Form an LLC in Delaware and enjoy the benefits of doing business in the U.S.’s most business-friendly state.
Why is the Delaware Limited Liability Company the best LLC on the planet? It’s a question we get asked a lot. In a state best known for its business entities, the Delaware LLC sometimes gets overlooked, as its older, more distinguished sibling, the corporation, receives a lot of the attention. We think that’s mostly because Delaware didn’t allow the formation of LLCs until 1991 when it passed its first Limited Liability Company Act. Since that time, however, the Delaware LLC has offered the same asset protections and tax advantages that a corporation offers. Often the LLC is the simpler, more private, more flexible choice for small businesses. Below, you’ll find a list of the advantages that make the Delaware LLC one of the world’s best business entities:
Delaware LLC Advantages
- Simple and Secure
Of all the LLCs in the known universe, the Delaware LLC is by far the simplest to form. The Delaware Division of Corporations requires only a minimal amount of information in an LLC’s formation documents (called the Certificate of Formation). This small amount of required information not only makes it easy to start an LLC in Delaware, but it also helps to keep your identity and personal information secure. Since much of your personal information isn’t required to form an LLC in Delaware, your information won’t be published on public documents. When you hire us as your registered agent, our Delaware business address is the only easily available piece of contact information on your formation document. Our service is designed to provide as much personal privacy protection as permitted by law. And, LLCs in Delaware don’t file annual reports, so even after your Delaware LLC is formed, your information will remain secure.
- Tax Exemptions
As the most business-friendly state in the U.S., Delaware is oftentimes referred to as a tax haven. While this is a misnomer, Delaware actively tries to maintain a healthy business atmosphere and offers benefits that other states don’t, all of which an LLC can take advantage. Our state doesn’t tax “intangible income” (like patent and trademark leases), which has made Delaware an attractive state in which to form holding companies (LLCs and corporations formed to “hold” assets, intangible or otherwise). Our state has also created incentives for LLCs formed in Delaware that don’t operate in Delaware. For example, according to § 1902, you’ll pay no state income tax as long as your LLC in Delaware doesn’t do business in Delaware.
- No Double Taxation
Operating as a Delaware LLC gives you flexible taxation options. An LLC in Delaware can choose to be taxed as a pass-through entity, an S corp, or a C corp. Corporations in Delaware and elsewhere are by default taxed as C corporations. For many small businesses this tax structure doesn’t make sense, as C corp profits can be taxed twice (once as corporate income, a second time as personal income). Delaware LLCs, by default, aren’t taxed that way. LLCs in Delaware pass profits directly to their members, and the LLC’s profits are taxed only once, as the members’ personal income. However, LLCs can also opt to be taxed as an S corp or a C corp if the members choose, adding to the LLC’s flexibility as a business entity.
- Strong Business Laws
One of the most attractive features of starting an LLC in Delaware is that our state offers the best-known, most-carefully-studied business laws in the US. Because of Delaware’s long history as the nation’s leader in business formation and business law, its codes and legal statutes are studied in law schools around the country. Delaware even has its own court specifically for businesses; it’s called the Court of Chancery. Cases in the Court of Chancery are argued in front of judges, not juries, and any legal dispute you have has likely already been argued in court, so businesses usually know ahead of time whether to fight a lawsuit or settle. This knowledge can be especially beneficial for companies who are sued often, as it saves time and money spent on legal fees.
- No Business License Required
According to Section 2301(b) and (d) of our state’s code, Delaware LLCs not doing business in Delaware are not required to obtain a business license, register with the Department of Revenue, or pay Delaware’s gross receipts tax.
- Few Formalities
Possibly the greatest advantage of starting an LLC in Delaware is that a Delaware LLC requires so little maintenance, which is often perfect for small businesses. LLCs in Delaware do not file annual reports (LLCs pay a flat $300 annual tax) and it’s due on June 1 every year and can be paid online. LLCs require less paperwork and administrative formalities than corporations. Delaware LLCs don’t need to hold annual shareholders or board of directors meetings. Overall, LLCs tend to be the simpler entity.
Can I form an LLC in Delaware if I live in a different state or country?
Yes, absolutely. A person doesn’t need to live in Delaware to start an LLC in Delaware. The only physical requirement for Delaware LLCs is that the limited liability company must have a registered agent in Delaware. With our LLC formation, we provide a year of registered agent service. For those with greater Delaware business address needs, we also offer mail forwarding and virtual office packages starting at $49 a year. Some of the advantages of Delaware LLCs are only available to nonresidents. The benefits of starting an LLC in Delaware as a nonresident are listed below:
- No sales tax
Delaware does not have a sales tax on goods and services.
- No state income tax
Delaware LLCs taxed as S corps, and LLCs in Delaware that do no business in Delaware, don’t pay state income taxes. Residents of other states and other countries may be obligated to pay their home state’s income taxes, but they will not have to pay Delaware’s income tax.
- No ad valorem tax
Delaware doesn’t have an intangible personal property tax. If the state or country in which you live doesn’t have one either, you shouldn’t have to pay any tax on intangible personal property like patents or trademarks.
Should I form a Delaware LLC or a corporation?
Business entities are not one-size-fits-all, but the advantages of Delaware LLCs and corporations are highlighted below:
|Delaware LLC Advantages||Delaware Corporation Advantages|
|Flexible tax structures||Prestige of a corporation|
|Low maintenance||Ability to raise capital through investors|
|Flat-annual tax||Ownership is easy to transfer through stock|
|Minimal information requirements||Possibility of no inheritance tax on DE corporation stock|
|Easier to form|
As you can see from the advantages above, corporations tend to be more advantageous if you’ll be trying to attract investors and raise capital through the selling of ownership; Delaware LLCs often shine as smaller businesses with few owners who wish to keep their personal information secure.
How to Form a Delaware LLC
1. File a Certificate of Formation with the Delaware Division of Corporations
In Delaware, limited liability companies (LLCs) are formed by filing a formation document called the Certificate of Formation with the Division of Corporations.
2. Include the following information in the Certificate of Formation
- Delaware LLC name
- Delaware registered agent and registered office address
- Duration of LLC (most filers will simply put “perpetual”)
- Any additional information the members wish to include
- Date of formation and the name and signature of a person authorized to form the LLC
3. Submit online or mail the completed Certificate of Formation to the Division of Corporations
If you file by mail, you’ll need to include the Division of Corporation’s cover sheet and a check or credit card number to pay the $110 filing fee, but Delaware also has an online filing option accessible at the Delaware Division of Corporations website.
4. File a Beneficial Ownership Information Report with the Financial Crimes Enforcement Network
Starting January 1, 2024, most new LLCs are required to file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) within 30 days of formation. This federal filing is submitted online and is free to file. The information you share is not made public.
You’ll need to provide name, address, and tax or personal identification information for your LLC, anyone with at least 25% ownership interest and/or who has substantial control over your LLC, and whoever files your Certificate of Formation with the Division of Corporations.
Delaware LLC costs and fees?
LLC formation costs:
- Delaware LLCs have a $110 filing fee paid to the Division of Corporations.
- If you hire us, your LLC will be active in 1-3 days (the timing depends on state filing times), however, if you need the LLC the same day, Delaware charges a $50 expedite fee.
LLC maintenance fees in Delaware:
- Delaware LLCs do not file annual reports; instead, LLCs in Delaware file annual taxes. The annual tax is a flat $300.
- The annual Delaware LLC tax is due by June 1 each year. You can file online on the DE Division of Corporations website.
- The Division of Corporations charges $200 for nonpayment or late payments. Interest accrues at 1.5 percent per month on the tax and late fee payment.
Do Delaware LLCs need an operating agreement?
No, Delaware LLCs are not required to have an operating agreement. However, in Delaware operating agreements aren’t required to be in writing. Operating agreements in Delaware can be written, oral, or implied. That means that you’ve likely formed an operating agreement between members without even knowing it. That said, LLC operating agreements are the internal rules of an LLC. Clear, well-thought-out agreements will help settle member disputes, explain how profits and losses are distributed, and set forth rules about membership and dissolution. If you hire A Registered Agent, Inc. to form your Delaware LLC, an operating agreement for your company will be included.
Why hire A Registered Agent, Inc to form your Delaware LLC?
This is what we do. We’re inexpensive, we’re fast, and we’re Delaware locals—we know Delaware inside and out. It’s the only state we file in. We own our own building, and our Delaware business address is in a fantastic location. We’re on a first name basis with the Division of Corporations, just a short walk away. And we have the best prices around.
For $184, you’ll not only have your own LLC, but you will be given:
- Free mail forwarding (for 10 pieces of mail)
- Free 60-day trial of Phone Service (a virtual phone line you can use to keep your own number private)
- Our Delaware business address on your public documents for maximum privacy protection
- A custom draft of your Certificate of Formation
- Initial resolutions formally appointing LLC management
- LLC operating agreement (which outlines the internal functions of the LLC)
- Access to your online account through which you can manage and maintain your Delaware LLC.
- Optional add-on services inside your client account, like a corporate book and seal and our Trade Name Service. For $150 (per county), we’ll help you register a trade name (also known as a DBA) for your business.
- On top of that, you’ll also receive one year of the best registered agent service in Delaware.
By far, we offer the best Delaware LLC formation package.
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