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Why use UpCounsel to form an LLC in Delaware
Starting an LLC in Delaware with a business startup attorney on UpCounsel is easy, informative, and cost-effective. In just three simple steps, our LLC attorneys will help you protect your business and personal assets, and help you organize your business for state and federal compliance for limited liability companies.
When forming an LLC in Delaware with UpCounsel, the attorney you choose to help you will conduct a business name search for your Delaware LLC and assist you in preparing your LLC Operating Agreement, along with providing other legal services based on your needs. Once your Certificate of Formation have been prepared and successfully filed with the Delaware Division of Corporations, your Delaware LLC has been formed and begins its existence as a corporate entity.
Choosing a Company Name for Your LLC
One of the first steps in the process of forming your Delaware Limited Liability Company is to choose your business name.
The business name that you choose must contain the words "limited liability company" or the abbreviation "LLC" or "L.L.C." as the last words in the name of the limited liability company. The words "limited" and "company" may be abbreviated to "Ltd." and "Co.," respectively.
It must be distinguishable (not the same as or deceptively similar to) the name of any Delaware Limited Liability Company or foreign LLC reserved or registered and cannot contain the words "bank," "trust," "trustee,""incorporated," "inc.," corporation," or "corp.," or "insurer" or "insurance company" or any other words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks.
Your LLC name may contain the name of one or more members.
By using UpCounsel, you can choose several business names in order of preference. Your attorney of choice can then conduct a name check for your Delaware Limited Liability Company before filing to see which names are available. Once you have chosen an available name, your chosen LLC attorney can help you properly register your name with the State of Delaware.
Requirements for Forming a Delaware LLC
Certificate of Formation: When forming an LLC in Delaware, the Certificate of Formation must be filed with the Delaware Division of Corporations. Delaware state law requires that certain information be included in your Certificate of Formation when forming your Delaware LLC.
This information must include:
- The LLC name
- Authorized entity's name and signature
- The name and address of the initial registered agent for service of process on the LLC.
- Date when LLC effective, if other than date filed.
Additionally, a Delaware LLC formation generally requires inclusion and/or consideration of the following:
Organizers: One or more people may form a LLC, yet they do not need to be members of the LLC.
Minimum Number of LLC Organizers: One (or more).
Eligibility: An organizer may be an individual, partnership, limited partnership, trust, estate, association, corporation, limited liability company, or other entity, whether domestic or foreign.
LLC Operating Agreement: If you have an LLC with more than one member, it is highly recommended that you adopt an operating agreement for the company although it is not required. The operating agreement may also be amended and repealed as allowed by the agreement or applicable law. The Certificate of Formation may contain restrictions or prohibitions on the power of the members to adopt, amend, or repeal an operating agreement. If there is more than one member, any operating agreement shall initially be agreed to, in writing, by all of the members.
Membership: A limited liability company must have one or more members.
Eligibility Requirements: A natural person or an entity.
Procedure for Membership: The member may acquire an interest in the LLC directly from the limited liability company at the time of formation and, after formation, at the time provided in and upon compliance with the Certificate of Formation or the operating agreement or, if not provided, only upon the vote of a majority in interest of the LLC members, excluding the vote of the person acquiring the membership interest, and only when the person becomes a party to the LLC's operating agreement.
Professional Services: If you are an LLC that will provide a professional service, according to state law, you must contact the proper licensing board according to determine whether your business must meet certain requirements to operate as a professional service LLC.
Resident Agent needed for a Delaware LLC
UpCounsel attorneys can also provide your business with a registered agent in Delaware. Every Delaware LLC must have a registered agent in Delaware, which is the person or office designated to receive official state correspondence and notice if the company is "served" with a lawsuit. The registered agent must have a permanent address in Delaware and be authorized to do business in the state. If the LLC itself is located in Delaware, it can act as its own registered agent.
Delaware Secretary of State
Once you create an LLC in Delaware, the Delaware Secretary of State will require that certain recurring responsibilities and duties be fulfilled. The most important of these are explained below.
For further information, contact the Delaware Secretary of State.
Recurring Responsibilities and Duties for Delaware LLCs
Annual Report: Each limited liability company shall provide an annual report to the Delaware Secretary of State regarding its financial condition to each of its members.
Records: Each Delaware limited liability company must keep the following records open to inspection at its office:
- A current list of the full name and last known business or residence address of each member and of each holder of an economic interest in the limited liability company set forth in alphabetical order, together with the contribution and the share in profits and losses of each member and holder of an economic interest.
- If the LLC is manager-managed, you will need a current list including the full name and business or residence address of each manager.
- A copy of the Certificate of Formation and all amendments thereto, together with any powers of attorney pursuant to which the Certificate of Formation or any amendments thereto were executed.
- Copies of the limited liability company's federal, state, and local income tax or information returns and reports, if any, for the six most recent taxable years
- A copy of the LLC's Operating Agreement, if in writing, and any amendments thereto, together with any powers of attorney pursuant to which any written operating agreement or any amendments thereto were executed.
- Copies of the limited liability company's financial statements, if any, for the six most recent fiscal years.
- The books and records of internal affairs as they relate to the limited liability company for at least the current and past four fiscal years.
Filing Fees for a Delaware LLC
Filings must be made with the Delaware Division of Corporations in which the LLC was organized, along with the appropriate state filing fee. The filing fee for the Certificate of Formation is $90. This fee can be subject to change, so make sure to keep yourself updated on the latest fee requirements on the Delaware Division of Corporations website.
Taxes for a Delaware LLC
Having an LLC in Delaware can offer certain tax advantages over having a corporation, including the availability of more tax deductions. Additionally, an LLC is not required to be a separate tax entity like a corporation; instead, it can be considered a "pass-through entity," so that the owners of the LLC report business losses or profits on their personal tax returns, just like in a partnership.
Federal Income Tax: Unless you elect to tax the limited liability company as a corporation, the IRS will treat a single-member LLC in Delaware as a sole proprietorship for tax purposes. This means that the LLC itself does not have to pay taxes or file a tax return. Unless you elect to tax the Limited Liability Company as a corporation, the IRS treats multi-member LLCs as partnerships for tax purposes. This means that LLC owners will each need to pay taxes on their lawful share of the profits on their personal income tax returns, not just on the LLC itself. However, if you file IRS Form 8832, you may elect for corporate taxation if you regularly need to keep a substantial amount of your profits in the LLC.
Federal Tax Identification Number: Your LLC will need to obtain a federal tax identification number, which is also known as an Employment Identification Number (EIN). An EIN is similar to an individual's social security number. You will need an EIN for your LLC as long as there is one member, even if the LLC does not have employees. For certain tax filing requirements the attorney you choose on UpCounsel can help prepare your Federal Tax ID Application, if you have not done so already.
State Taxes: According to state law, LLCs operating in Delaware must pay an Alternative Entity Tax every year by June 1st. Registered Agents will receive a notice in December of each year. This is an annual $250 tax paid every year to the Delaware Division of Corporations. There is a penalty for late and non-payments, and interest is accrued every month that the tax is not paid.
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