ContractsCounsel Logo

Forming LLC in Delaware

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 7,581 reviews
Home Blog Forming LLC in Delaware

Jump to Section

Forming an LLC in Delaware is a prevalent alternative for company owners and entrepreneurs, given its increased flexibility and limited liability protection. Moreover, among the different states in the United States, Delaware is one of the most preferred locations for LLC formation. Besides, Delaware's enterprise infrastructure, business-friendly provisions, and profitable legal structure make it a lucrative option for organizations. This blog post will help you understand more about forming an LLC (Limited Liability Company) in Delaware and other relevant information.

Steps in Forming an LLC in Delaware

Here is the comprehensive process of instituting an LLC (Limited Liability Company) in Delaware.

  1. Select a Suitable Name for LLC. The principal step in forming a limited liability company in Delaware is picking a distinctive and relevant business name. In addition, the organization's name must end with "Limited Liability Company," "LLC," or any other abbreviation. Moreover, by performing a title search on the official Delaware Division of Corporations' website, ensure the name chosen is not already registered by another company.
  2. Hire a Registered Agent. In Delaware, every limited liability company must appoint a registered agent with a physical address in the state to collect authorized documents and legal notifications on behalf of the organization. This appointed agent is vital in keeping the limited liability company in good standing with the state authorities.
  3. File the Certificate of Formation. The next step is to file the Certificate of Formation with the official Delaware Division of Corporations. This document functions as the authorized formation document for the LLC. One can complete the LLC registration either online or by mail. The essential details to comprise in the Certificate of Formation are the LLC and registered agent's name and address, the LLC's organizers (the people constituting the LLC) name and address, and the effective date if one wants the LLC to be effective on a future date.
  4. Prepare an Operating Agreement. While Delaware law does not mandate a limited liability company to keep an operating agreement, it is highly recommended to prepare one. An operating agreement is a lawful document that summarizes the internal functions of the LLC, including members' rights and obligations, profit-sharing structures, and decision-making processes. This legal arrangement can help safeguard the interests of all concerned parties and prevent conflicts.
  5. Comply with Delaware Tax Provisions. Delaware does not inflict a state-level income tax on companies, including LLCs. However, if a limited liability company (LLC) performs any taxable activities, one might have to settle other state taxes. Furthermore, consulting with a tax specialist is necessary to ensure compliance with all tax requirements.
  6. Get Necessary Trade Licenses and Permits. Depending on the nature of the company and its location, one might have to obtain appropriate licenses or authorizations to function lawfully in Delaware. Since the provisions can differ, checking with the official Delaware Division of Small Business for guidance is rational.
  7. Maintain Constant Compliance. To keep Delaware limited liability companies profitable, one must adhere to continuous compliance obligations. It comprises filing an annual financial report and settling the corresponding fee. Delaware's annual report filing can be online through the Division of Corporations' website.

Options for Forming an LLC in Delaware

Below are different types of Limited Liability Companies (LLCs) in Delaware.

Single-Member LLC (SMLLC)

A Single-Member LLC, as the name suggests, has only one owner or member. This type of LLC is commonly chosen by entrepreneurs and small business owners who want to operate their businesses with limited personal liability protection. By forming an SM LLC in Delaware, sole proprietors can separate their assets from the business's liabilities, shielding themselves from personal responsibility for business debts. Some key advantages are:

  • Simplicity: SMLLCs require less paperwork and administration compared to multi-member LLCs.
  • Personal Liability Protection: The owner's assets are safeguarded from the LLC's debts and legal obligations.

Multi-Member LLC

A Multi-Member LLC, on the other hand, is formed by two or more owners or members. Each member contributes to the business's operation and decision-making, sharing the profits and losses according to their agreed-upon ownership percentages. The operating agreement outlines the rights, responsibilities, and distribution of profits among the members. Some key advantages are:

  • Shared Responsibility: Multi-Member LLCs allow for shared decision-making and resources, which can lead to better business outcomes.
  • Diverse Skill Sets: Members can bring unique skills and expertise to the company, enhancing its overall capabilities.

Series LLC

Delaware is one of the few states allowing a Series LLC to be formed. A Series LLC is a single legal entity that can establish separate "series" within itself, each with its assets, liabilities, and members. This structure provides substantial advantages for companies with different ventures or assets, as it allows for personal protection and security of each series from the liabilities of the others. Some key advantages are:

  • Risk Segregation: Each series operates independently, protecting the assets of one series from potential lawsuits or debts incurred by another series.
  • Cost-Efficiency: A Series LLC can save money on formation and administrative costs compared to establishing multiple separate LLCs.

Series LLC with Protected Cells

A Series LLC with Protected Cells is an advanced version of the regular Series LLC. In this type, each series is referred to as a "protected cell." These cells are legally isolated from each other, offering an additional layer of liability protection. Some key advantages are:

  • Enhanced Asset Protection: The "protected cells" further reinforce the separation of liabilities and safeguard the assets of each series.
  • Investment Funds: This structure is commonly used for investment funds and asset management companies.

Public Benefit LLC

A Public Benefit LLC (PB LLC) is a unique limited liability company that seeks to generate profits for its members and achieve specific social or environmental purposes. A PB LLC's primary goal is to impact society or the environment positively, and its mission is stated explicitly in its certificate of formation. Some key advantages are:

  • Social Impact: PBLLCs allow entrepreneurs to pursue their passion for social responsibility while running a profitable business.
  • Marketing and Public Relations: Committing to social and environmental causes can enhance the company's brand image.
Meet some lawyers on our platform

Zachary J.

191 projects on CC
View Profile

Melissa L.

4 projects on CC
View Profile

Spencer R.

3 projects on CC
View Profile

Ted A.

5 projects on CC
View Profile

Key Terms for Forming an LLC in Delaware

  • Delaware Corporation Law: The statutory framework governing the formation, operation, and dissolution of LLCs in Delaware, known for its business-friendly and well-established legal structure.
  • Certificate of Formation: The document filed with the Delaware Division of Corporations to establish an LLC and legally recognize its existence.
  • Registered Agent: A designated individual or entity responsible for receiving legal and official documents on behalf of the LLC in Delaware.
  • Operating Agreement: A contract outlining the rights, responsibilities, and financial arrangements among LLC members, providing internal guidelines for operation and management.
  • Member: An individual or entity that holds ownership interest in an LLC and participates in its management and profits.
  • Annual Franchise Tax: An obligatory tax paid by Delaware LLCs for the privilege of operating in the state, usually calculated based on the company's authorized shares or gross assets.
  • Delaware Court of Chancery: A specialized court that handles disputes involving LLCs and corporate matters, renowned for its expertise in corporate law and efficient resolution of business disputes.

Final Thoughts on Forming an LLC in Delaware

Forming an LLC in Delaware offers considerable benefits, including legal security, adaptable management possibilities, and profitable tax treatment. Following the steps above, you can successfully institute your business entity and set a stable foundation for your Delaware organizational journey. Nevertheless, it is necessary to consult with a competent lawyer or a business advisor to ensure adherence to all lawful and regulatory provisions specific to your situation.

If you want free pricing proposals from vetted lawyers that are 60% less than typical law firms, click here to get started. By comparing multiple proposals for free, you can save the time and stress of finding a quality lawyer for your business needs.

Meet some of our Lawyers

Garrett M. on ContractsCounsel
View Garrett
5.0 (7)
Member Since:
August 30, 2021

Garrett M.

Associate
Free Consultation
Dexter, MO
7 Yrs Experience
Licensed in TX
University of Texas

Hello! I am a young attorney with four years' experience in real estate transactions, fund formation, and general corporate transactional work. I graduated in 2016 from the University of Texas - Austin and I am barred in Texas.

Tim E. on ContractsCounsel
View Tim
4.9 (41)
Member Since:
August 12, 2020

Tim E.

Founding Member/Attorney
Free Consultation
Cleveland, OH
9 Yrs Experience
Licensed in OH
Cleveland-Marshall College of Law

Tim advises small businesses, entrepreneurs, and start-ups on a wide range of legal matters. He has experience with company formation and restructuring, capital and equity planning, tax planning and tax controversy, contract drafting, and employment law issues. His clients range from side gig sole proprietors to companies recognized by Inc. magazine.

Kelvin R. on ContractsCounsel
View Kelvin
4.8 (11)
Member Since:
February 25, 2022
Christian D. on ContractsCounsel
View Christian
Member Since:
September 6, 2023

Christian D.

General Practice Attorney
Free Consultation
Austin, Texas
10 Yrs Experience
Licensed in TX
St. Mary's University - School of Law

Christian Davila received his Juris Doctorate from St. Mary’s University and becoming a member of the State Bar of Texas in 2013. Before law school, he studied at Texas A&M International University (TAMIU), and participated in multiple programs across various fields of study, including the University of Texas Medical Branch-School of Medicine’s “Early Medical School Acceptance Program,” and the Hispanic Association of Colleges & Universities’ “National Internship Program” at the Library of Congress in Washington, D.C. Christian’s legal experience includes criminal law (both prosecution and defense), family law, transactional law, business litigation, real estate litigation, and general civil litigation. Christian was previously in-house counsel for a multi-million dollar apartment construction and management company, handling all property acquisition, document drafting, negotiations, and litigation. Christian is a former member of the American Association for Justice (formerly the Association of Trial Lawyers of America), and he has been distinguished by the National Trial Lawyers as one of their TOP 40 Civil Plaintiff attorneys in Texas UNDER 40 years old. He likes weightlifting, reading comicbooks, and being silly with his kids in his spare time.

Kahlee S. on ContractsCounsel
View Kahlee
Member Since:
September 6, 2023

Kahlee S.

Managing Partner
Free Consultation
Mount Dora, Florida
2 Yrs Experience
Licensed in FL
Barry University Dwayne O. Andreas School of Law

I opened Hestia Legal when I was 6 months pregnant with the focus on educating and assisting families in my community. While the majority of my practice revolves around Estate Planning, I have a history of experience with contract and general business agreement drafting, discovery drafting, and general litigation document drafting.

Nadir C. on ContractsCounsel
View Nadir
Member Since:
September 6, 2023

Nadir C.

Compliance Analyst
Free Consultation
Mokena,Illinois
2 Yrs Experience
Licensed in IL
Northern Illinois University College of Law

I am a licensed attorney in Illinois, I am currently a Regulatory Compliance Analyst.

Kyle T. on ContractsCounsel
View Kyle
Member Since:
September 7, 2023

Kyle T.

Associate Attorney
Free Consultation
Houston, Texas
1 Yr Experience
Licensed in IN
South Texas College of Law

Obtained J.D. in December 2021, admitted to the Indiana Bar in November 2022. Began working as a clerk for civil defense firm in March 2022 and have been the same firm to the present, currently working as an Associate Attorney.

Find the best lawyer for your project

Browse Lawyers Now
CONTRACT LAWYERS BY CITY
Learn About Contracts
See More Contracts
other helpful articles

Need to form an LLC?

Create a free project posting

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city