If you’re starting a new business or already have one, Delaware could be an ideal location for your endeavor. The state provides numerous advantages and is generally seen as having a business-friendly legal climate.
Establishing an LLC in Delaware is a relatively straightforward process that entails several steps. The first is registering the name of your new business with the state authorities.
What is an LLC?
An LLC is a type of business entity that shields the owners’ personal assets from business debts and liabilities. This can be especially advantageous to small businesses and entrepreneurs who wish to reduce the likelihood of bankruptcy or legal disputes.
Delaware LLCs offer several advantages over corporations, such as flexibility in management structure and profit distribution. Furthermore, they aren’t as dependent on shareholders and board directors, giving management more control.
Delaware LLCs allow members to decide how profits should be distributed based on past contributions and work performed. Furthermore, Delaware LLCs have fewer statutory requirements than corporations; they don’t need to hold an annual meeting or file an annual report.
Delaware requires an LLC to have a registered agent who accepts legal and official mail on behalf of the business. This individual must be a resident of Delaware with an address where notices can be delivered.
Forming an LLC in Delaware
Delaware is an ideal location to form your limited liability company (LLC), whether you’re starting a brand-new venture or expanding an existing one. Delaware offers numerous advantages to LLCs, such as its favorable tax code and easy filing requirements.
Forming an LLC in Delaware begins with selecting a name for the business entity. Make sure it’s distinctive, not misleading, and distinct from other business names registered with the Delaware Secretary of State.
Selecting an appropriate LLC name is essential in the process, as your business will be identified with that name in legal and advertising documents. Furthermore, selecting an appropriate LLC name helps safeguard personal assets from creditors who might attempt to recoup losses from your company.
Registered agent requirements
Every LLC formed in Delaware must appoint a registered agent. This individual or firm will be responsible for receiving and forwarding franchise tax reports and LLC tax notices to either the Secretary of State or Delaware Division of Corporations on behalf of the entity.
Delaware requires registered agents to have a physical business address within the state (no post office boxes). Their office must remain open during regular business hours so they can accept service of process and other duties required by the Delaware Code.
Finding a registered agent that is reliable and professional is essential. They should have staff who can keep regular business hours, handle service of process on your behalf, and provide important documents when needed. Furthermore, they must be able to coordinate expansion into other states as well as adhere to all corporate policies and regulations.
Taxes
Delaware does not have a sales tax, but if your LLC operates as a business that sells goods or provides services, then you must pay gross receipts tax. The amount due depends on your business type and will be determined by the Delaware Division of Revenue.
Corporate Income Taxes: If your LLC is a corporation, then you must file corporate income tax returns with the state by March 1 of every year. These filings must be done electronically.
Alternative Entity Tax: LLCs formed in Delaware are required to pay a flat $300 tax to the state by June 1. There is also an additional $200 penalty for late payments.
Workers’ Compensation: Delaware requires all businesses with one or more employees to purchase workers’ comp insurance. Rates vary based on your business’ risk profile and history of claims.
For further insight on state taxation and other matters related to an LLC, it may be beneficial to speak with a certified accountant or tax preparer. UpCounsel offers experienced attorneys in taxation who are ready to help.
