Sections of this topic
Welcome to the exciting realm of Delaware business opportunities. Are you considering setting up a Limited Liability Company (LLC)? Well, you’ve landed at just the right spot! Understanding the costs of this venture, as well as both the initial fees and the ongoing expenses to maintain your LLC, is crucial.
We’ve detailed all the potential costs you might encounter while forming your LLC in Delaware. Need a bit more guidance? LLC services like Tailor Brands can simplify the paperwork process and ensure everything’s sorted.
With the proper knowledge and support, you’ll confidently manage the financial aspects and intricate details of your Delaware LLC setup.
What Is the Cost of Forming an LLC in Delaware?
The main expense when forming an LLC in Delaware is the $90 fee for filing the Certificate of Formation via the Delaware Department of State’s online platform.
Delaware Foreign LLC Formation Costs
If you already own an LLC established in another state and want to expand your business to Delaware, you must register your LLC as a foreign entity there.
Delaware charges a $200 fee for this business registration. To complete the process, you must submit a Certificate of Registration of Foreign Limited Liability Company online or by mail.
Annual Cost for LLCs in Delaware
When thinking about starting a Limited Liability Company (LLC) in Delaware, it’s important to understand the ongoing costs associated with maintaining your LLC.
The main recurring costs for a Delaware LLC include the annual franchise tax and partnership return. Delaware charges a $300 flat fee for this tax annually. The costs for partnership returns depend on the tax returns of the individual partners.
Moreover, every LLC in Delaware must have a registered agent. You can either appoint yourself or hire a professional service, which usually costs between $100 and $300 annually.
Keep these ongoing expenses in mind while planning your LLC’s budget in Delaware to make informed decisions and maintain your LLC’s financial health.
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How Much Does It Cost to Start an LLC in Delaware With the Best LLC Service?
Tailor Brands LLC Formation Cost
The base cost to file an LLC in Delaware is $90, marking the initial expense before any additional charges. Typically, the processing time ranges from 2 to 3 weeks. If you’re in a hurry, you can opt for expedited processing that shortens this period to 4 to 6 days for an extra $50.
A higher fee of $100 is required for faster processing within 1 to 2 days. Tailor Brands Lite LLC offers a straightforward LLC formation package. With their Lite plan, you simply cover the state filing fee.
This plan is their most budget-friendly option for starting a Limited Liability Company. Step it up a notch, and you get the Essential LLC plan. Priced at $199 plus state fees, this includes quicker LLC formation service, yearly compliance services, and an operating agreement.
Stick with Tailor Brands; they’ll charge you $199 annually to keep these services going. Now, for those aiming higher, there’s the Elite LLC plan. It costs $249 plus the state fees and packs everything from the Essential plan with heaps of extra business tools.
You’ll get a business domain (free for the first year), a DIY website builder, an online store, eight nifty logos, a digital business card, a business card tool, and even a social media post maker. Maintain these goodies with an annual fee of $249 to Tailor Brands.
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Additional Costs When Starting an LLC in Delaware
Delaware LLC Name Costs
You won’t have to pay anything in Delaware to register a business name. Your Limited Liability Company name is registered free of charge. Once the state approves your Certificate of Formation, your chosen Delaware LLC Name is also approved, all without extra costs.
You might encounter online claims about the need for LLC Name Reservations. However, this isn’t true for most states. Generally, forming an LLC does not require a Name Reservation.
Delaware Registered Agent Costs
In Delaware, the Registered Agent Fee ranges from $0 to $125 annually, and appointing a Registered Agent is necessary when setting up your LLC.
A Delaware Registered Agent can be a person or a business that handles legal paperwork and state notifications for your LLC. They need a physical address in the state and be available during normal business hours. Choosing to act as your own Registered Agent or having a friend do it will cost you nothing extra.
However, you can also opt for a Registered Agent service, which typically costs between $100 and $300 annually. These services handle all Registered Agent responsibilities and often offer additional business services, helping to protect your privacy.
Consider a Registered Agent service if:
- You need a Delaware address (Delaware requires Registered Agents to have a physical street address in the state).
- You prefer to keep your address private on public records (some services may allow you to use their address for enhanced privacy).
Delaware Operating Agreement Costs
There’s no charge for an LLC Operating Agreement in Delaware, it’s completely free ($0). The Delaware LLC Operating Agreement is a formal document outlining LLC members’ arrangements.
It covers detailed aspects of LLC ownership, management, and profit distribution. Single-Member and Multi-Member LLCs are recommended to create an Operating Agreement, keep it with their business records, and distribute copies to all members.
Typically, most platforms charge between $50 to $200 for drafting LLC Operating Agreements.
Delaware EIN Cost
The Employer Identification Number (EIN), or Federal Employer Identification Number (FEIN), serves several key functions. It’s essential for filing income taxes, setting up a bank account for your LLC, and hiring employees when necessary.
Although many websites charge a fee to obtain an EIN for your LLC, you can get one for free. You can acquire an EIN for your LLC directly from the Internal Revenue Service (IRS) at no cost. The online application is straightforward and takes just a few minutes to complete.
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Delaware LLC Taxes
Delaware LLC taxes vary widely, leading to significant differences in annual costs for owners. Some of the taxes that LLC owners need to pay include:
Federal Income Taxes
The Internal Revenue Service (IRS) offers various tax treatment options for your LLC. The IRS considers single-member LLCs and Disregarded Entities for tax purposes. This designation means the LLC cannot file a federal income tax return independently. Instead, the owner of the Single-Member LLC is responsible for filing and paying federal income taxes.
The taxation approach varies depending on who owns the LLC: if it’s an individual, the tax treatment is similar to that of a Sole Proprietorship; if a company owns it, the taxes are handled as part of the parent company’s taxes.
Multi-Member LLC Taxes
When an LLC has multiple owners, it is taxed as a Partnership. The LLC is required to file a 1065 Partnership Return and provide each owner with a Schedule K-1. These K-1 forms outline each owner’s portion of the profits, which are then reported on their personal tax filings. Owners must pay income taxes on these amounts through their individual tax returns (Form 1040).
Husband and Wife LLC Taxes
In some states, a husband and wife LLC can be taxed as a Single-Member LLC under a structure known as a Qualified Joint Venture instead of the usual Multi-Member LLC status. This option, however, is only available in community property states. Delaware, which is not a community property state, doesn’t provide this option.
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Election for Corporate Taxation
An LLC can be taxed under corporate structures, removing the default classifications. This includes two types of corporate elections: S-Corporation and C-Corporation.
An LLC must file Form 2553 with the IRS to be taxed as an S-Corporation. Although this choice brings additional costs, it can lead to savings on self-employment taxes for well-established businesses. Generally, this option becomes viable when the business demonstrates steady revenue and profits.
Alternatively, an LLC can elect C-Corporation status by submitting Form 8832 to the IRS. This choice is less typical and often favors only some business owners.
Delaware State Income Tax for LLCs
In Delaware, Single-Member LLCs do not file a state-level tax return; the owner reports the LLC’s profits or losses on their personal state tax return instead. Multi-Member LLCs might be required to file a state-level Partnership return, while the owners include their share of the LLC’s profits or losses on their individual state tax returns.
Local Income Tax for LLCs
In Delaware, LLCs may need to meet local income tax requirements for their municipalities, which involves filing and paying taxes at the local level. It’s advisable to consult with an accountant to ensure adherence to these local tax obligations.
Delaware Sales Tax
Delaware stands out from many states because it does not levy a sales tax. Instead, businesses must pay a “Gross Receipts Tax,” calculated from the total revenue of goods and services sold. This tax affects nearly all businesses. To comply, you must register your LLC with the Delaware Division of Revenue and make payments through their online system.
Delaware LLC Payroll Taxes
If your Delaware LLC employs staff, you must handle payroll taxes. This includes withholding federal and state income taxes and contributions to Social Security, Medicare, and unemployment taxes, among other deductions. Managing payroll can be intricate, prompting many businesses to seek help from payroll services or accountants.
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Delaware LLC Cost – FAQs
Conclusion
Setting up an LLC in Delaware involves specific expenses that need thorough consideration. Delaware’s business-friendly environment and tax advantages are appealing, but the costs involved include filing fees, registered agent fees, and possibly legal or consulting fees.
LLC services like Tailor Brands provide various packages that can streamline the process. Entrepreneurs should carefully evaluate these costs alongside the benefits of Delaware’s robust legal framework and reputable business climate.
