How to Start an LLC in Delaware

The first step will be to decide on a name for your business. Choose a name that is memorable and unique, easy to understand and pronounce, and accurately represents your business. You'll want to search your name choices on the web to quickly find out if they are already taken. It's also best to jot down one or two alternatives, in case the name you settle on is not available for registration in Delaware.

Like most states, Delaware's Division of Corporations offers the ability to conduct a name search Opens in a new window for your LLC. The Division of Corporations can determine if the business name you plan on registering conflicts with any other businesses already registered in the state of Delaware.

If you find the name of your business is available, you may reserve an entity name through the Delaware Division of Corporations. Reserve the name online (or submit a reservation application in the mail), pay a fee of $75, and your business name will be held for 120 days.

There are two options to choose from when it comes to setting up your limited liability company in Delaware. "Member managed" or "manager managed". The first thing you need to know is that owners of any LLC are referred to as "members". A single member LLC has just one owner, while a multi-member LLC is an LLC owned by 2 or more members. Pretty simple, right?

Delaware LLCs also must also designate one or more individuals to manage the day to day operations of the business. This can be handled by one of the members of the business (member managed, the most popular choice and the default in most states), or a professional manager appointed by the members to act on their behalf (manager managed).

While the differences are subtle, what you really need to know is that each member in a member managed LLC has the power to make decisions for the business. However, in a manager managed LLC, the members choose who will manage the business and relinquish all of the decision making to the manager chosen. The person chosen can be one of the members of the business as well, or it can be someone else entirely.

Most states require that you designate a registered agent for your business, and Delaware is no exception. A registered agent acts as the state's means to communicate with a business and is responsible for receiving legal and official documents related to the business.

A registered agent can be anyone you wish, with one small caveat. The registered agent must have a physical address in Delaware. In other words, a P.O. Box is not allowed as a registered agent address. This means a member of the limited liability company can act as the registered agent if desired, or a third-party registered agent service like MyCorporation can be used.

Why designate a third party to act as my registered agent?

It should be noted that registered agent information is made publicly available. This can cause privacy concerns for business owners who do not wish to list their personal contact information on the internet for everyone to see. It is also common for the registered agent to become a target of spam or robocalls since this private information is relatively easy to obtain.

Another issue that may arise is that in the case of a lawsuit, these documents would be hand delivered directly to the registered agent, and in the case that you used your business location for this purpose, this could occur in front of your customers. This is why many business owners opt for a third-party registered agent service such as MyCorporation to act as a registered agent on behalf of their business.

For a full list of registered agents in Delaware Opens in a new window, please visit the Delaware Division of Corporations.

In order to form a Delaware LLC, you must complete and file a Certificate of Formation(PDF)(69.5 KB) with the Delaware Division of Corporations . This is a brief document that requests only a little bit of information including the LLC's name, name and address of the registered agent, and date of dissolution (if applicable to the LLC). A filing fee of $90 must be included when filing the certificate. The check must be made payable to the Delaware Secretary of State, too.

What information should be included in the Articles of Organization?

As noted above, information required in the Certificate of Formation covers basic information as it pertains to the Delaware LLC.

If you plan to open a business bank account, you may be required to have a certificate of good standing for account for your Delaware LLC's legitimacy. A Certificate of Good Standing may be obtained through two methods. There are Short Term certificates available at $50 per certificate and Long Form certificates for $175 each, depending on the needs of your Delaware LLC.

After formation, the state of Delaware requires an LLC to create an operating agreement. This agreement needs to be written, and should be kept with the company's records.

What kind of information needs to be included in a Delaware operating agreement?

Operating agreements are required in Delaware and are important to laying the foundation of a properly run business. An operating agreement sets guidelines for the way your business operates now and into the future. Common details in an operating agreement include the following:

• Basic contact details: The name of the LLC, the address of the principal business location and often, the registered agent address.
• The business purpose: This is a basic one sentence description of what kind of business your LLC will do, and is often a very general description, which creates a bit more flexibility as the business matures.
• Tax structure: Often this indicates the way the LLC will choose to be taxed. The main options are to be taxed as a sole proprietor or a partnership ( both pass through options ) or to be taxed as a corporation ( which requires an S Corp Election to be filed )
• Ownership and management: This section lays out the general rules about how the business will operate day to day. This refers to step 3, where you determined whether your business would be "manager managed" or "member managed". As mentioned before, member managed is the default and the most common choice. If you are unsure, member managed is a pretty safe bet.

In Delaware, nearly all industries require registering and licensing your business. Begin your business license registration at Delaware One Stop. This is a licensing portal for businesses, including LLCs, that operate in the state of Delaware. With the help of Delaware one stop, your Delaware LLC may take care of the following items.

• Learning about the information necessary to start a business in Delaware.
• Register and license your business in Delaware.
• Add, renew, change, or close licenses for a Delaware registered business.
• Hire employees in Delaware.
• Register out-of-state businesses as a Delaware withholding agent.

Keep in mind that annual fees for Delaware business licenses do vary. However, you may expect to pay $75 for the first location. Separate licenses must be obtained for separate business activities. Check in with your local and county offices to see whether or not you'll need additional licenses, too.

An EIN (also called a Federal Tax Id) is a nine-digit number that is issued by the IRS and used to uniquely identify your business for tax purposes. Think of it as a Social Security Number (SSN) for your business, except an EIN is far less sensitive. It is important to wait until the LLC has been approved by the state before applying, and for that reason, filing for an EIN is one of the last things to do when you are setting up a business.

Like a social security number, the EIN allows you to:

• Open business checking, savings, or investment accounts
• File taxes for the business
• Complete payroll for employees if applicable
• Obtain lines of credit and credit cards, as well as "build credit" for your business
• Apply for applicable business licenses when required.

You only need a few pieces of information to file including your mailing address and legal business name. You can apply online with the IRS by downloading IRS Form SS-4 (PDF)(116 KB), or work alongside a third party organization like MyCorporation to complete an EIN application.

You must obtain an EIN when you file your legal entity with the Delaware Division of Corporations.