Delaware Secretary of State LLC: Everything You Need to Know
The Delaware Secretary of State LLC process only takes about five minutes and can be done entirely online. One of the best places to start your business is Delaware.3 min read
The Delaware Secretary of State LLC process only takes about five minutes and can be done entirely online. One of the best places to start your business is Delaware.
Why Is Delaware So Popular For LLC Formation?
Over 50 percent of all publicly traded companies in the U.S., including 63 percent of businesses listed in the Fortune 500 are registered in the state of Delaware. Here are some reasons why:
- It's easy because you don't need to go to the state, and minimal information is needed for your LLC formation.
- It offers a business-friendly environment, zero sales tax, a lot of travel hubs, and a great location.
- Delaware's business-friendly laws offer many benefits.
- Delaware allows you to set up a "series LLC," which lets you manage more than one LLC under one main LLC.
Why Form an LLC?
Regardless of where you form your LLC, it offers significant benefits. It limits your personal liability, separating you from your business, and protects you from debts or lawsuits involving the business. Unlike corporations, LLCs require no board of directors, annual meetings, or complicated rules. Members can be added or subtracted at any time, and very little paperwork is required. Taxes are easier too, because all profits and losses are passed through to the owners' personal tax returns.
Starting an LLC in Delaware
The process of forming your LLC in Delaware is easy:
- Choose a name for your LLC.
- Perform a business entity search to make sure your name of choice is not being used.
- Follow naming rules — you must use LLC or “Limited Liability Company” at the end of the business name.
- Assign a designated address for your LLC, which can be your home address, or even a P.O. Box; this does not need to be located in Delaware.
- Choose a Registered Agent, which can be you, a director, other owner, or a professional service. Whomever you choose must be available during business hours, 9 a.m. to 5 p.m. Monday through Friday.
- List names and addresses of all the members, or owners, of your LLC.
- File a Certificate of Formation with the Delaware Secretary of State. This includes the LLC name, name and address of your registered agent, and an authorized person's signature.
- Create an Operating Agreement for your LLC, which lays out details about how the business will be run. This does not need to be filed with any agency.
Why Do You Need an Operating Agreement?
If an operating agreement is not a requirement for LLC formation, why do you need one? For one thing, it provides a structure for decision making, and gives your business credibility for financial transactions and dealing with other businesses. It lays out the procedure for choosing managers, adding and subtracting members, and dividing or shutting down the company. Though professional incorporation services may provide this document, it should be tailored for your own unique needs.
Once the operating agreement has been written, all members need to sign it. Because LLCs do not have all of the formal requirements that corporations do, the operating agreement helps to avoid bureaucracy and disputes. If the agreement is not signed by all members, it's hard to prove that all members agreed on it. While it's particularly important when the LLC has multiple owners, an operating agreement is a useful document for single-member LLCs as well. The document should be revised and signed every time there is a change in ownership or procedure.
Advantages of Delaware LLCs
Since Delaware's laws are so beneficial to businesses, you and your LLC have the most protection possible. Delaware LLCs offer two-way protection, which strengthens the division between personal assets and business liabilities. If the business owes money to a creditor and cannot pay, creditors cannot seize your personal assets. Also, if an owner has personal liabilities, their creditors can only seize their interest in the LLC's distributions, not their ownership in the LLC.
If you or the other owners are located in another state, or you want to conduct business outside Delaware and the United States, you can form a Delaware LLC in most cases. Delaware LLC status may even be an option if you live outside the U.S.
If you need more information or help with a Delaware Secretary of State LLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.