
There are 3 Superior Courts in Delaware state:
1. The Kent County Superior Court Kent County Courthouse:
2. The New Castle County Superior Court:
3. The Sussex County Superior Court:
Note: The fee is $25, and a registered Delaware notary must sign your application.
The US Patent and Trademark Office defines a trademark as including any name, word, symbol, device, or combination used to identify the source of goods/services of one business/brand from others.
But typically, we associate trademarks with a business name or logo, and you need a trademark to stop another business from using yours.
You can research your business name’s trademark availability at the national level and register it using the US patent and trademark office website.
In Delaware, you can research and register your trademark online on Delaware.gov. Or, download the form and send it by postal mail to: 401 Federal Street—Suite 4 Dover, DE 1990.
The application filing fee is $25.00, and the “Certificate of Registration” fee is $10. You make your check payable to the “Delaware Secretary of State.”
Note: A registered Delaware notary must sign your trademark application.
A registered agent is an individual or business entity appointed to receive official mail, a notice of a lawsuit, and other government correspondence on behalf of your LLC.
Registered agents go by various names, including an agent for service of process, statutory agent, and resident agent. And all 50 US states, including Delaware, require an LLC to appoint one.
Delaware state allows either an individual resident, such as yourself or another member of your LLC, or a registered professional agent to act on your behalf.
The registered agent must have a physical street address in Delaware, be 18 years old or over, and open during working hours to receive all Secretary of State’s communications.
To start an LLC in Delaware, you must file articles of organization–also called a Certificate of Formation–with the Delaware Department of State.
An Article of Organization is a legal document that proves your LLC is registered with the state and allowed to trade. If you need help completing your Articles of Organization, contact the Delaware Secretary of State office at 302-739-3073.
Once your Articles of Organization Certificate is filed and accepted, you’ll be an LLC!
The cost to form an LLC in Delaware is $90. The fee is non-refundable, and you pay it to the Delaware Department of State when filing your Articles of Organization.
And although Delaware doesn`t require your LLC to file an annual report, you must pay a $300 yearly tax to the state to maintain your LLC business.
You must maintain a registered office to form your LLC in Delaware. The address requires the street, number, city, county, and postal code.
If your LLC does not have a physical address, you can employ a Delaware-registered agent.
Download the Certificate of Formation of a Limited Liability Company, make your check payable to the “Delaware Secretary of State,” and return to:
An operating agreement is a legal document that outlines your LLC’s ownership and operating procedures. It covers how you’ll run your LLC, who’s responsible for specific duties, percentage ownership details, and disbursement of profits and losses.
Every LLC type should have an operating agreement, and here’s why:
An operating agreement ensures all members are on the same page, reducing the risk of disagreements and conflict. But more importantly, if you’re a single-member LLC, an operating agreement might help you to remain a separate entity from your business should someone sue your LLC.
We cover everything you should include in your operating agreement in our “what is an operating agreement” post.
But in short, a definitive operating agreement should have the following:
If you’re a single-member LLC, you can write it yourself. For multi-member LLCs, you can share the responsibility. Or, where the LLC structure is complicated, you can hire a competent Delaware attorney to write your operating agreement for you.
However, if you get your LLC through Tailor Brands, we’ll take care of the operating agreement for you as well.
An operating agreement isn’t a legal requirement in Delaware. However, the SBA recommends that every LLC has one because of its added protection.
Only 5 states legally require LLCs to write and keep an operating agreement (New York, Missouri, Maine, California, and Nebraska), and even those states don’t require LLCs to file them.
As states do not require you to file your LLC operating agreement, you may wonder where you need to keep it. Given that unfortunate (and unforeseen) events such as fires happen, it’s wise to make a copy of your operating agreement and keep it with either your registered agent or accountant.
As Delaware does not require an LLC to file an operating agreement, when you write yours is up to you.
But, it’s advisable to either write it before or just after filing your Articles of Formation. And although verbal operating agreements are acceptable, it’s always best to put everything on paper to keep a record you can refer to when necessary.
Delaware is known as an LLC-friendly state for several reasons, one being the flexibility of state requirements regarding operating agreements.
LLC members are free to choose how to organize and run their LLC as they see fit–with almost total freedom of governing and defining the internal rules and regulations all members must adhere to.
All you have to do is write your LLC rules down and have every member sign them.
An EIN (employer identification number) is like an SSN (Social Security number) for your LLC business.
Its purpose is to enable the IRS to track and record your LLC business tax reporting.
Only multi-member LLCs (with over one member), LLCs with employees, or single-member LLCs with excise tax liabilities need an EIN.
If you’re a single-member LLC with none of the above, you can use your SSN for filing taxes.
You can apply for your EIN for free from the IRS. Getting your EIN is a straightforward process, and you can either do it by mail or online, using the EIN assistant. If applying by mail, download the SS-4 Application for Employer Identification Number form and return it completed to:
If you’re applying internationally, you can get an EIN by phone. Just call 267-941-1099. Monday to Friday, 06.00 am to 11.00 pm (Eastern time).
Of course, you can get your EIN through Tailor Brands if you apply for your LLC through us!
Although LLCs do not have to file an annual report in Delaware, LLCs must pay Delaware’s yearly tax of $300.00, no later than June 1st every year. Failure to comply will cause a $200.00 penalty plus 1.5% interest every month on the tax penalty.
You must pay the yearly tax if your LLC is active (registered) with the Division of Corporations anytime between January 1st and December 31st of the current tax year.
LLCs are flow-through entities (unless requested to be taxed as an S-corporation). This means your LLC does not pay income tax. Instead, members pay any tax due on wages/profits earned by reporting them on their tax returns.
See our How to File LLC Taxes post if you’d like to know more about how single-member and multi-member LLCs pay tax.
Residents of Delaware pay income tax by filing an individual tax 200-01 form.
Delaware State has a graduated tax rate, meaning the more you earn, the more tax you pay. Rates start as low as 2.2%, rising to 6.6%.
Delaware Taxable Income
$20,000 – $25,000
$25,000 – $60,000
Payroll taxes include Social Security, Medicare, Federal income, and Federal unemployment.
Delaware requires employers to withhold state income payroll taxes from their employee paychecks. The employers’ portion of Social Security and Medicare taxes are 6.2% and 1.45%, respectively.
Employers calculate wage withholdings using the federal W-4 form, which employees must complete annually.
Delaware’s 2021 minimum wage base (the lowest wage you can pay a worker) is $16,500, and tax rates start at 0.3%, rising to 8.2%.
If you’re a new LLC employer, you’ll pay the state of Delaware a flat rate of 1.8%.
These are some of the other potential taxes you could pay and how Delaware handles them:
LLC owners in Delaware can also avoid paying other taxes common in other states, such as:
Congrats–you’ve got yourself an LLC! But now what? Here are a few of the immediate next steps you should take:
Here are a few reasons to consider opening a business bank account:
There are 2 annual costs or fees associated with keeping a Delaware LLC in “good standing.”
1. Delaware franchise tax, which is $300 due on June 1st
2. Designating a registered agent, where fees range from $99-$150
It pays to hire a CPA (certified public accountant) to do your LLC taxes in the long run.
A CPA is a licensed professional approved by a territory or state to provide accounting services to the public. The typical cost of a CPA for small businesses ranges between $1,000 to $5,000.
To help with your finances, a CPA can:
Any LLC with a business location or property, or employees, or generating sales in Delaware must apply for a business license and register with the Delaware Division of Revenue.
Those LLCs with employees must also file “Workers’ Compensation and Unemployment Insurance” forms and register for a withholding account.
You can apply for the Delaware Business License online using the Delaware One-Stop Business Licensing and Registration Service, or by mail using the Combined Registration Application form.
The Delaware Business License filing fee is $75 and can take between 2–4 weeks to receive.
Any LLC owners unsure if their business requires a license, or any relevant permits, can contact the Division of Revenue at 302-577-8778.
We all need a little help now and then, and the State of Delaware provides the type of help small LLCs need to succeed:
Now that you know everything there is to know about how to start your Delaware LLC, nothing is stopping you from starting yours today!
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.