Delaware LLC Formation

On April 29, 2023

At 12:02 pm

In Legal

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Delaware is a popular state for business formation, especially for Limited Liability Companies (LLCs). Delaware’s LLC laws are very flexible, and the state offers many benefits to businesses, such as low taxes, a pro-business legal system, and a business-friendly regulatory environment. In this article, we will cover everything you need to know about forming an LLC in Delaware, including the requirements, fees, and process.

Delaware LLC Formation Basics

1.1 What is an LLC?

A Limited Liability Company (LLC) is a legal structure that combines the liability protection of a corporation with the tax benefits of a partnership. LLCs offer limited liability protection to their owners, which means that their personal assets are protected from business liabilities.

1.2 Why form an LLC in Delaware?

Delaware is a popular state for business formation because of its flexible LLC laws, low taxes, and business-friendly regulatory environment. Delaware LLCs also offer many benefits, such as:

Limited liability protection for owners
No state income tax for non-resident owners
Easy management and governance
Flexible ownership structure

1.3 What are the requirements for forming an LLC in Delaware?

To form an LLC in Delaware, you must:

Choose a unique name for your LLC
File a Certificate of Formation with the Delaware Secretary of State
Appoint a registered agent in Delaware
Prepare an operating agreement

1.4 What is a registered agent?

A registered agent is a person or business entity that is authorized to receive legal documents and other important correspondence on behalf of your LLC. The registered agent must have a physical address in Delaware and be available during normal business hours.

Delaware LLC Formation Process

2.1 Choose a unique name for your LLC

The first step in forming an LLC in Delaware is to choose a unique name for your business. Your LLC name must be distinguishable from any other business registered in Delaware. You can check the availability of your desired name on the Delaware Division of Corporations website.

2.2 File a Certificate of Formation with the Delaware Secretary of State

To form an LLC in Delaware, you must file a Certificate of Formation with the Delaware Secretary of State. The certificate must include the following information:

Your LLC name and address
The name and address of your registered agent
The name and address of each LLC member
The purpose of your LLC
The duration of your LLC (if it is not perpetual)

You can file the Certificate of Formation online or by mail. The filing fee is $90.

2.3 Appoint a registered agent in Delaware

Every LLC in Delaware must have a registered agent who is authorized to receive legal documents and other important correspondence on behalf of the LLC. The registered agent must have a physical address in Delaware and be available during normal business hours.

2.4 Prepare an operating agreement

An operating agreement is a legal document that outlines the ownership and management structure of your LLC. Although it is not required by Delaware law, it is highly recommended that you prepare an operating agreement for your LLC.

Delaware LLC Formation Checklist

Here is a checklist of the steps you need to take to form an LLC in Delaware:

Choose a unique name for your LLC
File a Certificate of Formation with the Delaware Secretary of State
Appoint a registered agent in Delaware
Prepare an operating agreement

Delaware LLC Formation Requirements

4.1 Name requirements

Your LLC name must be unique and distinguishable from any other business registered in Delaware. It must also include the words “Limited Liability Company” or “LLC” in the name.

4.2 Registered agent requirements

4.3 Filing requirements

To form an LLC in Delaware, you must file a Certificate of Formation with the Delaware Secretary of State. The certificate must include the LLC name and address, the name and address of the registered agent, the name and address of each LLC member, the purpose of the LLC, and the duration of the LLC (if it is not perpetual).

4.4 Operating agreement requirements

Although it is not required by Delaware law, it is highly recommended that you prepare an operating agreement for your LLC. The operating agreement outlines the ownership and management structure of your LLC and can help avoid disputes among LLC members.

4.5 Tax requirements

Delaware LLCs are not subject to state income tax if the owners are non-residents and the business does not operate in Delaware. However, LLCs may still be subject to other taxes, such as federal taxes, sales taxes, and employment taxes.

Delaware LLC Formation Fees

The fees for forming an LLC in Delaware include:

Filing fee: $90
Registered agent fee: varies depending on the registered agent service you choose
Operating agreement preparation fee: varies depending on whether you prepare it yourself or hire an attorney

LLC Formation Services in Delaware

There are many companies that offer LLC formation services in Delaware. These companies can help you with the entire LLC formation process, from choosing a name to filing the necessary paperwork. Some popular LLC formation services in Delaware include:

LegalZoom
Incfile
Northwest Registered Agent
Harvard Business Services, Inc.
ZenBusiness

Cheap Delaware LLC Formation

While forming an LLC in Delaware can be expensive, there are ways to keep costs down. Here are some tips for forming a cheap Delaware LLC:

Do it yourself: You can save money by filing the paperwork yourself and preparing the operating agreement on your own.
Use a low-cost registered agent service: Shop around for registered agent services to find the best deal.
Choose a simple business structure: The more complex your LLC structure, the more expensive it will be to form.

Company Formation in Delaware

Delaware is not just a popular state for LLC formation; it is also a popular state for company formation in general. Delaware is home to many Fortune 500 companies and has a pro-business legal system. Some benefits of forming a company in Delaware include:

Low taxes
Business-friendly regulatory environment
Pro-business legal system
Access to a large network of business professionals and resources

Delaware C Corp Formation

Delaware is also a popular state for C corporation formation. A C corporation is a type of corporation that is taxed separately from its owners. Delaware’s pro-business legal system and business-friendly regulatory environment make it an attractive location for C corporation formation. The process for forming a C corporation in Delaware is similar to forming an LLC and requires filing a Certificate of Incorporation with the Delaware Secretary of State.

Suggested FAQs

How long does it take to form an LLC in Delaware? The processing time for LLC formation in Delaware is typically 1-2 business days for online filings and 7-10 business days for mail filings.
Can I form an LLC in Delaware if I am not a resident of Delaware? Yes, you can form an LLC in Delaware even if you are not a resident of Delaware.
Do I need to have a business address in Delaware to form an LLC? No, you do not need to have a business address in Delaware to form an LLC. However, you must have a registered agent with a physical address in Delaware.

What is the difference between a single-member LLC and a multi-member LLC? A single-member LLC is an LLC with only one owner, while a multi-member LLC has more than one owner. The formation process for both types of LLCs is the same, but the operating agreement may differ depending on the ownership structure.
Can I change the name of my LLC after it is formed? Yes, you can change the name of your LLC after it is formed by filing an amendment to the Certificate of Formation with the Delaware Secretary of State. There is a fee for filing an amendment.
How much does it cost to maintain an LLC in Delaware? The annual fee for maintaining an LLC in Delaware is $300, which is due on June 1st of each year. Failure to pay the annual fee can result in the LLC being dissolved.
Do I need an attorney to form an LLC in Delaware? No, you do not need an attorney to form an LLC in Delaware. However, it is recommended that you consult with an attorney to ensure that you understand the legal implications of forming an LLC and to prepare an operating agreement.
Can I form a series LLC in Delaware? Yes, Delaware allows for the formation of a series LLC, which is an LLC with multiple series, each with its own assets, liabilities, and members. The formation process for a series LLC is the same as for a regular LLC.
Can I convert my LLC to a corporation? Yes, you can convert your LLC to a corporation by filing a Certificate of Conversion with the Delaware Secretary of State. The process for conversion can be complex, and it is recommended that you consult with an attorney.
Can I dissolve my LLC in Delaware? Yes, you can dissolve your LLC in Delaware by filing a Certificate of Dissolution with the Delaware Secretary of State. The Certificate of Dissolution must include the reason for dissolution and the effective date of dissolution.