Whether it’s the liability protection, tax advantage, or both, forming an LLC for your business can prove extremely beneficial. Delaware is an extremely good choice for opening an LLC in the US, as you can benefit from the flexible tax system and Court of Chancery.
In this complete guide, we will take you through the entire journey of forming LLC in Delaware, step-by-step. By the end of it, you’ll learn all about the formation process, relevant fees, and steps unique to Delaware. So, let’s get started!
Steps to Forming LLC in Delaware
In this segment, we’ll go through the steps that are required to forming LLC in Delaware. You need to go through these sequentially.
Step 1: Reserve a Name for Your LLC
The very first step should be reserving a name for your LLC. Before filing the papers, it’s important to ensure that the name you’ve chosen for your business is available.
How to Check Availability of Company Name in Delaware?
To check if your desired name is available, you need to visit their official search engine. Here, you have to select the entity of your choice, which is obviously LLC.
Then, you’ll proceed to enter the entity name. You can make multiple searches. However, refrain from using any automated tool as the website may flag that as a potential data miner. This will get you suspended from the website.
Reserving a Name for Future
The state of Delaware allows you to reserve a name for 120 days, if you aren’t planning on forming the LLC right away. This can be handy if you want to prevent others from snatching up the name you’ve chosen for your company.
For this, you need to pay a small, one-time fee of $75. To make the payment, you can use a VISA, Master Card, Discover card, or American Express. Note that the transactions are non-refundable.
You can file it both online and offline. If you’re planning on mailing it, you need to download the required documents and mail them at 401 Federal Street, Suite 4, Dover, DE 19901, to the Delaware Division of Corporations.
What to Avoid?
In the following are a few pointers that you must follow while choosing a name for your LLC:
- Don’t include words such as “medical” or “Bank”, or any other word that may indicate that your business is a bank or offers medical services without the approval or relevant regulatory body.
- Don’t use words that are considered inappropriate or racist.
- Don’t use words such as “Inc.” or “Incorporated”.
- Avoid acronyms or words that may confuse your business with a government entity, such as “IRS”.
Additional Pointers
The unique name that you pick for your business should end with “Limited Liability Company” or the abbreviation of it. If the name includes any foreign words (Non-English words), you will have to include the translation of that word into the file.
Lastly, even if the name is available, it may not be accepted due to legal complications. So, we highly recommend consulting an agent for ensuring a smoother experience.
Step 2: Choose a Registered Agent
The law of Delaware requires every business entity to maintain an agent registered in the state of Delaware. The agent can be an individual or business entity. Regardless, it has to be a resident and the authorization to do business in Delaware.
Choosing the right agent for your business is crucial. The agent will mainly take the responsibility of receiving important documents or lawsuits on your behalf. However, the right agent can make the LLC formation process a breeze for you.
Step 3: Submit Your Paperwork
The filing for Delaware’s LLC is 90 dollars, and all the paperwork and documentation need to be passed through the Division of Formation, where you need to mention all the business activities, procedures, and affiliations along with the details of the registered agent.
The state doesn’t make it necessary to form an operating agreement. Still, it’s more convenient to create one as it keeps a lot of records and affiliations about the employees and members of the company. It takes around. It takes around three weeks to complete formation, but the whole thing can be expedited in 1 or 2 days by paying 100 dollars.
You can apply for it either online or via mail. If you’re using online, you need to wait around two weeks. Applying via mail takes a similar processing time, but it may take a few days extra for the mail time.
Expedited Processing
The state of Delaware offers four different options for expediting the LLC forming process. The standard process takes around 10 business days. In the following are some of the options that can make this faster.
| Name | Cost | Processing Time |
| Priority 4 | $50 | 24 Hours |
| Priority 3 | $100 | Same Day |
| Priority 2 | $500 | 2 Hours |
| Priority 1 | $1000 | 1 Hour |
Things to Do After Forming the LLC
Your work isn’t fully done even when the LLC is formed. If you want to sustain the business and make future endeavors easier, you need to follow these steps:
Step 1: Drafting an Operating Agreement
A lot of states in the US don’t require an operating agreement, but Delaware is one of the five states that do require one, given the company has more than one member.
You don’t necessarily have to submit the operating agreement. However, you need to have one in place that governs how your business will operate.
So, what is an operating agreement? It’s essentially a legal contract that specifies how the company will operate. It also specifies the obligations and rights of each member.
Another important role the operating agreement plays is differentiating the company from the person. This helps in long term liability protection.
Here are some of the common elements of an operating element, so you have a clear path while creating one.
- Classes of interest
- Management
- Profits and distributions
- Transfer of interest
- Fiduciary duties
- Adding members and raising funds
- Dissolution
Step 2: Get an Employer Identification Number (EIN)
If you’re planning on forming an LLC in Delaware of one member, having an Employer Identification Number isn’t a must. However, you’re required to have one if there are multiple members in your company.
The EIN is also referred to as the federal tax ID, and it’s essentially a 9-digit number. It’s mainly used for dealing with tax. However, you’ll need it for some other activities, such as:
- Opening a business bank account
- Getting a business loan
- Most vendors and suppliers may ask for it as well
Applying for an EIN isn’t a necessity, as I have mentioned before, but it all certainly add value. Not to mention, if you create one online, it is completely free.
Non-residents or people without any sort of SSN or ITIN cannot apply for an Employer Identification Number online. That is where Rocket Wave can come in aid to atleast assist you in creating your individual Taxpayer Identification Number (ITIN).
Step 3: Pay the Annual Tax
As an LLC operating in the state of Delaware, you aren’t required to submit an annual report. However, you have to pay a yearly fee of $300, regardless of whether you’re a domestic or foreign LLC. The payment must be done by June 1st.
Conclusion
Forming LLC in Delaware isn’t very complicated, but one must stick to the regulations throughout the process. Even one simple mistake will cost you a lot of time, effort, and cash. So, we recommend maintaining utmost caution.
Here at Rocketwave, we strive to make sure our clients have the smoothest experience while forming their LLC. Fortunately, we help people from all over the world form their LLCs in Delaware too.
So, if you want to form an LLC in Delaware in the most hassle-free manner, contact us right away!
