How to Start an LLC in Delaware
- Comparing LLC Rules with Other States
- What are the Requirements Before Setting up an LLC in Delaware?
- What are the Costs of Starting an LLC in Delaware?
- How to Start an LLC in Delaware
- Step 1 – Choose an LLC Name
- Step 2 – Consider Using a DBA
- Step 3 – Find a Registered Agent in Delaware
- Step 4 – Submit Certificate of Formation
- Step 5 - Operating Agreement
- Step 6 – Get an EIN
- Final Word: How to Start an LLC in Delaware
Delaware is a state with one of the highest GDP per capita ratios across the US. The GDP is nearly 33% higher in the state than the average US state and much higher than in neighboring states like New Jersey, Maryland, and Pennsylvania. There are some advantages to the state and in this article, we will cover how to start an LLC in Delaware.
Comparing LLC Rules with Other States
Compared to other neighboring states and the US in general, there are some advantages of starting an LLC in Delaware. But there are also some drawbacks. For example, the filing fee is much lower in the state. The US average is $130.38, across all states. And in the local area, the filing fee is lower than in New Jersey, Maryland, and Pennsylvania.
And the corporation tax is about the same as the other states, with Pennsylvania having a rate of 9.99%. New Jersey has a sliding tax rate of 6.5% to 11.5% and Maryland is just under 8.25% compared to Delaware's 8.7%.
However, the smaller population in the state tends to be financially better off, with the average GDP per capita at $80,446. In Pennsylvania, the GDP is just $64,751. However, there are 13 times the population. You can see the statistics below.
|State||LLC Filing Fee||LLC Annual/Biennial Fee||Corporate Tax Rate||Nominal GDP per capita|
|Delaware||$90||$300 (every year)||8.70%||$80,446|
|New Jersey||$125||$75 (every year)||6.5-11.5%||$72,524|
|Maryland||$100||$300 (every year)||8.25%||$71,083|
|Pennsylvania||$125||$70 (every 10 years)||9.99%||$64,751|
|US Average||$130.38||$89.34 (every year)||5.60%||$64,773.08|
But there are some disadvantages to starting an LLC in Delaware. For one, the corporation tax is much higher than the US average, which is 5.6%. And the LLC Annual is $300 compared to the $89.34 that is the US average. There are states, such as Pennsylvania, where the LLC Annual is $70 every 10 years.
What are the Requirements Before Setting up an LLC in Delaware?
In Delaware, several requirements must be met before you start registering your LLC in the state. For example, you need:
- Certificate of Formation
- Company name
- EIN (Employer Identification Number)
- Operating Agreement
- Registered Agent
Once you’ve got all of these in place, you will be able to register your business. If you don’t have a registered agent, or you want to take advantage of the services of a professional registered agent, then you need to speak to ZenBusiness or IncFile who can help you register your LLC in Delaware and other states.
What are the Costs of Starting an LLC in Delaware?
There are numerous costs when it comes to submitting your details and forming an LLC in the state. The submission of the articles of organization cost about $90 and then you will need a business license. The cheapest option for a business license is $50.
Though there are also other costs in the state. For example, to file for a name reservation in the state, there is a $75 fee. This reservation lasts for 120 days. There is also a $25 per county charge for an LLC to function as a Doing Business As license. And for those who are based in other states or countries, there is a filing fee of $200 instead of $90.
And the process can take a long time. So some business owners look to make the process faster, which can cost between $50 and $100.
And there is an annual report that must be submitted and paid for in each state. This is at least $300 per year, which is higher than in most states.
How to Start an LLC in Delaware
So if you want to know how to start an LLC in Delaware, here are the instructions that you’re going to need.
Step 1 – Choose an LLC Name
Delaware state law, like most other states across the US and in other countries, requires all registered businesses to have a unique name. Therefore, you cannot have a name that has been registered with the state’s Division of Corporations.
Choosing a name can be one of the most challenging aspects of business formation, partly because there have been so many businesses that getting a unique name can be challenging in some respects. To help you out, you might want to use a business name generator.
But you should always check that the name doesn’t have any associated social media, domains, or businesses in the state. A business name search on the state’s website can help you to check that there are no similarly named businesses.
When you have a name that you’re happy with, register your interest by reserving your business name. The cost for this is $75. And the name is reserved for 120 days. This should be long enough for you to get your paperwork into order and get your business registered as an LLC.
Step 2 – Consider Using a DBA
Imagine if you wanted to use the name: Example Business Limited Liability Corporation as your LLC name, this is a rather long and hard-to-remember name. It is also bulky and not friendly for logos or websites. Therefore, many business owners, who are in the same position will use a Doing Business As structure. This is where you have a registered LLC but have a different name that you trade as.
To complete this you will want to fill out the Registration of Trade, Business, and Fictitious Name Certificate form. Then you can submit it to the county Superior Court for each county where you will do business. This form requires you to pay a $25 filing fee for each county. There are only three counties in the state, so the max cost is $75.
Step 3 – Find a Registered Agent in Delaware
As mentioned before, all businesses in the state require that you have a registered agent. A registered agent acts as a point of contact between the government and your business. They have to be a Delaware-based resident. However, there are fewer restrictions than there are in other states.
Step 4 – Submit Certificate of Formation
Now you must complete and submit the certificate of formation to the Division of Corporations. The certificate of formation is a relatively simple form to complete. All you need to include on the state forms are:
- The name of the LLC
- The Registered Agent’s Name
- Registered Agent’s Address
- The Name and Signature of the Person Completing the document
- The Cover page.
It doesn’t matter whether you complete the document online or via mail, the cost of completing the document is $90. That is unless you are a foreign LLC. In this case, you will need to complete a different form, the certificate of registration as a foreign limited liability company. They must also show proof of existence in their home state. They will also need to pay a $200 filing fee.
You might also need to showcase other documents, like the business license. To do this you will need to create a ‘One-Stop’ account and complete the entire procedure for the license online. The license can cost from $50 up to $450.
Those who are filing for an LLC in the state will have to wait nearly three months to get the paperwork back from the state department. Those in the state can wait up to 11 weeks before they get all the certificates. Those who are outside of the state or submit their application via mail can wait up to 12 weeks.
This is a very long time to get the paperwork and is one of the longest periods across the United States. However, some options allow business owners who want to create their LLC quicker to have the paperwork completed in a shorter period. One option is to have an expedient service that can take just 24 hours. The cost for faster processing is at least $50. And this can be done for both online and offline applications.
Step 5 - Operating Agreement
The operating agreement is the contract that describes the business’ procedures for the company. While this is an optional process for a business, it can really help you when there are issues within the business, such as when team leaders have disagreements or there are financial concerns.
Step 6 – Get an EIN
Even if your business will not have employees, get an Employer Identification Number from the IRS. This can be requested from the IRS website and does not cost anything. And there are some benefits as some bank accounts can’t be opened without one.
Final Word: How to Start an LLC in Delaware
If you want to know how to start an LLC in Delaware, then the instructions and some advice are above. Delaware is a great start for an LLC with some great benefits. Many brands start their LLCs in the state, even if they don’t have any intention of doing any business within the state. Some businesses think that the benefits of the state outweigh the slightly higher charges that are there on taxes and filing.