How to open your LLC in Delaware?

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Delaware is one of the most popular American states for registering an LLC.  In fact, almost 67.6% of Fortune 500 companies are incorporated here.

This is not a surprise, as Delaware offers excellent benefits for entrepreneurs: anonymity, tax advantages, quick resolution of business disputes, registration costs and low maintenance... It is logical then to evaluate this option to create your LLC in the USA. 

If you want to register your LLC in the state of Delaware, but you still don't know if it is the right option, or if you don't know the steps to follow to register it, we are here to help you. Let's start then with our complete guide with everything you need to know  before creating your LLC in Delaware. Come on! 

The advantages of registering an LLC in Delaware

As we mentioned previously, Delaware is one of the most famous states in the USA to register your LLC. Here we can cite the advantages of opening an LLC exclusive to this state:

Anonymity

For business owners or entrepreneurs who value privacy, registering your LLC in the state of Delaware is a great option. In Delaware, it is not necessary to indicate the names or addresses of the owners or administrators of the LLC. The only details required to open the LLC in Delaware are:

• the name of the LLC
• the information of the registered agent in Delaware

Attention: By anonymity, we refer to the fact that the names of the owners will not be publicly disclosed, but the secretary of state or the IRS may have access to that information. 

Advantageous tax conditions

LLC taxation in Delaware is very advantageous. LLC members can choose the way the IRS will tax the LLC's income. There are four options:

• Disregarded
• Partnership
• S Corporation
• C Corporation

Remember that if your LLC is “foreign owned”, the concept of tax transparency applies, means that your LLC does not pay taxes in the USA, but rather each member pays taxes personally in their country of tax residence.

If you do not work with companies in the state of Delaware, you will have other additional tax benefits, such as:

• You will not pay income tax
• There is no sales tax.
• There are no taxes on intangible income

Favorable legislation

Delaware has an independent court dedicated to resolving business disputes, called the Court of Chancery, which is reputed to resolve disputes quickly and fairly.

Delaware has a well-established body of case law relating to LLCs, which means it benefits from predictability in judicial decisions.

Delaware law is generally quite favorable with LLCsand business owners, adding an additional layer of protection to businesses.

Limited liability

Delaware LLCs put a barrier between personal assets and business liabilities. Business owners are protected from their trade creditors.

This is one of the basic principles of the Limited Liability Company (LLC) and you can have this advantage in any other state you open.

Economical opening and renewal costs

The cost of registering an LLC in Delaware is $90. This is paid by filing your LLC's certificate of formation with the Delaware Department of State and can be done online. It usually takes 9 to 12 weeks to be processed, but to speed up processing time, you can pay a fee of $50. 

Then, there is a “franchise tax” of $300 annually, regardless of income or business activity.

What are the requirements to open an LLC in Delaware?

LLCs in the state of Delaware can be opened by American residents or foreign persons who are over 18 years of ages. It can be done online, so it is not necessary to travel to Delaware to register it. 

No minimum capital contribution is required, you do not need to have a Tax ID, and you can open it alone or with partners. 

How to open an LLC in Delaware?

Now that you know that Delaware is the state that best suits you to open your LLC in the United States, let's look at step by step the steps to follow to register your LLC in this state. 

1. Choose the name of your LLC

Choosing the name of your Delaware LLC is the first step.  LLC names in Delaware must meet some requirements, which we will summarize below:

• Your business name must include the words Limited Liability Company, LLC, or L.L.C.
• There cannot be another LLC registered under the same name in Delaware.  If you want to check its availability, you can do so in this name validator for LLC. 
• The business name cannot contain words used to name a government agency (Department of State, CIA, FBI, Treasury, etc.)
• Certain words are restricted (bank, lawyer, credit union, etc.) and may require additional documentation and licensing procedures to be used.

2. Choose the registered agent

It doesn't matter if you decide register your LLC in New Mexico, open it in Florida, create it in Wyoming or Delaware, every LLC must have a registered agent. The registered agent is who receives lawsuits and other legal documents on behalf of his company, and then transfers them to the owners or managers. The registered agent can be any Delaware resident over the age of 18 who has a physical address in the state.

You can also use companies that offer registered agent services (these are the companies recommended by our team). These companies may only offer registered agent service, or handle the process of registering your LLC from 0 to 100.

3. Complete the Certificate of Training

To form an LLC in Delaware, a Certificate of Formation must be submitted. Submission of this form has a cost of $90, and can be done by mail or online.  

In this document, the articles of organization of the LLC will be formed, providing key information such as the name of the LLC, the registered agent, and optionally the names of the owners, the purpose of the LLC, etc... The document must be signed by one of the members or the organizer, if anonymity is desired. 

Once the document is completed, the application must be submitted to the Delaware Division of Corporations. The process usually takes between 2-3 weeks, but for an additional $50, it can be expedited in 24 hours. 

Once your LLC is registered in Delaware, its data will be published in a state database (only the name of the company, the registered agent and the date of creation appear) and the registered agent will also receive the stamped Certificate of Formation by postal mail. Ready, your LLC is incorporated in Delaware!

5. Write your operating agreement

An Operating Agreement is basically an internal agreement on the functioning and operations of the LLC between the members. If you opt for an anonymous LLC, it is important that you have this document, since it will be the only thing that lists the names of the members, in addition to other details such as dividend distribution, abandonment clauses, non-compete clauses, capital contributions and other legal, financial and operational issues...

Contar con un operating agreement para tu LLC de Delaware es importante para asegurarse de que todos los miembros de la LLC estén de acuerdo sobre cómo se opera y así evitar conflicto a futuro. 

What is included in this operating agreement will depend solely on you and your potential partners based on the specific needs of your business. This is an internal document and does not require sharing with any public entity. 

Here we have a free example of an Operating Agreement, so you can use it as a basis for drafting your LLC in Delaware. 

6. Get an EIN

Now that you have your LLC formed and your operating agreement signed by all the members of your LLC in Delaware, it is time to tackle the last step: obtain an Enterprise Identification Number (EIN). 

The EIN has several uses for a company. The main one is that it is used by the IRS to fiscally identify your business, both for state and federal taxes. 

In addition, an EIN allows you to request business resources, it will be required in order to open a business bank account, and it is essential if you need to hire employees, among other things. 

EINs are free and available on the IRS website. 

Delegate the creation of your LLC in Delaware and save yourself from all these complex processes

If you want to save yourself the days of research and work that it can take to open an LLC in Delaware, there are companies that take care of ABSOLUTELY EVERYTHING for you. 

What to do after opening my LLC in Delaware?

Now that you have your Delaware LLC ready to operate, there are a couple of additional issues that are important to keep in mind. 

Get a bank account dedicated to your Delaware LLC

Separating personal assets from company assets is essential to benefit from the protection of your personal assets that opening an LLC in Delaware offers.

If you keep your business assets mixed with your personal ones, you can put this veil of protection at risk. Therefore, it is highly recommended that youopen a business bank account and that it be used only for the activities of your New Mexico LLC.

Having a bank account for your LLC will make accounting for your business much easier, and will save you a lot of time when preparing your income tax returns and taxes. 

If you still don't know which bank to use, we recommend the following: Mercury, Relay, Revolut, AirWallex, Wise, Bank of America, Chase.  All of these allow you to open an account with your LLC documents, whether you are an American resident or a foreigner. 

• Best business bank accounts for foreigners

Plan the taxation of your Delaware LLC

Existen algunas obligaciones fiscales para las LLC del Estado de Delaware que deberás estar atento a cumplir. 

• In Delaware, there are no sales taxes, so it's one less worry. 
• If you do business in the State of Delaware, you may have to pay Gross Receipts Tax ("Delaware Gross Receipts Tax"), which varies from 0.0945% to 0.7468%, depending on the business activity. 
• If you have hired employees in Delaware, you must register at "Unemployment Insurance Tax". Then, companies that must pay "Employee Withholding Tax" by registering online with the Delaware Division of Revenue.

• What taxes does an LLC pay?

Meets Delaware annual obligations

Delaware does not require LLCs to submit an annual report, but they must pay a "Franchise tax" of $300, which expires on June 1 and has a late fee of $200 + 1.5% each extra month. 

If you fail to file your Franchise Tax, you risk the automatic dissolution of your LLC and losing the protection of limited liability.

Therefore, having a trusted registered agent who can advise you and support you in solving these aspects is key. Don't forget to renew it every year if you have hired an external service. 

Registering an LLC in Delaware: Frequently Asked Questions

What is an LLC?​

A limited liability company or LLC is a business structure in which the company is legally separated from the owner or owners. 

An LLC combines the advantages of a corporation (protection against personal liability) and a Partnership (direct taxation of its owners). Since the company has an independent legal existence, the members are not personally responsible for the debts and obligations of the company.

How much does it cost to have an LLC in Delaware?​

The Certificate of Formation necessary to register your LLC in Delaware has a filing fee of $90 (one time).

Then, there is the “Franchise Tax” which must be paid by June 1 and costs $300 per year.

You should also take into account the cost of renewing your registered agent if you choose to outsource it to a service (recommended).

How long does it take to register an LLC in Delaware?​

The approval of an LLC by the State of Delaware, after having submitted the “Certificate of Formation” usually takes between 2-3 weeks. You can expedite the process for an additional $50 to have it expedited within 24 hours. 

Is it difficult to create an LLC in Delaware?​

Thanks to the business-friendly policies and simplified legal structures offered by the state of Delaware, establishing a business there is a simple and digital process, made even easier by Delaware.gov's “One Stop” website.

How many members can an LLC have in Delaware?​

There is no minimum number of members required to form an LLC in Delaware. They can be created with just one member (LLC Unipersonal), or with dozens of partners. Members do not need to be US citizens or US residents and may be US or foreign individuals, trustees, corporations or other entities.

Are Delaware LLCs required to file an annual report?​

Delaware LLCs do not have to file an annual report, they only have to pay a franchise tax of $300 annually.

What are the differences between an LLC and a C Corp in Delaware?​

If you want to open a company in Delaware, you can choose between a C Corp or an LLC. 

Unlike LLCs, C Corps must file an annual report in which they must name an officer and the board of directors, which is publicly available. Additionally, they must have an annual meeting of shareholders, and pay an annual tax of $125 (vs. $300 for LLCs). Finally, although both entities can raise investment, LLCs cannot be listed on the stock exchange, unlike C Corps.

As similarities, both offer limited liability and “Pass-Though Taxation”.

¿Como disolver una LLC en Delaware?​

To dissolve an LLC in the state of Delaware, you will need to file a Certificate of Cancellation. Although there are two types of forms, one for national entities and the other for foreign LLCs, both have a cost of $200 for dissolution.

What taxes does a Delaware LLC pay?​

If you open an LLC in Delaware, you will have to pay $300 in franchise tax annually, you will not have to pay sales taxes, you may have to pay gross receipts taxes and employer taxes.

Discover here the taxes of a Delaware LLC.