Form An LLC
Step 1) Verify & Secure Brand Name
First off, in order to launch a successful Delaware LLC, you need to give it the right name. Your business name needs to be catchy for branding purposes and legitimate for legal purposes. We go into depth on this topic in our LLC naming guide, but we’ll go over the legal basics below.
Legally, your business name must:
- Contain the words limited liability company or limited company, or the abbreviation LLC or L.L.C.
- Not contain the word bank or any variation of it.
- Be distinguishable from any other entity or trade name registered in Delaware.
For an exhaustive list of naming rules you can visit the state webpage.
If you’re having trouble coming up with a name that captures your brand, don’t let that stop you from forming your LLC. For now, you can focus on the legal requirements and consider filing a DBA (doing business as) name after you’ve nailed down your branding.
What To Do:
Once you’ve decided what you’d like to call your LLC in Delaware, do a business name search to find out whether or not it’s in the cards. If your business name is available, you’ll be able to lock it down when you file your Certificate of Formation.
Quick Note: Before you commit 100% to a name, you should see if there’s a decent URL available. Use Weebly to search your options. If there’s a quality domain name for purchase, we advise buying it right away because even if launching a business website isn’t on your radar right now, it’s going to be soon..
Step 2) Appoint A Delaware Registered Agent
When you file your Certificate of Formation, you will be asked to appoint a Delaware registered agent.
Your registered agent will be responsible for receiving important legal documents like tax forms and service of process notices on behalf of your LLC. Your registered agent can be an individual resident of the state or a company that’s legally authorized to represent businesses in Delaware.
Delaware does give you the option to act as your own registered agent, but many business owners choose to appoint a professional instead. Here are a few things to think about before you decide to act as your own:
- You’ll have to maintain normal (9 am - 5 pm) business hours at the address you provide.
- If you run your business from home, you’ll be required to make your personal address public.
- You must keep up on important notices, dates, and deadlines.
- You could be served in front of your family or coworkers.
What To Do:
If you’re considering acting as your own registered agent, do some research, starting with our registered agent guide. If you decide you’re up for the task, go ahead and list your own name and address on your Certificate of Formation.
If you’re leaning toward hiring a professional, we recommend doing so through an online LLC formation service. Many of these companies (like IncFile) offer up to one year of registered agent service free when you form your LLC with them.
Step 3) File Certificate Of Formation
Congrats, this is a big step! Once you’re through filing your Certificate of Formation, you’ll be a legitimate Delaware business.
Delaware handles their formation documents differently than most states. Rather than providing the exact form to fill out, they offer only templates for you and your registered agent to use as a guide. Their LLC formation template asks for:
- The full name of your company
- The name and street address of your registered agent
- The name and signature of an authorized person
The filing fee is $90.00.
What To Do:
Since Delaware’s LLC formation requirements are more complicated than most other states, we highly recommend using an online filing service for this step. They’ll take the reins on the formation process and make sure your Certificate of Formation is filed perfectly. They’re also able to provide a bunch of additional services if you need extra help along the way. Head over to our top 7 business filing services to learn about our favorite providers’ pricing and features!
Step 4) Draft An Operating Agreement
Creating an LLC operating agreement is the only way for you and your members to fully define your roles and lock down your LLC’s management and ownership structure. Having this document in place will also give you all something to return to if a dispute or lawsuit arises.
Your operating agreement should outline the following:
- each member’s responsibilities
- how new members will be admitted
- how existing members may transfer or terminate their membership
- how profits and dividends are to be distributed
From there, you can add as many provisions as you want, provided they are not in conflict with Delaware business law. To access a free operating agreement and learn more about how this document works in Delaware, click here.
Step 5) Get An EIN
The Employer Identification Number (EIN), or Federal Tax Identification Number, is essentially a social security number for your company. State and federal agencies use this number to track your business activity.
Your EIN will come in handy when it’s time to:
- Open a business bank account
- File Federal and State taxes
- Hire employees
We think the best way to get an EIN is by using the free online application on the IRS website. We prefer this method because it’s the most efficient, but if you’d prefer to apply via phone, fax or mail, read through our guide to find out how.
Maintain Your LLC's Personal Asset Protection
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
You can protect your business with these two steps:
1. Opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
2. Getting a business credit card:
- Helps you separate personal and business expenses.
- Builds your company's credit history, which can be useful to raise capital later on.
Reduce the Liability of Your LLC
Business insurance helps you manage risks and focus on growing your business. The most common types of business insurance are:
- General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
- Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers against claims of malpractice and other business errors.
- Workers' Compensation Insurance: A type of insurance that provides coverage for employees’ job-related illnesses, injuries, or deaths. Get a free quote with ADP.
The final step is to figure out exactly what you need in the way of licenses, permits and taxes. After this, you can focus your attention on building and marketing your brand!
When it comes to licensing and taxes, remember to consider federal, state and local requirements:
- Federal: You can find a ton of information on federal licenses and permits on the Small Business association website. The IRS is the most direct resource for small business taxes -- head over to their business taxes page to get the ball rolling.
- State: You can apply for a general business license through the Delaware state website. Depending on your industry, you may be obligated to obtain other special permits or pay additional taxes. Click around on the Delaware Department of Finance page to learn more.
- Local: You may be required to adhere to other special requirements depending on the borough or city in which you’re running your business. To be totally sure you’re not missing anything, contact your local Chamber of Commerce.
What To Do:
If the nature of your business requires you to get quite a few permits and licenses, you may want to consider using a business license service. These companies will research all of the federal, state, and local business requirements on your behalf, and send the necessary applications right to your doorstep (or inbox) so you know exactly what needs to be done.
Reduce Administrative Burden
There will be many demands on your time once you start your business. With that in mind, it’s a good idea to streamline your workflow and reduce administrative overhead from the get-go. The two most important business tasks to get help with are:
Getting your books in order right up front will save you headaches in the future. At the very least, you can have a professional setup your bookkeeping and accounting for you. This will save you money and time in the long run.
There are all in one services that will do your bookkeeping/invoicing/tax filing for you all for one monthly fee. Mazuma ($95/month) is a reliable all in one tax service.
2) Employee Payroll
If you have employees, a payroll service will save you a lot of time and also save you from having to become an expert on state compliance or employee tax withholdings and filings.
Gusto is a reliable and good payroll service for small businesses.
Need Help Forming an LLC?
If you’ve got too much on your agenda to worry about all the paperwork and state-requirements, there are a handful of LLC formation services that can take care of everything for you.
Here are the two most popular:
– IncFile ($49 + state fee) = Best Price & Overall Value
– LegalZoom ($79 + state fee) = Best For Brand Recognitio
Note that this guide for forming a Delaware LLC isn’t a legal document or legal advice. It’s for informational purposes and the information above is subject to change. For specific legal questions regarding how to form an LLC in Delaware, consult with a business attorney.