How To Form an LLC In Delaware
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1. Choose a name for your Delaware limited liability company
Check for an Available Name For the LLC in Delaware: In advance of forming an LLC in the State of Delaware you will need to select a name for your small business. It is important to find out first if the name is available and has not already been reserved or taken by someone else. You may perform an early search on the Delaware Secretary of State websites to find out if a name is available for your proposed new limited liability company by going here https://delecorp.delaware.gov/tin/EntitySearch.jsp
Reserve a Name For Your Delaware LLC: In Delaware you can reserve a name for your LLC before you file the LLC formation documents in Delaware. But keep in mind that if you are planning to register the LLC right away, you probably don’t need to reserve the name. You can reserve a limited liability company name in Delaware for 120 days for a fee of $75.
Filing For Trademarks Protection and Doing an LLC Name Search. Even if you have done a search on the Secretary of State website and the LLC name appears available in Delaware online, another company could still be using that name somewhere else in the country or there could be other reasons that prevent you from using that name for your LLC. This is especially critical in Delaware as most companies formed in Delaware are actually based in another state and will need to make sure the name is available in their home state as well. See the article on how to choose a name for your company here how to choose a name for your llc.
Delaware LLC name requirements. A Delaware LLC must contain one of the following: "LLC," or “L.L.C.” or "limited liability company." Remember that the term “LLC” stands for “limited liability company,” and NOT “LLC corporation, “ or “limited liability corporation” or other variations. An LLC and a corporation are two different types of legal entities.
2. Find a Registered Agent in Delaware. Every Delaware LLC needs a registered agent within the State of Delaware that acts as an agent for service of process. This is to ensure that if anyone files a lawsuit against the company or if the State needs to take any action against the corporation or provide other official notice it can serve the notice of the dispute with the registered agent in Delaware to ensure that the notice will reach the LLC. You can find various companies that can perform this service for your LLC for fees between $75 and $150. It is required to get a registered agent before forming the LLC as it must be named in the Certificate of Formation. The Delaware Secretary of State website lists many of the registered agent services here http://corp.delaware.gov/agents/agts.shtml
3. File a Certificate of Formation with the Delaware Secretary of State
Minimum Requirements for the Certificate of Formation:
An LLC’s Certificate of Formation must contain the following
Name
Registered Office
Registered Agent (see below)
Signed certification
Other Delaware legal provisions. Some LLCs include additional clauses. For example, the LLC can state the date that it will be dissolved automatically instead of continuing in perpetuity. This is most common for investment funds or real estate ventures. Other clauses, such as the purpose of the company, are usually not included in the Certificate of Formation since it is a public document. Most members choose to include all other provisions in the LLC Agreement, which is discussed below. It is best to consult a lawyer. The Delaware Secretary of State provides a sample Certificate of Formation form for new LLCs to use at http://corp.delaware.gov/corpformsllc09.shtml.
Where to submit the Certificate of Formation for filing:
Delaware Division of Corporations 401 Federal Street – Suite 4 Dover, DE 19901
Filing Fee:
The LLC filing fee is $90, and if you need a certified copy it is an extra $50. Delaware offers same day filing services, including 2 hour or even 1 hour service (for $1,000). A list of filing fees and a spread sheet for how to calculate the initial filing fee based on the total stock of the company can be found here. Delaware LLC
4. Form a Delaware Limited Liability Company Agreement (Operating Agreement)
Once the Delaware LLC has been formed by filing the Certificate of Formation, the LLC’s members must sign an LLC Agreement that governs how the company will be operated. There is no standard form of operating agreement for an LLC in Delaware. Unlike corporations, LLC’s are usually operated very simply without the need to have annual meeting minutes, or separate consents. LLC’s do not have bylaws. The LLC Agreement governs all aspects between the members of the LLC, just like the bylaws and shareholders agreements in a corporation. The LLC Agreement can be simple or complex depending on the nature of the company, how many people are involved, whether it will be operated by all of the members, or whether the members will have a single manager, or a group of managers (like a board of directors), as well as how and when money will be distributed to the members. LLC Agreements also vary by industry, such as for start up companies with venture capital, or real estate development ventures, or private equity funds. LLCs typically also do not use stock certificates. The LLC Agreement will generally state what percentage interest each member of the LLC has. Other formation documents that are required for a new start-up limited liability company are:
- Securities Filings (Many states have laws that require filing a document with the State regarding the number of shares of stock issued and at what price)
- IRS EIN (Obtained through the IRS. See the IRS Website here.) Although generally for a solely owned LLC, the person uses their social security number.
- Business License (Search for how to get a business license in your city through our online guide here http://www.cityapplications.com/business-licenses.html)
It is highly recommended that the LLC Agreement be drafted by a lawyer. There are various state legal requirements and federal tax laws that must be followed when preparing the LLC Agreement.
Many of the above documents can be obtained through a corporate service company who can make all of the filings for you and provide you with all of the form documents you need for a fixed fee for simple LLCs.
5. Qualify your Delaware LLC to do business in other states
You should also check if you need to register or qualify the LLC to do business in you home state if Delaware is not your main office. Most states require this and require that you pay taxes in your home state. Most companies that form LLCs in Delaware do not have Delaware as their headquarters and will need to register in another state and make annual filings and pay annual franchise taxes to another state in addition to Delaware. See our article on Qualifying to Do Business in Other States.
6. Make annual filings and pay annual taxes in Delaware
LLCs do not need to file annual reports in Delaware, unlike corporations; however, LLCs do need to pay an annual tax of $250 per year. The annual tax is due before June 1 of each year and can be paid online.
LLCs can be fairly complicated, especially where more than one person is involved. You should consult an accountant and an attorney before forming a corporation to make sure that it is right for you and that all paperwork is processed correctly.
This article is for informational purposes and does not constitute legal, financial or tax advise. This information is derived from various sources and should not be relied on as an official source of information. All information should be independently verified. You should consult a legal or accounting professional before incorporating your business.
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