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How to Form an LLC in Delaware

[Our Complete Guide and Answers to FAQ About LLC Formation]

So you've decided to start an LLC in the state of Delaware.  Congrats!  Officially forming your LLC requires for some paperwork to be filed with the State, and it can be difficult to know exactly what to do if you aren't experienced with forming legal entities.

Our goal with this article is to go over everything you need to know for how to start a Delaware LLC.  We'll point you to the right paperwork and walk you through all of the requirements you need to satisfy to form an LLC in Delaware.

In addition, we'll answer some frequently asked questions about Delaware LLC's and go over some other things you should consider at the formation stage of your business.

Check Out Our Free LLC Formation Guide Below

Everything you need to know to get your Delaware LLC formed can be found in the guide below along with a few extra resources, tips, and suggestions for getting your entity up and running smoothly.

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Step 1: Pick a Name for Your Delaware LLC

Since your new LLC is going to be a distinct legal entity, it has to have its own name so it can be easily identified by the State.

If you are forming an LLC strictly for investment purposes, you might not have to overthink naming process since the name of the entity isn't really going to ever be in front of a consumer.

On the other hand, if your business is consumer facing, will regularly pay or receive payments, or your branding is more central to the business, it might be a good idea to be a little more intentional about the name you choose.

No matter which way you go about it, here are a few things you should keep in mind when you are brainstorming names:

  • Your business name must be unique to the state of Delaware.  It's ok to have the same name as a business in another state.  But if the name you like is already taken in Delaware, you can't also use it (Incfile has a business name search tool to check for name availability in a given state).  You can also check out the state's naming guidelines right here.
  • The name must have the term "LLC", "L.L.C.", or "Limited Liability Company" at the end of the name.
  • Most states require additional paperwork for names that are common for financial or higher education institutions.  That means words like "Bank", "Credit Union", "Insurance", "College", "University", and other similar words are likely to require an extra step of paperwork and approval from the state.
  • You can't use a name that could confuse your LLC with a federal entity.  Sorry, but you can't name your business "Internal Revenue Service, LLC".

One more think to take into account is domain name availability.  Nowadays almost all businesses have a website.  It probably makes sense to check and see if a good domain for your LLC is available before finalizing your name choice.  Click here to jump to resources you can look at for finding a domain and starting your website.

Step 2: Pick a Delaware Registered Agent

The next thing you need to do before filing with the state is to pick a registered agent.

A registered agent is an individual (you can choose to be the registered agent yourself) or a business that is designated to receive service of due process for your business if it ever becomes a party in a legal action.  

In Delaware, registered agents are required and must conform to the following requirements:

  • If an entity, agent must have maintain a business office in Delaware
  • If an individual, agent must be generally present at designated location
  • Is 18 years of age or older
  • Is physically available during normal business hours

If you satisfy each of the above requirements, you can be your own registered agent in Delaware.

However, most companies use a third party registered agent service instead.  For a marginal fee, a registered agent service will receive official correspondence from the state on your behalf and forward it to you.

It's worth pointing out that a registered agent's address becomes part of public record, so using a third party service also adds an extra layer of privacy.  That way if you work from home, you don't have to disclose your home address on your business documents which get filed with the state.

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Step 3: File Certificate of Formation

In Delaware, you need to file a Certificate of Formation with the Delaware Department of State.  This is the official form where you provide the state with your LLC name and your Registered Agent's name and address.

On top of that, the form asks for some other information that's pertinent to your business.  You'll need to provide information about the purpose of your LLC and the name of the organizer (this can be you, an attorney, a third party service, or another advisor who might be filling out the form).

There is a filing fee of $110 to get your LLC officially formed in the state of Delaware, which will need to be sent in alongside your Certificate of Formation.

How to File With the State

There are a few options you can choose from when it comes to filing your Certificate of Formation.

Delaware has an online option for filing CoF's, which allows for you to submit your documents electronically.

If you prefer to file by mail, you can do that too.  Simply download their Certificate of Formation template, fill it out, and mail it to the below address.  Delaware has a $110 filing fee that must be sent in with your Certificate.

Delaware Division of Corporations
401 Federal Street, Suite 4
Dover, DE, 19901

And as we've mentioned above, you can hire a third party to take care of filing your Certificate of Formation as well.  Out of all of the online entity formation service providers, our favorite (and the most cost effective) is ZenBusiness.

FREE first year of Registered Agent Service

With purchase of LLC Formation Plans which start at $49 + state fees

Same day filings and excellent service

LLC Formation Plans start at $100 + state fees (registered agent services also offered)

How Long Does LLC Formation Take in Delaware?

It largely depends on the amount of applications the Secretary of State happens to receive around the time you send your paperwork in.  But generally speaking the filing time for an LLC in Delaware is 7 to 10 business days, but you can pay a fee to have the process expedited.

Step 4: Post Filing Considerations

Enact a Delaware LLC Operating Agreement

Delaware does not require an operating agreement, but have to and should are two entirely different things.

Generally speaking, operating agreements are a good idea whether or not they are required by the State.  Having one in place creates guidelines and provisions for your entity, and can greatly reduce the risk of future conflict between business partners.

A good operating agreement will clearly lay out the obligations and duties of each member of the LLC and will usually:

  • State the intent and business purpose of the entity
  • Decide how the LLC will be taxed (they are taxed as a partnership by default if there is more than one member)
  • Decide management structure
  • State member obligations and investments
  • Govern sharing of profits

In Delaware, you do NOT need to file your Operating Agreement with the state, but you should still keep it on file in your company's records.

One other thing that you will need to lay out in your Operating Agreement is whether your LLC will be member-managed or manager-managed.  You should read more about this topic if you are unsure, but here is the essence:  

Member-managed LLC's are managed by all of the owners of the LLC.  In a manager-managed distinction, managers have the autonomy to handle day-to-day operations and member owners roles are more passive and limited to input on big picture decision making like taking out loans, buying/selling major assets, etc.

Acquire an EIN for Your Delaware LLC

All of the paperwork and filing so far is done with the State of Delaware. 

An Employer Identification Number (EIN) is a federally issued number that identifies your entity with the Internal Revenue Service (IRS).

You’ll definitely need an EIN if you hire employees, and you’ll also need one to open a business bank account.  You'll need one in most cases to file federal tax returns.  EIN’s come in handy in the course of dealing with other businesses too.

Getting an EIN is free and really easy to do on your own.  All you have to do is go to the IRS website and complete their identification forms online.  You can also acquire one via mail by filling out this form and mailing to the below address:

Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH, 45999

Alternatively, if you use a service like ZenBusiness or Incfile to form your LLC, there's a good chance your LLC formation package will include an EIN acquisition.

Step 5: Organize Your Finances

One of the main reasons to form an LLC in the first place is to limit your personal liability and to protect your personal assets from the risk of being lost in the event that your entity gets sued.

You might have heard the term "piercing the corporate veil" before.  What this refers to is a situation where courts set aside the limited liability nature of an LLC and hold members personally liable for the LLC's actions or debts.

It sounds serious, and it is.  Odds are if somebody is coming after your company's assets in a litigation, they probably will try to see if they can pierce the veil to settle with your personal assets.

Fortunately, Limited Liability Companies are a legal structure that by default protect your personal assets.  The thing to keep in mind though is that it's extremely important to keep you keep your business assets separate from your personal assets.

If you start commingling funds or using your personal credit card for both business and personal expenses on the regular, you are playing with fire and increasing the odds that somebody could successfully pierce your corporate veil.

What follows is a list of things you can do to help ensure that the veil of your LLC remains intact.

Open a Business Bank Account

It's hard to imagine a business that doesn't make use of a bank account.  Even if you're forming an LLC solely as an entity to invest through, you'll still need a bank account to fund your investment and receive payments.

Back in the day, it used to be pretty difficult to find a business bank that offered all of the necessary features at a reasonable price.

In recent years, the business banking scene has become much more accessible.  Nowadays I almost exclusively bank with Azlo for my businesses.  They have a great service, ZERO account fees, and offer all of the essentials you need in a business bank.

If your business is a little more capital intensive, or you plan to send and receive lots of wires, or if you want a bank that can help with financing products like working capital lines of credit, it may be a better idea for you to go to a local or national bank.

Either way, it's a good idea to set up a business bank account to collect and make payments and also to keep all of your business' assets together.

Open a Business Credit Card

Even if you don't think you need a credit card, applying for one can have a few benefits for your business.

In addition to being a means to help your cash flow while you get started, it's also generally a good idea to start building a credit profile for your business.  That way when your operation gets bigger, your LLC will be able to get approved for bigger credit lines.

A business card is also a great way to rack up some credit card points that you can use to take a vacation, get yourself something nice, or just to offset some expenses.

American Express offers some great entry level credit cards that don't have an annual fee.  Most major banks and then Visa and MasterCard also offer business credit cards to get you started.

Get Your Accounting Right From the Beginning

You'll do yourself a lot of favors by maintaining pristine accounting books from the inception of your business.

An accounting system like Quickbooks is almost essential to keep track of your business income and expenses.  You can get away with using a spreadsheet if your operations are relatively simple and you stay on top of your finances.

You might opt to hire a CPA to do this for you.  If help in the accounting department is within your budget, I'd highly recommend enlisting an accountant.

A good CPA can be a huge asset and can help to greatly reduce or eliminate the administrative burden for all of your tax and accounting obligations.  If they are good at their job, they'll bring tremendous value to the table and help you strategize to legally reduce your tax liability as much as possible.

Assess Your State Tax Requirements

Your LLC's tax obligations might vary depending on the type of business you are running, and how much net income your entity makes.

Delaware is one of only a handful of states that does not levy sales tax on goods or services.

Employees bring on greater tax requirements too.  If you plan to hire people to work for your business, you will probably need to register for unemployment insurance tax via the Delaware Department of Labor.  Additionally, you will probably need to pay Employee Withholding Tax for any hires you make.

Delaware also has a Franchise Tax for LLC's, which is a flat $300 per year for all LLC's.

Last but not least, Delaware has a Gross Receipts Tax that taxes a small percentage of your revenue if your LLC makes over a certain threshold of revenue.  Generally speaking for most businesses, Gross Receipts Tax starts after you are making over $100,000 per month.

Each LLC in Delaware is required to file annual taxes with the state Department of State.  This is one of those situations where having a good CPA on your team can help you out a lot, because they will most likely have an account with the comptroller and will be able to handle this for you.

If you are filing yourself, you can create an account and file your taxes on the Delaware Division of Corporations website.

Assess Your Federal Tax Requirements

Your LLC will be required to report income to the IRS each year.  Limited Liability Companies have flexibility when it comes to federal taxation.  They can be taxed as an S corp, a C corp, or as a partnership.

Most multi-member LLC's end up choosing to be taxed as a partnership.  The relevant tax form is IRS Form 1065 U.S. Return of Partnership Income

For single member LLC's, the form common federal tax reporting is done on the IRS Form 1040 Schedule C.

Once again, a good CPA will be able to do this for you and make sure you are filing your federal taxes properly with the IRS.

Step 6: Other Considerations for Your Delaware LLC

Business Insurance

Depending on the nature of the business you plan to conduct in your Limited Liability Company, some form of business insurance might be a good idea, or outright necessary.

There are a lot of different types of business insurance out there.  Here are a few of the most popular forms of business insurance that you might consider obtaining:

General Liability Insurance - as the name suggests, this type of insurance covers a broad range of liability that your business could incur like property damage, personal injury, and advertising injury to name a few.  This type of insurance is popular for contractors, builders, pressure washing businesses, and many other business models that use independent contractors.

Professional Liability Insurance - also known as Errors and Omissions (E&O) insurance, this form of coverage helps professional advice giving and service providing business in the event that they cause financial loss to a client.  Types of businesses that commonly purchase professional liability insurance include accountants, engineers, and financial services, among others.

Property Insurance - if you plan to own or lease real estate with your LLC, property insurance is a must.  Good coverage will protect your inventory, equipment, and other property from theft, fires, and other accidents that might occur at the property.

Worker's Compensation Insurance - if you start hiring employees, it's probably a good idea to purchase some worker's comp coverage.  This type of insurance covers medical expenses and disability or death benefits if an employee is injured or dies while acting in the scope of employment.

Additional Insurance for Home Based Businesses - if you run your LLC out of your home office, be sure to double check your home or renter's insurance policy to see what kind of coverage you have for business equipment and inventory.  You might be surprised to find that business inventory and equipment is generally not covered on your typical home insurance policy.  It might be worth reaching out to your insurance agent to see if additional coverage is worth it.

Depending on the nature of the business you plan to conduct in your Limited Liability Company, some form of business insurance might be a good idea, or outright necessary.

There are a lot of different types of business insurance out there.  Here are a few of the most popular forms of business insurance that you might consider obtaining:

Tip: Sign Documents This Way

One of the ways you can help to maintain your LLC's "corporate veil" is to make sure you sign all of your legal documents properly.  You need to make it explicitly clear that you are signing as a representative of your entity and NOT as an individual.

To make it extremely clear, best practice is to always include your signature, your name, the name of your LLC, and your title.

So if you are the manager of your LLC, your signature on legal documents should look something like this:

[sign here]
My Awesome Business Name, LLC
By: Jane Doe 
Its: Manager

Licensing and Permitting

The responsibility is on you to make sure your business is compliant with Delaware state regulations.  There might be some federal regulations you need to remain compliant with for your business too.

For example if you want to sell insurance, each state has a licensing requirement and you'll have to take classes to obtain your license.  Many types of permits require some form of ongoing education too.

In any event, do some research on the type of business you are conducting before you start soliciting customers to make sure you have all of the necessary licenses.

For Delaware specific licensing, Delaware One Stop is a great resource to get you pointed in the right direction.

DBA's in Delaware

For most situations, filing a DBA (doing business as) in Delaware is very simple.  In Delaware, a DBA is referred to as a "business fictitious name" by the Delaware Department of State.

An DBA can be useful if you want to have multiple brands but run them out of the same legal entity.  It's important to note that filing a DBA doesn't create another legal entity.

For an LLC, Assumed Name Certificates are filed with the Department of Courts.  The first step you should take is to make sure the assumed name you want isn't already in use.

After you've confirmed that the assumed name you want isn't already registered by somebody else, you should make sure that your name is compliant with the state's rules.  See the Step 1 Guidelines above for the requirements of naming in Delaware.

Once you've settled on your name, the next step is to file your Registration of Trade, Business & Fictitious Name Certificate with the Department of Courts.

Certificate of Good Standing (Certificate of Status)

Knowing where to go to get a Certificate of Good Standing for your Delaware LLC, known there as a Certificate of Status, can come in handy in a variety of situations.  It's not the type of document you'll use day-to-day in your business, but you might need to produce one if:

  • You want to register your Delaware LLC as a foreign entity in another state
  • Your LLC is applying for or renewing various licenses and permits
  • Your LLC is applying for loans or other funding vehicles from a bank or lender

A Certificate of Status request can be made via mail by filling out this form and mailing to the below address:

Delaware Division of Corporations
401 Federal Street, Suite 4
Dover, DE, 19901

Registering a Foreign LLC in Delaware

Maybe you opted to form your LLC in another state.  But your business still has a presence in Delaware, so you need to register your foreign LLC with the State to remain compliant.

The process for doing this is pretty simple.  All you need to do is fill out a Certificate of Registration Form and mail it in to the Delaware Division of Corporations (address above).

Dissolving a Delaware LLC

Whatever the reason might be, when it's time to officially end your Delaware LLC, there are some steps that you need to take.

If you were thorough in the set up if your entity, you should have an operating agreement which has outlined the steps for dissolving your LLC.  This should outline procedure and distribution of assets, along with other important steps.

After you've made sure to follow the steps in your operating agreement, the next thing to do is make sure your taxes are squared away.  You'll need to file a final tax return with each respective State and Federal entity that you have filed taxes with every year up until dissolution.

Last but not least, you should file a Certificate of Dissolution with the State Department's Division of Corporations. 

FREE first year of Registered Agent Service

With purchase of LLC Formation Plans which start at $49 + state fees

Same day filings and excellent service

LLC Formation Plans start at $100 + state fees (registered agent services also offered)

What is an LLC?

A Limited Liability Company (LLC) is a legal business structure, formed under the laws of one of a U.S. State, which offers personal liability protection and pass through taxation.

Why are LLC's so Popular?

First, they offer the benefit of limited liability.  As long as you keep the assets of your LLC separate from your personal assets, owners of an LLC will be protected from personal liability for business debts and claims.

Second, an LLC offers the benefit of pass-through taxation.  This means that profit, losses, or other tax liabilities are passed through to the owner’s personal tax return.  As such, Limited Liability Companies avoid the double taxation that Corporations have to deal with.

The third main reason that they are popular has to do with the flexibility of the legal structure.  With an LLC it’s much easier to set up the entity, maintain it, and change ownership if you ever need to do that.  On top of that, there is flexibility in how owners choose to distribute profits.

Is Delaware a business friendly state?

Yes!  Delaware is actually the state of formation for more than half of the Fortune 500 companies, and more than 75% of new IOP offerings in the U.S. are incorporated in Delaware.

Like many other states, Delaware does not impose a sales tax and generally keeps business tax rates low.

But the real reason is that Delaware's government has made it a number one priority to keep their business law statutes and policies up to date and with modern times.

They also have a dedicated court system which handles corporate law disputes without juries, in the presence of some of the best legal minds in the state (appointment to the Delaware Court of Chancery is one of the highest honors in the state).

What all of this means is that Delaware is not only generally pro business, but their business laws and the way they're interpreted by courts are extremely clear.  This eliminates a lot of uncertainty that might be present when incorporating in another state.

Looking For a Different State?

If Delaware isn't the right state for you to form your LLC, click the below map to find a detailed guide for forming an LLC in any of the other U.S. states!