The State of Delaware makes starting an LLC relatively straightforward. As long as the individual or organization adheres to the rules set forward by the state, it is possible to successfully file by mail or fax without the need to physically travel to Delaware.

Getting Started

Naming the LLC

Every LLC in Delaware must contain the words “Limited Liability Company”, or an abbreviation of the term (LLC). The naming requirements permit most words to be used, with the exception of words that would easily cause confusion with other federal or state entities – such as FBI or EPA. Some words do require additional paperwork and/or licensed individuals to be part of the LLC, such as Bank, Banc, Banque, etc.

A company must register a name for the LLC that does not match the name of another LLC in the state. Delaware offers a free search tool to verify if a name is available for an LLC. One can quickly determine if a name is available – and if not, make the necessary adjustments to move forward with the registration process.

When naming an LLC, it can also be helpful to consider website names. The vast majority of businesses have websites, and ideally the website name is easy to relate to the name of the business. There are a variety of domain registration options available online, such as GoDaddy, where one can search and determine whether a domain name is available. Again, it may be necessary to come up with slight variations to find a name that is both available and that serves the purpose of the business.

Selecting a Registered/Statutory Agent

The State of Delaware requires every LLC to have a registered agent available to accept legal documents on behalf of the LLC. If the LLC is sued for any reason, the registered agent must be the one to receive the legal paperwork.

For businesses located in the state, it is possible to elect a registered agent from within the company – either one of the members of the LLC, or an employee working for the company. For businesses outside of Delaware, it is necessary to retain the services of a resident of the state or a corporation authorized to transact business in Delaware. There are multiple organizations that provide registered agent services in Delaware.

File Articles of Organization

Articles of Organization can be filed by mail or fax for $90. The completed certificate should include a cover letter with name, address and phone/fax number.

Create Operating Agreement

Delaware requires an operating agreement, an agreement that defines how an LLC will operate. The operating agreement can be written, oral or implied, and can be created before, during or after the LLC paperwork is filed.

Running Your Business

Getting Your EIN

What’s an EIN?

An EIN is an employee identification number, issued by the Internal Revenue service. Sometimes it is also called a Federal Tax Identification Number. It’s a unique number issued to each business.

You’ll need an EIN to

  1. Open a business bank account.
  2. File Federal and State Taxes
  3. Hire employees.

Before you get your EIN:

  1. Make sure your new business has been properly formed before applying.
  2. Be wary of paid sites. EINs are free direct from the IRS.

How do I get an EIN?

  1. Apply online: The easiest way is to apply online for an EIN. Note, the IRS website has office hours, and is only available Monday through Friday, 7am to 10pm. Yes, we also agree this is one of the most ridiculous things we’ve ever seen.
  2. Call: You can call 1-800-829-4933, between 7am to 7pm of your time zone, Monday to Friday.
  3. Snail Mail – You can download the form and mail it in.

Keep Business and Personal Accounts Separate

  1. Get a business bank account for your business. This will help you protect your personal assets from potential creditors and lawsuits, and will also make life A LOT easier come tax time.
  2. Get a business credit or debit card. This will help you keep your expenses separate and easier to track.

Accounting

No matter what business you run, accounting software and processes is a must for any small business. If you have an accountant, ask them which software they work with and recommend.

A good accounting system is necessary to:

  1. Track income and expenses, so you can easily see if you’re making money
  2. Makes filing income taxes so much easier.

Always try and find something that will:

  1. Sync with all of your bank and credit card accounts automatically – not just downloads, but auto sync.
  2. Automatch vendors, customers and other accounts.
  3. Let you accept credit cards and ach drafts with ease.

Setting Up for Taxes in Delaware

 

Companies with employees will need to pay unemployment insurance tax, as well as employee withholding tax.

The State of Delaware official site also offers a comprehensive guide on workers’ compensation for all companies with employees.

Gross Receipts Tax

Delaware requires the majority of businesses to pay a gross receipts tax, which is levied against the business as opposed to the consumer. The rate varies depending on the business activity.

Franchise Tax

The state requires all LLCs to pay an annual franchise tax.

Keeping Your LLC Compliant

Renewing Franchise Tax

The franchise tax must be renewed each year by June 1st. Currently $300, the franchise tax can be paid online. Failure to pay the franchise tax on time will result in a penalty of $200 along with an interest fee of 1.5% each month.

Informational Tax Returns for Multi-Member LLCs

One of the advantages of an LLC is that it can usually avoid paying direct income tax. However, Delaware does require the majority of multi-member LLCs to file an informational tax return each year.

Certificate of Good Standing

A Certificate of Good Standing is available for a fee to demonstrate that an LLC was formed legally and that it is in good standing. Such a certificate can be useful when attempting to get a loan or trying to get certain permits or certifications. The fee to get a Certificate of Good Standing ranges from $50-$175.

How to File a Foreign LLC in Delaware

Delaware offers advantages to businesses that make it attractive to companies in other states. Any company registering as an LLC from another state is considered a “foreign LLC”. One can file a foreign LLC in Delaware for $200 in much the same way one would register a local LLC, only using a different form. Foreign LLCs are also expected to pay annual taxes of $300 by the first day of June each year.