Delaware LLCs are business entity types that offer many of the same legal protections and tax flexibility as corporations without all the formalities involved.
LLCs can be an attractive choice for startups and medium-risk businesses, as they allow owners to shield their personal assets from debts and liabilities associated with the business.
Choosing a Company Name
Name selection is key when forming a Delaware LLC, as you don’t want it to become confused with any other businesses filing with the Division of Corporations. Your customers or clients shouldn’t become confused by any similar names filed.
Delaware requires your business name to end with one of the following words (or abbreviations): company, club, corporation, fund, association foundation institute incorporated limited public benefit corporation union society or syndicate
Filing an application with the Delaware Secretary of State allows you to reserve a name for up to 120 days, preventing other entities from using that name during that period.
Filing the Certificate of Incorporation
Step one in forming a Delaware LLC is filing the Certificate of Incorporation with the Division of Corporations – this can be done either online, by mail or in person.
Form LLC-1 must be completed and signed by at least one member of an LLC, and includes details about its name, address and registered agent.
Once a form has been filed with the state, you’ll need to wait for approval. How quickly this occurs depends upon which priority option was selected when submitting paperwork.
Typically, it takes 10 days to process an LLC formation filing; however, this can vary significantly during peak processing times (March, June and December) when approval times may take longer.
Obtaining an EIN
When forming an LLC in Delaware, an EIN (Employer Identification Number) will be necessary. An EIN serves federal tax purposes when opening bank accounts or hiring employees.
Before applying for your EIN online or through a third party provider for a fee, ensure you have all of the required information and are familiar with the application process.
An EIN can help keep your personal and business finances separate, which is beneficial when tracking expenses and income as well as protecting you in case of legal disputes or litigation.
Creating an Operating Agreement
After you’ve formed your Delaware LLC, one of the key steps you need to take is creating an operating agreement. This document will establish rules and help ensure everything runs smoothly.
The Delaware LLC Operating Agreement, more commonly referred to as a Limited Liability Company Agreement, is an important legal contract among members that establishes ownership structure and operations management of your business. Drafting this document thoroughly and documenting it can protect it from claims of unapproved transactions as well as disputes among members.
There are a variety of operating agreements you can utilize when setting up a Delaware LLC, such as single-member, multi-member (commonly referred to as member-managed), and series LLCs.
Getting the Right Licenses and Permits
Establishing your business requires the acquisition of licenses and permits from various government agencies. Most government entities issue these permissions that grant businesses or professionals permission to perform certain activities within certain geographic locations or for a limited time frame.
Delaware Division of Revenue requires all LLCs operating in their state to acquire a business license through One-Stop Business Licensing and Registration Service, making the process straightforward.
Your business may also be required to pay a gross receipts tax and federal/state income taxes depending on its type and location. These costs will depend on what kind of activity is performed within its sphere of influence.
