Delaware is an ideal starting point for your business, offering a straightforward filing process and well-established business laws. Additionally, Delaware provides businesses with liability protection as well as tax advantages.
LLCs are a popular business structure with numerous advantages. But selecting the right entity for your venture can be challenging.
Articles of Organization
Delaware is considered to be one of the most business-friendly states, providing LLC owners with a range of advantages. These include asset protection, minimal filing and reporting requirements, as well as tax flexibility.
Forming an LLC in Delaware requires just a few simple steps. First, select a name for your business and register it with the Secretary of State. Afterward, file articles of organization for the LLC with the Division of Corporations.
The filing fee is $90 and the process typically takes 10 to 15 business days. Please be aware that processing times may take longer during peak seasons such as March, June or December.
Additionally, you must designate a registered agent for your LLC. This individual or company will accept legal correspondence on behalf of the business and keep a physical address in Delaware.
Selecting the ideal registered agent is essential, as they serve as your main point of contact between your business and the state. You have two options: appoint a local resident or hire an outside company to handle it for you.
Registered Agent
When forming an LLC in Delaware, you must appoint a registered agent. This individual will be responsible for receiving service of process and other legal documents as well as mail on behalf of your company.
A registered agent is typically an individual or agency that maintains a physical address in the state of incorporation and can receive legal and official mail during business hours. Your registered agent’s name and DE address will be published in public records and accessible via the Division of Corporations website.
Your registered agent, in addition to accepting mail and providing a physical address, will also help manage compliance with the government. This means they’ll remind you of report filings, government notifications, and other deadlines.
Having a designated registered agent can give you peace of mind and allow you to focus on running your business. Plus, having someone located close by in the same city or state as you will likely be more responsive to queries you may have.
Annual Report
If your Delaware LLC is incorporated, there are certain state taxes that must be paid. The first is an annual franchise tax of $300 that must be paid on June 1.
Additionally, Delaware requires LLCs registered to do business there to pay a gross receipts tax that varies based on business type (from 0.0945% to 0.7468%).
Taxes must be filed online with the Secretary of State. For companies, this task can be overwhelming as they must stay abreast of deadlines, collect data, fill out forms and navigate online filing portals efficiently in order to submit reports on time.
Failure to file and submit taxes can result in a $200 penalty plus 1.5% interest per month. Furthermore, if you haven’t paid your franchise tax or filed the annual report for multiple years, its charter will be declared null and void; at which time you would need to form a new LLC in Delaware.
Taxes
If you’re looking to do business in Delaware, LLCs are an attractive option. They’re taxed at a lower rate than many other states and provide owners with limited liability protection.
If your company sells products and services within the state, it is subject to a gross receipts tax. You will pay this tax based on how much sales volume there are within that jurisdiction.
However, if you do not sell anything in the state, then you are exempt from paying this tax. However, to avoid a $300 franchise tax, you must file an annual report.
In addition to these taxes, LLC owners who generate income from their business operations are considered self-employed and must pay Social Security and Medicare taxes at a graduated rate depending on how much you make.
