Delaware LLC Costs Explained: Your Detailed Guide

Dreaming of starting a Limited Liability Company (LLC) in Delaware? It’s not just about a state filing fee of $110. There are other expenses to consider. This detailed guide will help you understand all of the costs involved when starting a Delaware LLC.

Cost Breakdown for a Delaware LLC

People planning to set up a Delaware LLC usually ask two key questions:

1. What are the total costs to start a Delaware LLC?
2. What are the yearly costs to keep the LLC active?

Let’s take a closer look at these two aspects.

You can think of the total cost of starting a Delaware LLC in three main parts:

1. Setting up the LLC (This includes state filing fees and hiring a Registered Agent in Delaware)
2. Yearly costs (This mainly involves the Delaware Annual Franchise Tax)
3. Extra costs (These are for various essential documents)

Setting Up a Delaware LLC: Costs and Fees

• Delaware LLC State Filing Fee – $110

To start a Delaware LLC, you’ll first need to pay a $110 state filing fee. This fee is for filing the LLC’s Certificate of Formation with the Delaware Secretary of State’s Division of Corporations. The Certificate of Formation is like the LLC’s birth certificate. It’s the official paper that makes your LLC a legal entity.

• Delaware Registered Agent Fee – $109

IncNow®’s Delaware LLC packages include first year Delaware Registered Agent services. Delaware Registered Agent service costs $109 per year after the first year.

Every LLC in Delaware must have a Delaware Registered Agent. A Delaware Registered Agent is a person or company who is the official contact point for your LLC. A Registered Agent accepts important legal papers and state notices for your company and has to forward these notices to you.

If you live in Delaware, you can be your own Registered Agent. However, if you’re not based in Delaware or don’t have a physical address in the state, you can still start a Delaware LLC. You can hire a Registered Agent service, like IncNow, to meet this requirement.

INCNOW: “HOW TO CHOOSE A DELAWARE REGISTERED AGENT.”

Yearly Costs for a Delaware LLC

• Delaware Annual Franchise Tax – $300

The Delaware LLC Annual Franchise Tax is a set fee of $300 per year. 

Keeping your Delaware LLC active involves some yearly tasks. The most important is paying the Delaware Annual Franchise Tax. Every Delaware LLC must pay its franchise tax each year to stay in Good Standing with the state.

It’s crucial to pay the Delaware Annual Franchise Tax on time. If you don’t pay by the deadline of June 1st, you’ll face late fees and interest on the unpaid amount. If your LLC doesn’t pay its franchise tax for three years, the state will cancel your LLC.

INCNOW: “DOES MY DELAWARE LLC HAVE TO PAY FRANCHISE TAX?”

Extra Costs for Starting a Delaware LLC

There are a few other costs you’ll need to think about when starting an LLC in Delaware.

• Delaware LLC Operating Agreement

Delaware law requires LLCs to have an LLC Operating Agreement. This document sets out the rules for your company and explains who the owners and managers are. A good LLC Operating Agreement can help prevent disagreements and misunderstandings within the business.

You have several options for getting a written Operating Agreement for your Delaware LLC:

Option #1.) Draft Your Own Operating Agreement:

The owners of a Delaware LLC can draft their own Operating Agreement if they are up to the challenge

     Pros:

• Affordable: Preparing your own Operating Agreement is the cheapest option. 

     Cons:

• Less protections: It is likely that you will make mistakes and leave out important provisions if you do not have experience writing LLC Operating Agreements. 

Option #2.) Hire a Lawyer

Hiring an attorney is a good way to ensure that your LLC Operating Agreement gives you the protection you need. However, hiring an attorney is not the best option for every business.

     Pros:

• More protections: An attorney can prepare a more complete Operating Agreement including more protections for owners. 

     Cons:

• Expensive: An attorney may charge high fees for providing a cookie-cutter Operating Agreement that can be found online. 

Option #3.) IncNow’s Ready-to-Sign Operating Agreement

IncNow’s Ready-to-Sign LLC Operating Agreement is written by A-rated Delaware business lawyers and comes included with a Now LLC or Complete LLC package. 

     Pros:

• Maximum protection: IncNow’s Operating Agreement is prepared by Delaware corporate attorneys with 50 years of experience who update the Operating Agreement to address recent changes in the law. 

• Customizable: IncNow’s Operating Agreement can be customized to fit unique ownership arrangements or management structures. 

• Flat Fee Pricing: IncNow’s Ready-to-Sign LLC Operating Agreement comes included with a Now LLC or Complete LLC package.

• Federal Employer Identification Number (EIN)

IncNow can help you get an EIN from the IRS for your new LLC. The cost is $99, or $199 for international customers.

An EIN is like a Social Security Number for your LLC. The IRS uses it for federal tax purposes. An LLC needs this number to hire staff, open a business bank account, pay federal taxes, and apply for business licenses and permits.

INCNOW: “WHAT IS AN EIN NUMBER AND DOES MY BUSINESS NEED ONE?”

• Delaware Certificate of Good Standing

IncNow can help you get a Delaware Certificate of Good Standing from the Secretary of State’s office for $99.

A Delaware Certificate of Good Standing is a document that shows your LLC is up-to-date with all state requirements, like paying all necessary fees. You might need to show this certificate when opening a business bank account, or in other business dealings.

• Delaware Certified Copy

IncNow can help you get a Certified Copy of your Delaware LLC Certificate of Formation for $99.

A Delaware Certified Copy is an official document that confirms the validity of your LLC’s formation documents. It’s basically a copy of the original Certificate of Formation, approved by the Delaware Secretary of State. Some banks might ask for a Certified Copy when you’re opening a business account for a Delaware LLC. You may also need a Certified Copy for different business transactions. 

• DBA (Doing Business As)

 IncNow can help you file a DBA in New Castle County, Delaware for $214.

If your business wants to operate under a different name than its official LLC name, you need a DBA or “Doing Business As”. Also known as a “trade name” or “fictitious name”, a DBA lets your LLC do business under a different identity. For example, if “XYZ LLC” wanted to run a restaurant called “Tasty Treats”, they’d need a DBA for “Tasty Treats”. 

Why Choose Delaware for Your LLC?

Even with the various costs involved in starting and maintaining a Delaware LLC, many business owners choose Delaware. Why? Delaware has laws that favor businesses, and a strong legal system that protects the rights of business owners.

Delaware’s business court, Court of Chancery, is well-known for its understanding of business disputes. The Chancery Court provides quick and predictable outcomes. This alone can save businesses a lot in legal costs over time.

Also, Delaware gives a higher level of privacy to LLC owners. Unlike many other states, Delaware does not require the names of members or managers to be listed in the formation documents. This lets business owners keep their personal information private.

In the end, the costs of starting and maintaining a Delaware LLC should be seen as an investment in your business’s future. The initial and ongoing costs are a small price to pay for the benefits and protections of operating an LLC in Delaware. With this detailed guide, you now have a clear understanding of the financial needs of starting and running a Delaware LLC.