How to Form an LLC in Delaware

Forming a limited liability company (LLC) in Delaware offers business owners the advantage of combining the liability protection of a corporation with the operational flexibility of a partnership or sole proprietorship. This comprehensive guide outlines the key steps required to establish an LLC in Delaware, along with specific costs associated with each stage.

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Step 1: Select a Name for Your LLC

Select a unique name for your Delaware LLC that complies with state requirements. The name must include "Limited Liability Company" or the abbreviations "L.L.C." or "LLC." Additionally, you can incorporate the names of members or specific words such as "Club," "Foundation," "Fund," "Institute," "Society," "Union," "Syndicate," or "Trust." Ensure that your chosen name is not deceptively similar to existing business entities registered with the Delaware Secretary of State. To check name availability, use the Department of State: Division of Corporations business name database. You can reserve an available name for 120 days by submitting an Application for Reservation of Limited Liability Company Name online or by postal mail. The reservation fee is $75.

Using a fictitious business name, trade name, DBA (doing business as), or assumed name is an alternative option. Register your fictitious name with the county where your LLC operates by filing a Registration of Trade, Business & Fictitious Name Certificate with the Superior Court clerk. The filing fee for this certificate is $25.

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Step 2: Designate a Registered Agent

Every Delaware LLC must have a registered agent for service of process within the state. The registered agent can be an individual or a business entity authorized to conduct business in Delaware. If your LLC is physically located in Delaware, it can act as its own registered agent. Ensure that the registered agent has a physical street address within the state. You can find a list of Delaware registered agents on the secretary of state's website.

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Step 3: File a Certificate of Formation

Establish your Delaware LLC by submitting a Certificate of Formation of Limited Liability Company to the Delaware Division of Corporations. This can be done by mail or fax. The certificate should include the LLC's name, the name and address of the registered agent, and the signature of an authorized person (the organizer or an authorized representative). The filing fee for the Certificate of Formation is $90.

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Step 4: Create an Operating Agreement

While not required by Delaware law, it is highly recommended to create an LLC operating agreement. This internal document outlines the management and operation of your LLC, specifying the rights and responsibilities of members and managers. An operating agreement helps reinforce the separation between your LLC and personal liabilities. Although it does not need to be filed with the Certificate of Formation, it is essential for internal governance.

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Step 5: No Annual Report Required

Unlike many other states, Delaware does not mandate LLCs to file annual reports.

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Step 6: Get an EIN

If your LLC has multiple members or employees, you must obtain an IRS Employer Identification Number (EIN). This applies even if your LLC has no employees. For a single-member LLC, an EIN is required only if you elect to be taxed as a corporation or have employees. Obtain an EIN by completing an online application on the IRS website. The process is free of charge.

By following the outlined steps in this guide, prospective business owners can confidently establish an LLC in Delaware while understanding the associated costs. It is important to consult professionals or seek legal advice for any specific legal or financial concerns to ensure compliance throughout the LLC formation process.