Delaware LLC Filing
A Delaware LLC is one of the most popular business structures in the world. Delaware is known as the premier business state, a reputation it has earned not just in America, but across the globe. Delaware LLCs are formed by filing a Certificate of Formation with the Division of Corporations and paying the filing fee. Delaware LLC members write an Operating Agreement to determine the ownership of the company and lay out the management structure.
Below you will learn more about how to form a Delaware LLC and the advantages of owning one.
Advantages of the Delaware LLC
- Court of Chancery and Business Friendly Law:The single largest distinguishing element of a Delaware LLC is that the state of Delaware maintains its unique Court of Chancery, a special court that specifically addresses business-related litigation. Delaware’s Court of Chancery has existed since 1792, making it one of the oldest legal bodies in the country. The importance of the Court rests primarily upon the fact that it’s long 200-plus year history has given it ample opportunity to mold and shape business law, not just in Delaware, but around the nation, as other states have looked time and again to the Court for precedent. Delaware LLCs can look to the clear history of cases determined by the Court and understand the likely path any litigation will take.
- No Entity Level Taxation:Delaware LLCs are not taxed at the entity level, as corporations are. Instead, taxes are assessed only at the individual level, where members account for taxes on their personal income return. This means that a Delaware LLC is free from double taxation (one of the significant drawbacks of forming a corporation).
- Ease of Management:A Delaware LLC is a far simpler and less-regulated business structure. There are fewer management requirements (no Board of Directors, no annual shareholder meetings) and fewer reporting requirements. The lack of formalities also translates into real cost savings, as Delaware LLCs rarely have to employ the same number of accountants and tax specialists to meet financial reporting requirements.
- No Annual Reporting:A Delaware LLC does not have to file an Annual Report. This is yet another cost savings for Delaware LLCs. Most states require annual reporting, for which they charge high filing fees. Not in Delaware. A Delaware LLC is one of the least taxed and cheapest business entity structures in the country.
Steps to Form a Delaware LLC:
Choose a Name for Your LLC
When naming your company, it is important to check for availability first. You cannot register a new LLC with a name that is already in use by another company. If you are planning to submit the Certificate of Formation at a later date, you may want to file a Delaware Name Reservation which will hold your name for 120 days.
File a Certificate of Formation
The Delaware Certificate of Formation should be submitted to the DE Division of Corporations. There is a $110 filing fee. You must designate a Delaware registered agent on your Certificate of Formation.
The Certificate of Formation cannot be filed online. You must submit the filing by mail, fax or in person.
Wait for Confirmation
When you hire Corporate Filings Solutions, we’ll typically get your Delaware LLC formed in 2 business days. You can also choose 1-day (24-hour) expediting for an additional $50 state fee.
|Formation Filing||Delaware Certificate of Formation|
|Our Fee||$235 (includes registered agent service)|
|Government Agency||Delaware Division of Corporations|
|Annual Tax Due||June 1|
|State Income Tax||2.2% to 6.95%|
Delaware Registered Agent
To form an LLC, a Delaware registered agent and registered office have to be designated to accept service of process and official business mail. An agent must be either a resident of the state, a domestic business entity, or a foreign business entity with a local office in Delaware.
Delaware LLC Operating Agreement
When you form an LLC in Delaware, you will need to write an Operating Agreement. An Operating Agreement is a document which outlines the ownership of an LLC and how the company will operate.
An Operating Agreement should address (at least) the following:
- Members and their ownership percentages
- Rights and responsibilities of members (including shares of profits and losses)
- Voting rights and rules
- Management structure (member-managed or manager-managed)
- Amendment process
S-Corp Designation for Delaware LLCs
S-Corp is an IRS designation. When you form an LLC in Delaware, you can choose to have your LLC taxed as an S-Corp instead of as an LLC. To be clear: S-Corp is a tax designation; it does not actually convert your LLC into a Delaware corporation.
Many LLC’s elect to be treated as S-Corps for the savings potential. Delaware LLC members are taxed on the entire net income of the business, while S-Corp shareholders who are also employees will, by contrast, be taxed only on their wages.
There are many other differences between LLCs and S-Corps, and a business should consult an accountant to determine if making the designation is right for their company.
Delaware LLC Annual Reports and Taxation
When you form an LLC in Delaware, you are not required to file an annual report each year. However, LLCs are required to pay an Annual Tax of $300, which is due June 1.
LLCs are pass-through entities, and members pay taxes on their individual income returns. The state income tax in Delaware ranges between 2.2% and 6.95%.
Federal Beneficial Ownership Information Report Filing
As a newly-formed LLC, you’ll probably need to submit a Beneficial Ownership Information (BOI) Report to the Financial Crimes Enforcement Network (FinCEN). The BOI report provides the federal government with basic information about your LLC and the people with the most power over your business decisions and profits. Starting January 1, 2024, this report is due following company formation. This report is a little complicated, but we can make filing painless with our $9 BOI report filing service.