How to Form a Delaware LLC in 10 Steps
A Limited Liability Company (LLC) is a common business structure that allows one or more persons to own a portion of a company. Profits earned by the LLC are passed through to its members, and the LLC does not file a separate tax return the way a corporation does. An LLC also reduces the owner(s) exposure to liability from company activities.
Forming a Limited Liability Company is a straightforward process, but there are several steps you'll want to follow.
1. Choose Your Company Name.
You need a company name that no other business has the rights to use. SunDoc can run your name search or reserve your LLC name for a reasonable fee. At a minimum, your preferred name must be available in the State of Delaware. It is also wise to check for a registered trademark on your preferred name.
2. Understand the LLC Organizer Requirement.
Anyone can be your LLC organizer. It might be a lawyer who helps with the formation of your business, yourself (if you prepare and file your company's Articles of Organization), or a filing service like SunDoc.
By preparing on-line with us, SunDoc Filings will be your organizer. If you choose to prepare and upload your filing with SunDoc, you can name your own organizer.
3. Designate a Registered Agent.
You must designate a registered agent, either a person or a firm. This is required for the Articles of Organization form (see #6). For more information on registered agents and why your company must have one, see our article on Registered Agent Service.
4. Decide Your Ownership and Management Structure.
The Articles of Organization form asks whether your Delaware LLC will be managed by one manager, multiple managers, or all the members. You must decide whether you want to be a member-managed or a manager-managed LLC.
5. Create an Operating Agreement.
An operating agreement is an important document in the formation of your LLC. It does the following:
- Outlines rules and regulations for your business
- Outlines provisions for your business
- Lays out functional and financial decisions on your business's behalf
- Drives your business in a legal sense
- Outlines business governance
- Pays out profits
- Manages working capital
- Manages liability, voting, and fiduciary constraints
Most LLCs require having an operating agreement. Essentially, its job is to oversee the core internal operations of your new LLC so that all operations suit the business owners’ needs.
You may also wish to consult an attorney for advice.
6. File the Articles of Organization.
A form called the Articles of Organization is required by most states. This form will outline specific details about your company. After this document is accepted by Delaware State, your company will be created officially.
When filing your Articles of Organization, keep in mind that you'll need to know several things: The name of your company and its address, who your registered agent is and who your LLC organizer is, and finally, what management method you've chosen for your company. Often, member names need to be filed as well, but not always.
As with other documents, SunDoc can certainly file your Articles of Organization on your behalf if you choose.
7. Obtain an EIN and Open a Business Bank Account.
Congratulations! You now have a registered LLC with the state of Delaware. If your LLC has more than a single member, you’ll now need to get an EIN from the IRS.
EIN stands for Employer Identification Number. You’ll need one whether or not you have employees. You can file with the IRS yourself, or SunDoc can file for you.
It will also be necessary to have an EIN when it comes to opening your first business bank account.
We recommend opening a business bank account to handle all business expenses from now on. Be sure to reimburse yourself or any other members who have made any payments for the business out-of-pocket (pending presentation of receipts).
If you’d like to stay on top of your business finances as you're just starting out, you can also hire an accountant at this point.
8. Pay Delaware State Taxes.
Every year, it's likely you'll need to pay taxes to the state of Delaware. This will likely include the first year that your company is in operation. Additionally, sales tax may need to be collected if you plan to sell goods. Learn more about taxes in Delaware at the State of Delaware’s tax web site.
9. Determine Necessary Licenses and Permits.
In the majority of states, business licenses or permits are needed so that you can legally run your business in your county and/or city.
Check the state of Delaware’s website to see which of these permits or licenses you’ll need to have. Remember that if you don’t have the right permits and licenses, you’ll have to pay expensive fines. Even if you don’t think you need to have them, be sure to check this out before you wait too long — you may be surprised at what you find.
10. File an Annual Report (Biennial Report or Initial List).
Soon after the formation of your Delaware LLC, you'll need to file what's called an Annual Report. This document keeps the state updated with key information about your company. It's also called an Initial List.
You also need to file this report once every one or two years depending on your state’s requirements.
If you change your LLC in any fundamental way, you need to file again.
Time is very important when it comes to your Initial List. If you don't file on time, you'll incur a severe late fee. To avoid this late fee, ask SunDoc to file your Initial List on your behalf. We file on time and are extremely reliable.
No matter what you do, all forms pertaining to the formation of your LLC can be found at the Delaware business web site.
Important Notice: It is beyond the scope of this article to discuss your potential insurance needs, or matters relating to employees. You should consult an attorney or accountant with any questions about legal or financial matters. Please note that nothing in this article can be construed as legal, tax or accounting advice.
For additional learning, please visit our LLC FAQs.
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