If you are reading this article, you obviously have grand plans of taking the world of business by storm, and starting a Delaware limited liability company LLC is just a perfect way to begin. However, if that is your goal, then you need to know about certain start-up costs associated with launching an LLC in Delaware. And it is only ideal that you know and consider them.
Well, you are on the right track because, in this article, we will be disclosing the accurate costs related to starting an LLC in Delaware. So, please keep your eyes peeled as we unveil the treasure trove.
Step 1: Name Your Delaware LLC
First things first, of course, to run an LLC, you have to give it a name and possibly a distinct and meaningful one that best describes the business and what it stands for. Ideally, you already have that. The State of Delaware allows your business name to be reserved before your LLC can operate in Delaware, although reservation of business name is optional in Delaware. The cost of a name reservation in the State is $75 irrespective of if you apply online or through the mail. Name reservation in Delaware lasts for 120 days; you’ll have to pay another fee of $75 to renew your business name reservation after the 120 days have passed. In essence, your chosen name for your LLC will remain available and open to the public until you file an article of organizations. You can search for your business name’s availability on the State of Delaware business search platform.
To properly brand your business name and make sure no one else uses it, you need to buy a domain name for your business’s website. Services like GoDaddy offer domain names for a fee of $4.99.
Step 2: Select Your Registered Agent – $39+
An essential step in the formation of an LLC in Delaware is the appointment of a registered agent. Your LLC must select and depute a registered agent in Delaware as this is a necessity for every LLC operating in Delaware. If your limited liability company meets the terms of a well-staffed office in Delaware, then an employee or owner can stand in as the in-house registered agent; if not, you might need to hire a registered agent from the outside. The cost of doing so is between $50 to $500 annually, depending on the service you’re hiring.
If you want to start a new LLC and get a registered agent, ZenBussiness has the best package at $39+ State Fees. If you need only registered agent service, package starts at $99 with ZenBusiness.
The duties of a registered agent include managing delicate legal and tax documents and making sure that your business stays in compliance with Delaware business law. So, it would help if you had someone you can trust to fill this role. Of course, you can be your registered agent, but that will be placing more pressure on your shoulders to keep up with business documents and legal disputes that may arise. So it is advisable to delegate those duties to a professional or a reputable agent service that has the authorization to operate in Delaware. In Delaware, the registered agent must be at least 18 years of age, have a physical Delaware address, be within easy reach during standard business hours to receive service of process, and agree to employment by physically or electronically signing the Certificate of Formation.
Step 3: File the Certificate of Formation – $90+ expedited fee
One important thing you need to do to start a limited liability company in Delaware is to file your Certificate of Formation with the Secretary of the State of Delaware. The Certificate of Formation is an adequately uncomplicated document that demands just a few basic details from an LLC owner about himself and his business.
The Certificate of Formation requests for details like;
- The name of your LLC
- The address of the principal office of the business.
- The mailing address of the LLC
- The name and address of the company’s manager(s).
- The name, signature, and address of the company’s registered agent
- The date when the LLC went into operation.
- The name, address, and signature of a member of your LLC or an authorized representative.
Once this process is completed, your LLC will be in the state’s records, and you will be good to start running your business. You will be required to pay a fee of $90 only. You can choose to make use of the expedited service of the Secretary of State which costs between $50 to $1000, but don’t fidget; it’s a one-time thing. Once paid, you wouldn’t have to bother about it anymore.
If you need the certified duplicate of the business document, you would need to apply to the Department of the State of Delaware and pay the sum of $50 with an extra $2 per page for this. Also, a $50 fee is required for the certificate of good standing, as it is called in some states, which is a written document certifying that your business has the current authorization to run in the State of Delaware. These documents above are sometimes needed when carrying out business transactions like getting credit or opening a bank account.
This process might sound a little tedious to some. If that’s the case with you and you would instead use some help for this process, there are many businesses with a good reputation offering LLC formation services; reach out to any one of them. They will help put in the Certificate of Formation on behalf of you.
Step 4: Draw Up An LLC Operating Agreement
Although an LLC operating agreement is not necessarily needed in Delaware, it is highly advisable to have one kept in place. This operating agreement is a document or a guidebook that shows how you will run your LLC. It lays out essential company information like the names and addresses of the initial members of your LLC and their initial contributions to the company. It also stipulates the duties and rights of the members of the LLC and those of the managers, stating internal rules necessary to run the company in the most efficient way possible. An operating agreement helps protect your limited liability by exposing the view that your LLC is a distinct and independent entity on its own. Where an operating agreement is not present, the state law on an LLC will determine and influence how your LLC functions. You can find a template for the operating agreement here.
Step 5: Acquire An EIN – $0
The next step in starting up a Delaware LLC is acquiring an EIN. An EIN is also known as an Employer Identification Number, is a federal tax ID number. This is a nine-digit code used to file taxes, open bank accounts for your business, hire employees, and more. It is a social security number for your business. If your limited liability company has more than one member, even if you have no employees, you will need to acquire an EIN from the IRS (Internal Revenue Service). If you start up a one-member LLC, you would need to get an EIN as well, especially if you intend to have employees or if your business is set up and taxed as a corporation and not a sole proprietorship. You can get an EIN quickly by filling out and submitting an application online on the IRS website. There is no fee for filing an EIN. This process is free.
Step 6: File An Annual Report – $0
This is a step you don’t need to worry about in Delaware, the State does not request for Annual reports from LLCs in the State. However, all LLCs in the State are subjected to an Annual Franchise tax.
Register Relevant Taxes
Taxation in Delaware is pretty straightforward for LLCs. The State of Delaware imposes a somewhat hefty franchise tax on LLCs in the State with a cost of $300 which must be paid before June 1st of every year. In addition to the franchise tax, If your LLC tax structure is similar to a Corporation, you’ll be required to pay a corporate tax income which is usually 8.7 percent. However, if you don’t change the structure of your LLC, you’ll only be required to pay the personal income tax or the gross receipt tax to the State of Delaware.
It is recommended you register and check for relevant taxes with the revenue department in Delaware and get all permits and licenses relating to your business. Bear in mind that you might need permits from the state, municipal and federal governments depending on the type of business you run.
Other essentials you might need to know about when starting an LLC in Delaware include;
Some specific types of businesses necessitate that you have a professional license before you can be authorized to run your business in the State. These licenses, their requirements, and their costs vary depending on the type of business you run and the state you operate in. You can check with the Professional Regulation Division of the State of Delaware to know the licenses and permits that are specific to your business. You’re then required to apply for those business licenses/permits either online or on paper
#2.“Doing Business As” (DBA) Name
Also, you do not have to use your legal business name registered in your Certificate of Formation; you can use a DBA. A DBA, an abbreviation of “doing business as,” is a trade name or an assumed business name. To use a DBA in Delaware, you must register your assumed business name with the State of Delaware. This calls for a filing fee of $25 only.
#3.Cost For Running Foreign LLCs- $200
If you did not form your LLC in Delaware, but due to expansion, you now intend to conduct business in the state, your company will have to register as a foreign LLC with the secretary of state’s office. You will need to apply for an Application for Foreign LLC; the Certificate of Registration which costs $200 only. It’s a one-time payment. However, failure to do this could incur some severe consequences.
#4.Cost For Hiring Attorneys
An attorney can sometimes be helpful in some situations. If, for instance, you have concerns or questions about the LLC formation process, it’s not advisable to take on chances. Consult an attorney. Their services are not cheap, but they can significantly assist when professionally filing documents and giving vital business advice. The cost of hiring an attorney varies, giving considerations to factors like the location and expertise of the attorney. However, on average, a business attorney can charge between $150 to $350 per hour. And to set up an LLC, you can be charged a minimum of $500 and can go as high as $2000 depending on the experience and location of the lawyer. Here is a list of Business Attorneys in Delaware from which you can choose a good fit for your business.
The key factors and costs to consider when starting an LLC in Delaware are;
- The first is to select a good name for your LLC and make sure the name you come up with is still available and unclaimed by another establishment. You can ascertain this by searching the state’s business database and verifying the availability of your business name. After this, brand your business name and make sure no one else uses it by buying a domain name for your LLC from services like GoDaddy for a fee of $4.99.
- Secondly, assign a registered agent. While you can be your own registered agent, this role can be more grueling than meets the eye. Hence, hiring a registered agent with an excellent reputation is suitable to shoulder this responsibility on your behalf. The cost of doing so falls between $50 – $500 depending on the service you’re hiring.
- Thirdly, you would need to prepare and file your Certificate of Formation for your LLC. This process requires $90+ expedited fee to be paid to the secretary of the state; afterward, the documents will be processed. Once this is done, you will be free to run your LLC officially.
- Next, draw up an operating agreement for your LLC. Though this is not mandatory for Delaware LLCs, you must have one. This document stipulates how to run the company in the most efficient manner and can come in handy to prevent unnecessary ownership feuds that may arise along the line.
- The next step is to acquire an EIN (Employer Identification Number, also known as a federal tax ID number). This is your business Social Security Number and can come in handy when filing taxes, opening a business bank account, or hiring employees. Acquiring an EIN is cost-free.
- And finally, register for relevant taxes with the revenue department in Delaware and get all permits and licenses relating to your LLC. And depending on your type of business, you might need permits from the state, municipal and federal governments.
Once you’ve completed these six essential factors above, you can now legally run your LLC in the state of Delaware.
You might ask, though, with all these fees, is it possible to pay less or perhaps operate unnoticed?
While you may be tempted to play smart and fly under the radar, you should keep in mind that severe penalties can result from defaulting, including the possible dissolution of your LLC.
So, advisably, plan your expenses and include these fees while preparing the budget for your LLC. That way, there will be little or no surprises taking you unawares about the cost of starting your Delaware LLC.