Form Your US Company in Delaware

Form Your US Company in Delaware

In the business world, most would rank a Limited Liability Company (LLC) as the top business structure for the simple reason that, should the company attract legal action, the owner(s) are not personally liable.

How you set up an LLC varies depending on the state but if you are thinking of doing business in Delaware, you will need to form a Delaware LLC. Here we will take you through what is involved and make the procedure as straightforward as we can.

How to Start a Delaware LLC

Step 1: Name Your LLC

Before you can form an LLC you will need a name for your business. In Delaware, the name must be unique and not too similar to any other LLCs in the state. You will need to check that your chosen name isn’t already being used.

You can see if the name is taken by searching the State of Delaware’s Division of Corporations’ database here: Delaware Business Name Search.

Remember that abbreviations that may suggest the company is part of a government agency are not allowed – so no FBI or USDA, for instance. If you want to add specifics like “lawyer” you will need to provide information to prove your qualifications.

Whatever name you go for, it has to have a designator afterward to show that it is an LLC. So, if you want the company name to be, for example, Brighter Future, you would register it as Brighter Future LLC. There are three options:

• Limited Liability Company
• L.L.C.
• LLC (this is the most popular)

If you prefer, you can precede the designator with a comma.

Obviously, the business name is important, but don’t obsess over it; you can always register a “doing business as” name later on (called a DBA) if you want to present a different name to customers. When choosing a name it’s also a good idea to make sure that a suitable domain name (website address) is available tied to that name – it’s the best way to make sure your company’s website is easy to find.

Having a web presence is vital for any business concern so don’t neglect this aspect. A catchy name must be supported by a simple website address. You have to make it as easy as possible for people to find your LLC on the internet or you could struggle. Again, if you use a DBA later, this last aspect can be more flexible.

Optional: Business Name Reservation

You do not need to reserve your business name if you are completing the formation process all at once, but if you want to secure your name and take a little more time to iron out the other details before forming your LLC, it’s a good idea to do so.

In Delaware LLC name reservation is a simple online process and you can access the page here. The reservation cost is $75 (plus tax when paying online) and you can also do it by mail or in person.

Reservation means that your chosen name is reserved for the next 120 days, so you have three months to complete the rest of the process.

Step 3: Choose a Registered Agent 

Every Delaware LLC needs a registered agent with a physical address in the state available to receive mail during normal working hours (9 AM – 5 PM), 5 days a week.

The registered agent is responsible for receiving legal documents on behalf of your Delaware LLC, such as tax notices and, in unfortunate cases, subpoenas – these are known as “Service of Process.”

You can choose to be your own registered agent if you meet the above requirements, otherwise you can elect a friend or family member, or choose a commercial registered agent.

Many people setting up an LLC choose to use a commercial registered agent because the registered agent’s address is available publicly and they would rather not allow anyone to find out where they live.

Most commercial registered agents are not expensive (around $15 per month) and will forward scans of your mail via email, or forward it to you physically, depending on what you prefer.

If you are unsure about whether to employ a registered agent or take on these duties yourself you should read our guide here. If you’re looking for a trusted registered agent to protect your privacy, we are a commercial registered agent in Delaware. Reach out to us today for more information on our services.

Step 4: File Your Certificate of Formation

This is where it gets serious (in an exciting way!), as this step is where your company becomes a legal entity and gets its official Certificate of Formation. Filing for your Certificate of Formation is straightforward and can be fast if you have all your information ready to go. It’s best to file online, but you can file by mail if you prefer.

To file your Certificate of Formation, you will need:

• The name of your LLC exactly as you wish it to appear
• Your name, address, and other contact details
• The name and address of your registered agent
• If your business is member-managed or not (it is if you are going to be managing it and an owner)
• Your signature (or that of an authorized person)

Delaware’s processes are a little outdated as while you can fill in your form online, you’ll need to fill it in, download the file, sign it, and then upload it to their systems.

To complete this process, click here: File Online. 

Alternatively, you can mail in your forms with a cover letter.

Filing costs $90, paid by card or check. Your company formation usually takes about a week to approve, but it can take longer if they are particularly busy. If you’re short on time, you can pay $50 to have the process expedited and completed in just 24 hours. (There are even faster options available – up to one hour – though that adds $1,000 to the fee.)

A PDF of the certificate of formation is available here and the cover letter can be obtained here.

Once the LLC certificate has been approved you will receive a copy of your Certificate of Formation along with a receipt of purchase.

Step 5: Draw Up Your LLC Operating Agreement

An LLC Operating Statement is not a Delaware requirement and is not intended to be shown to any governmental body; it is purely for internal use but is essential.

Most LLCs are multi-member and the operating statement sets out the ownership percentage of each member, along with their duties, obligations, and rights. It should include:

• The company name and operating address
• The aims of the business
• The names of the members and their position in the LLC
• Contact details of the registered agent
• Investment details of the members in the LLC
• Ownership divisions of the members
• The process for introducing new members
• The process for a member leaving
• The expected life of the LLC
• How profits and losses are dealt with
• Annual accounting period
• How taxes are to be paid
• Timeline for meetings
• Voting procedures
• Any other details that could prevent the company from running smoothly in the future

Step 6: Secure Your EIN Number

An Employer Identification Number (EIN) is issued by the IRS and acts as your business’s social security number. It is used to identify the LLC for tax purposes, applying for permits and licenses, and opening bank accounts.

You only receive your EIN after you have created the LLC and it has been recognized by the State of Delaware.

To apply for your EIN, click here.

You’ll receive your EIN immediately after you submit your application.

(Note that if you aren’t a US resident you should write “Foreign” on line 7b where it asks you for an SSN/ITIN/EIN.)

Alternatively, you can apply by mail using Form SS-4, but it can take 4 weeks for you to receive your EIN.

Step 7: Get a Handle on Your Taxes 

Delaware does not require LLCs to file an annual report but you do need to pay an annual franchise tax of $300. This is a requirement of all LLCs regardless of income or industry and must be paid online by the first of June each year. Note that payment is due the year after the year your LLC was approved. For example, if you formed your LLC in April 2022, you would need to pay this franchise tax by June 1, 2023.

If your business is going to have employees or collect sales tax, you’ll need to register to pay state taxes with the Delaware Division of Revenue.

Step 8: Get Your Licenses and Permits

Not all Delaware LLCs are required to have a business license or permit, but many do, so it’s important to find out if you need to apply for any before you start trading.

Delaware offers a single-stage application process: the OneStop.

Some of the licenses and permits you may need include:

• Business Privilege License – this is county specific
• Sales Tax License
• Seller/Reseller Permit

Generally speaking, the more regulated the industry, the more licenses and/or permits you’ll need to seek.

Step 9: Open Your Business Bank Account 

An LLC requires its own business account. This is not a federal requirement but it keeps the business’s finance separate from personal accounts. That’s the only way to ensure that, should legal problems arise, your assets are kept separate from those of the business – the major reason for setting up an LLC in the beginning.

A bank account in the LLC’s name and using its EIN allows separation of the business from individuals and makes accounting straightforward. Complete this step now so you can get into good financial habits from the start of your business.

Step 10: Retain Essential Documents at the Registered Office

The following documents are legally required to be available at the LLC’s registered office:

• A current list of all members of the LLC, including both names and addresses
• All recent financial statements
• An up-to-date copy of the Certificate of Formation, including all alterations
• An accurate copy of the Operating Agreement

And that’s a wrap on this 10-step process to starting an LLC – you’re now ready to start doing business!

We Can Help

It is only 10 steps but no one can deny that they are time-consuming, detailed, and need to be done right. You want to begin trading as soon as possible and dealing with all the hoops that need to be jumped through will mean your time is spent on things that won’t move the needle for you early in your business.

We help people form LLCs all day every day and we can help you, too. While you get on doing the commercial side – the things that will actually make money – we can help with the administration of setting up your new LLC. You don’t have to tick all the boxes, we’ll do it for you. Less hassle, more productivity.

All you have to do is fill in a short form and we will do the rest, registering the name and filing for the Certificate of Formation. We can be your registered agent, and we can take care of contacting the IRS and getting your EIN.

You want to start a business and figure the best way is to have an LLC. That’s what we do – so you can get on with building your business and making money. All you have to do is click here.

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