Delaware LLC
Seeing the Value of an LLC Delaware
California is a great place to start a business. The economy in this state ranks fifth in the world, just behind the U.S. as a whole, China, Japan and Germany. Between 2015 and 2019, the Golden State grew faster than three out of the four highest economies. Only China’s economy grew faster (29% compared to 22%).
Small businesses are important to California’s economic health. They make up 99.8% of all businesses in the state. In 2019, there were around 4 million small businesses registered in the state. These companies employed nearly half of the state’s workers. Your new company will join these numbers and contribute to this state’s healthy economy. Follow these steps to get your company off the ground.
Step 1
Finding the Right Name for Your Company
Finding the right name for your company may seem like one of the biggest hurdles you have to overcome on this path to starting your business. You want the name to be catchy, and you need people to identify it easily. The best names are memorable and say something about your company. The name you choose should also resonate with you.
When creating your limited liability company’s name, your business’s identity must also follow the state’s naming rules for limited liability corporations, including the following requirements:
- Your company’s name must be distinguishable from other businesses registered with the Office of the Secretary of State. You can check the Delaware database of entity names to verify your company’s name is unique in the state.
- The name must include the words “Limited Liability Company” or an accepted abbreviation of this phrase (LLC or L.L.C.).
- Your business name cannot mislead the public about the type of business you conduct.
- You cannot choose a name that the public could mistake for a government entity.
After you find a name that works for you, you may want to take the extra step of reserving the name to ensure no one else takes it while you’re in the process of forming your LLC in Delaware. The fee to reserve a name is $75, and it keeps your company’s name safe for 120 days. You can apply online through the Delaware Division of Corporations.
Step 2
Deciding on a Delaware Registered Agent
According to Delaware law, every LLC must appoint a registered agent in the state. A registered agent is your company’s primary contact point for state business. The person or entity you choose to fulfill this role receives essential documents such as your business’s tax information. The registered agent also receives any lawsuit notices if someone sues the company.
To comply with the state’s rules for registered agents, you must choose an individual who is over 18 years of age and is a legal resident in the state. The individual needs to maintain a local physical address and be available to receive service of process. You may also hire a professional service to serve in this role. You can appoint yourself, your company, a trusted family member or friend, someone who works within your business or a professional registered agent service.
Step 3
Making Your LLC Delaware Official
Once you’ve chosen a name and appointed your registered agent, you can make your LLC official with the state. The next step in forming an LLC in Delaware is filling out and submitting your Certificate of Formation. This action puts your company on the records with the state and is the state’s official acknowledgment of your business.
On the COF, provide your entity’s name and the name and address of your registered agent. Be sure your name appears exactly as you want it to appear in the state’s records, as this is the legal name the state records for your company. Note that you must print off or download a copy of the form to sign it. You can then re-upload it and submit it online or mail it to the Delaware Division of Corporations.
The filing fee is $90, and the state returns your completed form with a stamp of approval. If you want a certified copy, it costs an extra $50. You can also get expedited services. For 24-hour approval, the fee is $50, and same-day services will set you back $100.
Step 4
Writing Up Your Operating Agreement
Though the state does not legally require limited liability companies to have an operating agreement, it’s still a good idea to write one up. The OA is an internal document that provides information on the structure and operating guidelines for an LLC Delaware. Even if you are the sole member of the LLC, this document is still valid.
Your operating agreement should include information about your operating procedures and identify each company member. In addition to naming members, a solid OA includes:
- Member roles, responsibilities, rights, liabilities, obligations and powers
- Member initial investments
- Profit distribution guidelines and instructions
- Voting rules for members
- Succession procedures for members who leave
- Guidelines for adding new members
- Amendment process for the OA
- OA dissolution process
You can keep the Operating Agreement on file with the rest of your business documents.
Step 5
Obtaining an Employer Identification Number
Every business has tax obligations, and the way that the government keeps track of multi-member LLCs is through an employee identification number. Most single-member LLCs do not need an EIN for tax purposes. You apply for your EIN through the Internal Revenue Service. It won’t cost you anything to obtain your EIN, and you can submit your application online for a faster response. When you apply, make sure you’re ready to complete the application in one sitting, as the system times out after 15 minutes with no activity, and you can’t save your work.
You need an employee identification number to open a business bank account. You may want to open your account as soon as you receive your EIN. Having separate company and personal bank accounts is important for keeping your finances organized for tax purposes and protecting your personal assets. Once you have your EIN and business bank account, you can begin operations.
Maintaining LLC Delaware Compliance
Once you complete all the steps to forming an LLC in Delaware, make sure you stay on top of regulatory requirements to maintain compliance. Following state and federal rules is imperative if you don’t want to pay hefty fines or lose operating privileges. Here are a few of the most critical compliance obligations most businesses face.
Obtain Necessary Permits and Licenses
Depending on what kind of business you run, you may need to obtain special licenses or permits. The federal government regulates specific industries, requiring these businesses to hold a license or permit to operate. Additionally, Delaware requires state-level permits and licenses for some businesses.
Pay Your Delaware Taxes
In this state, you may be responsible for registering for one of several state taxes, including:
- Delaware gross receipts tax
- Employer tax
- Income tax
- An annual $300 franchise tax
Pay Your Federal Taxes
The IRS does not tax a limited liability company as a corporation. Instead, these “pass-through” entities pay taxes through member personal income tax. When tax time rolls around, you report your share of the LLC profits on your federal tax returns. This is one of the reasons an operating agreement is beneficial. By putting a structure in place for profit distribution, the process of filing your federal taxes is more straightforward.
FAQs
No, you do not need a DBA or trade name for your company. Most businesses use the name they have on record with the state. However, if you want to operate your company under another name, you can register a trade or DBA name.
A domestic LLC operates in the state where the business first formed. A company forms a foreign LLC when the members want to conduct business outside the originating state.
It takes the Division of Corporations approximately two weeks to process a Certificate of Formation from when the office receives the form. However, the state offers expedited services for a faster response. Same-day services cost $100, while a 24-hour turn-around is $50.
Delaware makes it affordable to start an LLC. The standard cost is $90. If you want to reserve your company name while establishing your LLC, the state charges a $75 reservation fee. Additionally, if you opt for expedited services, you could pay an extra $100.
No. Operating Agreements are internal documents that you keep on file with your business records. The state does not require limited liability companies to have an OA, but creating one is a good business practice.
Not necessarily. If your LLC has more than one member, the IRS requires you to obtain an EIN. If you are a single-member LLC that chooses not to be treated in the same way as corporations, you do not need an EIN for tax purposes. However, if you want to open a business bank account, you do need an EIN.
Getting Help With Starting Your LLC Delaware
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