Delaware is often the preferred state for forming limited liability companies (LLCs) because of its business-friendly legal environment. The state has a specialized court called the Court of Chancery that exclusively handles business disputes. This court operates without juries, providing quick and expert resolutions, and it uses judges knowledgeable in business law—often leading to more predictable legal outcomes that are favorable to business. Delaware’s laws also provide strong protections against personal liability for company directors, which makes it an even more attractive locale for risk-averse owners.

Delaware is also popular for the financial benefits it offers businesses. The state doesn’t impose corporate income tax on companies that operate outside its borders, even if they’re incorporated there, which can yield serious tax savings for companies that conduct business across states. The state also ensures a high degree of privacy for owners and doesn’t require them to disclose their identities in public filings. These factors, combined with the efficiency and relative predictability of Delaware’s legal system, make it a compelling choice for many businesses.

However, there are costs and fees involved with forming a Delaware LLC. Below, we’ll break down the financial obligations commonly associated with forming and maintaining an LLC in Delaware.

What’s in this article?

• How much does an LLC cost in Delaware?
  
• Cost breakdown for a Delaware LLC
  
• How to incorporate an LLC in Delaware
  

How much does an LLC cost in Delaware?

The minimum cost to form a Delaware LLC is $110 for the state filing fee. You should budget for additional expenses such as the franchise tax, registered agent fees, and fees for any applicable business licenses or professional services.

Cost breakdown for a Delaware LLC

The cost of forming and maintaining a Delaware LLC includes several types of fees, outlined below.

State filing fees

• One-time fee for a domestic LLC

• One-time fee for a foreign LLC

• One-time fee for a certified copy of your Certificate of Formation

Registered agent fee

• Annual fee set by the registered agent, which accepts legal documents and government correspondence on behalf of the business
  

Franchise tax

• Annual fee, due by June 1 each year
  

Business licenses

• One-time fee set by the specific industry and location jurisdiction

• Might be required, depending on the nature of business and local regulations

How to incorporate an LLC in Delaware

To incorporate an LLC in Delaware, follow these steps.

Choose a name

Select a unique name that complies with Delaware naming guidelines. It must include the words “Limited Liability Company” or the abbreviations “LLC” or “L.L.C.”

The name cannot be identical or deceptively similar to an existing business entity in Delaware. You can check name availability on the Delaware Division of Corporations website.

Appoint a registered agent

Designate a registered agent who will receive legal documents and official correspondence on behalf of your LLC. The registered agent must have a physical street address in Delaware and be available during normal business hours. You can hire a registered agent service or act as your own agent if you have a Delaware address.

File a Certificate of Formation

Prepare and file a Certificate of Formation with the Delaware Division of Corporations. The certificate must include the LLC’s name, the registered agent’s information, and the purpose of the business.

You can file online or by mail, and the filing fee is $110 (as of August 1, 2024).

Create an operating agreement

Although not legally required in Delaware, creating an operating agreement is strongly recommended. This document outlines the ownership structure, management roles, operating procedures, and other important aspects of your LLC. It helps prevent disputes and provides clarity on how the LLC will be run.

Obtain an EIN

Apply for an Employer Identification Number (EIN) from the IRS. This number is used for tax purposes and is required to open a business bank account and hire employees.

Pay the franchise tax

Delaware LLCs must pay an annual franchise tax, due by June 1 each year. This tax is a flat fee regardless of your LLC’s revenue or activity. There is no requirement to file an annual report.

Comply with ongoing requirements

Maintain compliance with Delaware’s ongoing requirements for LLCs, such as maintaining a registered agent and paying the annual franchise tax.

How to save money when incorporating a business

While some incorporation fees are unavoidable, it’s possible to lower your business’s costs by handling as much as possible in-house and seeking professional help when necessary. Here are a few key strategies for saving money:

• DIY incorporation: If your business structure is straightforward and you’re comfortable with paperwork, filing the incorporation documents yourself can save you hundreds or even thousands of dollars in legal fees. Online resources and guides are available to help you through the process.

• Compare registered agent services: Registered agent fees vary between providers. Compare prices and services from different companies to find the best deal for your needs.

• Consider forming an LLC: Limited liability companies (LLCs) are often simpler and less expensive to form than corporations, making them a cost-effective option for small businesses.

• Choose the right location: Some locations have lower filing fees and franchise taxes than others. Research different places to see which ones have the most favorable business environment for your industry and budget. Delaware is a popular choice in the US for its business-friendly laws and low fees, for example.

• Take advantage of online legal services: Online legal services offer affordable packages that can guide you through the incorporation process and provide templates for necessary documents. Some might even have discounts and promotions for new customers. This can be less expensive than hiring an attorney.

• Negotiate professional fees: If you need to hire an attorney or accountant, don’t hesitate to negotiate their fees. Some professionals might offer discounts for startups or small businesses.

• Plan for ongoing costs: While saving on initial incorporation costs is important, make sure to factor in ongoing expenses such as annual report fees, franchise taxes, and registered agent fees.