Delaware has long been an important state for American businesses. You’ll find that many of the big companies whose products and services you use every day were formed in Delaware. It’s a sophisticated, business-friendly state, so it makes sense for people to want to form companies there. And, as with other states, the LLC is a great form to use for small businesses.
Just as with other kinds of companies, though, forming an LLC takes money. We’re here to help you figure out what you need to spend, as well as the optional purchases that can make running your company as simple as possible.
This article will help you make a budget for starting an LLC in Delaware.
- The required costs for every LLC
- Extra costs we recommend you incur
- The different ways you can form your LLC, as well as the pros and cons of each
Total Delaware LLC Cost – $90
If you are just looking for the bare minimum amount it takes to file and get started with an LLC in Delaware, the answer is very simple: there is only one state fee you need to pay.
According to the Delaware Division of Corporations (DOC) fee schedule, it costs $90 to file your certificate of formation. As part of that fee, you will get a file-stamped copy, though a certified copy will cost you more, as discussed below. Once your filing is completed, your LLC exists and can legally do business. However, there are other costs you may want to consider.
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How Much it Costs to Start a Delaware LLC
Delaware doesn’t require a lot of different fees to get your limited liability company started. That doesn’t mean, though, that you can simply pay $90 and you’re done. There are other things you should think about now before they become issues in the future.
Filing Fee for Certificate of Formation – $90
A certificate of formation is that legal paper that creates your Delaware limited liability company. Before that paper is filed, your company is just an idea. After, it’s a legal entity that can sign contracts, buy and sell goods, and pay taxes. It’s a short but vital document, so you want to ensure you get it right.
State law requires only two things to be included in your Delaware certificate of formation:
- Your LLC’s name
- The name and address of your LLC’s registered agent
Outside of those guidelines, you have a lot of freedom for how you want your LLC’s certificate to read. Most people, however, are just going to want something short and to the point. The state meets this need with a form fill-in-the-blank certificate you can use.
Delaware LLCs – Other Costs to Consider
It pays to plan out the creation and early days of your business. As part of that process, you should think beyond the initial cost of forming an LLC, to whether your Delaware business will need to spend a bit of extra money. Perhaps you need to get up and running faster than normal, or maybe your business has extra legal needs that require a special contract between the business owners.
Certified Copy of Certificate of Formation – $50
Though you will get a file-stamped copy of your certificate when you file it, a certified copy costs a bit more to obtain. These normally are not needed unless the certificate will be used in court or for some other official purpose that requires the accuracy of the certificate to be guaranteed. Certain lenders or other companies might, for example, ask for a certified copy.
Fortunately, this is an easy document to get in Delaware. You can just get a certified copy from the DOC.
Expedited Filing Fees – $50 to $1000 per document
Processing time varies based on the number of documents being handled by the DOC but generally, you can expect filings to be processed within three to four business days.
If you need your documents processed more quickly, the DOC offers several expedited service options:
- One-Hour Service: $1,000 (must be filed by 9:00 p.m. local time)
- Two-Hour Service: $500 (must be filed by 7:00 p.m. local time)
- Same-Day Service: $100 (must be filed by 2:00 p.m. local time)
- Next-Day (Business Day) Service: $50 (must be filed by 7:00 p.m. local time)
Registered Agent Fee – about $100 per year
The state doesn’t charge you a separate fee to name a registered agent for your LLC. Under Delaware law, you have to do that as part of your certificate of formation.
Many owners are tempted to serve as their companies’ agents. This is usually not a good idea. It involves making your address public and being constantly available just in case someone wants to sue your company.
It’s an easier and more cost-efficient plan to hire a Delaware registered agent service for your company. These agents usually charge $100 per year and take care of all your company’s registered agent needs. It’s money well spent.
For some of our recommendations, check out our Best Registered Agent Services article.
Operating Agreement – $39 and up
An operating agreement is a contract that sets down the rules of your LLC. It says how the people in charge should do their jobs, when meetings must be held, how members can enter and exit the LLC, and almost any other matter you need to address.
Delaware doesn’t force LLCs to have these contracts, but it’s still a good idea to have one. The purpose of an operating agreement is to figure out in advance what will happen when there is an unexpected event. What if you have partners who die or quit? What if you find someone who wants to buy into your LLC?
If you don’t have an LLC operating agreement, the answers to those questions will come from state law. You might not be happy with the results. If you have an operating agreement, though, you dictate everything that happens in advance. It’s an important way to control your LLC and your life.
You can write the contract yourself, but unless you are a lawyer or know what it’s supposed to have, a DIY job is not the best idea.
A lawyer would likely charge you an hourly fee to draft an agreement. While that agreement would likely be a good one, it could cost hundreds or even thousands of dollars.
You can have a good agreement drafted, though, for as little as $39 if you use a business formation service. This option tends to be more cost-effective, and it’s appropriate for a large number of LLC owners.
DBA fee – $25 to $75
Sometimes, after owners form their companies, they have some regrets about the name they have chosen, or they need to tweak the name a bit so that the public doesn’t confuse the company with that of a competitor. In that case, you can get a “doing business as” (DBA) name, also known as a fictitious business name.
This is a very common process governed by Title 6, Chapter 31 of the Delaware Code. Section 3101 requires that trade names (DBAs) be registered with the prothonotary (head court clerk) of each county where your LLC does business. (There are only three, so the maximum you could pay would be $75.)
The Delaware courts offer a fill-in-the-blank pdf form certificate on the Internet. The form will need to be submitted with a $25 filing fee.
Name Reservation Fee – $75
Maybe you have your business plan and the perfect LLC name, but you’re not quite ready to start yet. If you want to make sure that a certain name is still available, you can file a name reservation application with the DOC for $75. The reservation is good for 120 days and can be renewed.
Domain Name – about $20 per year
Your LLC can’t afford not to have a presence on the Internet. The first step in creating a website is to get your own domain name. While this might have been expensive in the past, it is now quite affordable.
We recommend you secure your domain name as soon as possible, even if you don’t have immediate plans for your website to go live.
For example, a competitor could buy your ideal domain and its variations to block you from using them. Even worse, domain squatters sift through newly registered LLCs and will buy their domains only to relist them with huge markups.
In general, a domain ending in .com will be more expensive than a .net or .info domain, and some names will likely be taken, meaning you will have to do some searching (and maybe compromising).
A domain name from GoDaddy.com or a similar registrar may cost you between $20 and $50 per year, with regular specials and sales where you can get substantial discounts.
Registering with the State Tax Office Online – Free
All businesses need to register with the DOR so that they can pay the necessary taxes, like gross receipts tax and withholding taxes. Note that you will also need to obtain a federal Employer Identification Number (EIN) for your LLC, which is discussed below.
Getting an Employer Identification Number (“EIN”) – Free
An EIN is a number created and assigned by the IRS to a business for paying taxes. (Think of an EIN as a social security number for a business.) Some LLCs need them and some don’t.
Regardless of whether the IRS says you need one, you need one to register your business with the DOR. Also, many banks won’t allow your company to open an account unless it has one, and having an EIN can also simplify the process of getting credit.
You can apply online and get an EIN for free in minutes, or you can apply for one through the mail or fax. Whatever you do, don’t pay someone else to get an EIN for you. It’s too easy to pay someone else to do it unless it is part of a broader service package.
Read More: How to Get an Employer Identification Number in Delaware
Foreign LLC Qualification Fees – about $100 per extra state
Your goal, of course, is to run a successful business. When that happens, you may want to open new locations. If you want to open in another state, you’ll have to pay that state for the privilege of doing business there. You won’t have to re-form your business, but you will have to register and pay some extra fees.
The exact fees will depend on where you are registering. As a rule of thumb, expect to pay about $100 in filing fees to register your LLC in another state.
Business and Professional Licenses – varies
Delaware companies must register with the Division of Revenue (DOR) for business licenses, though you’ll have to confer with the DOR about the exact requirements for your LLC. Also, certain kinds of businesses will need professional licenses and permits. Check with the Delaware Division of Professional Regulation for more details.
Finally, you should also remember to check with your city and county governments about their business license fees and requirements, as those differ from case to case. In the town of Bethany Beach, for example, a general business license will cost $250 per year and can be paid up to three years in advance.
Writing Formation Costs Off
The formation costs we are talking about are a necessary part of starting your Delaware LLC. For that reason, they can usually be deducted from your taxes as business startup costs.
The IRS has a lot of guidance on this matter, and you should compare your specific costs to the materials on the IRS website.
Keep in mind that, in most cases, an LLC is taxed as a pass-through entity. In other words, your income and deductions will go on your personal taxes, rather than a separate income tax for the LLC. The IRS, for example, allows LLC owners to deduct $5,000 of their business startup expenses in the first year.
Delaware’s most recent state income tax forms and instructions appear to allow you to claim federal deductions on your state taxes. If you have a question about a specific deduction in your case, you should ask a Delaware accountant.
Larry, inspired by his family’s Scottish history, wants to open a store that sells and rents kilts for special occasions in Bethany Beach. His company is called Up Your Kilt LLC. Because he was trying to beat his cousin, who also wanted the name from another business, Larry quickly reserved it with the DOC before he filed his certification of formation.
When Larry files his certificate a week later, he opts for same-day expedited service, which costs him $100. He knows that his cousin will eventually want to partner up, so Larry has a formation service draft an operating agreement that says how to bring new investors into the LLC.
Larry’s one-year business license for the town also costs $250, on top of the $250 license charged to him by the state.
He also gets a company to serve as the LLC’s registered agent and reserves a web domain as well.
His formation costs are as follows:
- Delaware LLC Certificate of Formation: $90
- Same-day expedite fee: $100
- Business license (state): $250
- Business license (town): $250
- Delaware LLC operating agreement draft: $39
- Web domain costs (first year): $50
- Registered agent company fee (first year): $100
For income tax purposes, Larry has elected pass-through taxation for his LLC. So, the IRS and the state will tax him directly for the money he gets from his LLC. He’ll then claim his startup deductions on his personal tax returns.
The total amount of Larry’s deduction in this example is $879. Before the deduction, his total taxable income for the year was $30,000. After the write-offs, the taxable income went down to $29,121.
In Delaware, Larry would be in the 5.55% tax bracket, meaning that the $879 would save him $48.78 in state taxes. On his federal taxes, where Larry is in the 12% tax bracket, he would save $105.48. Thus, his total tax savings from write-offs is $154.26.
Keep in mind that if Larry had spent more than $5,000, he would likely be able to write off all of that money, but not all in the first year. Instead, he would have to break out his deduction over multiple tax years.
Cheapest Way to Start an LLC in Delaware
Now that you know the basics, you might be wondering how to put it all together and start your company for the least amount possible. While everyone’s situation is different, these will likely be your main options.
Formation Service – $39 + state fees
A business formation service is a popular and inexpensive way for new LLC owners to get started.
These companies are dedicated to helping entrepreneurs bring their visions to life. They have not only the knowledge of all the state laws you need to know, but also forms, documents, and procedures to make your life as easy as possible.
Formation services are quick and complete ways to handle formation needs for most LLCs.
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
While formation services can be great for most people, they are not always the best choice. Some cons for these services are:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
Attorneys are licensed, reliable, and powerful resources for business formation. They are also quite pricey. A good business lawyer will usually charge hundreds of dollars in fees. When you’re just starting and have a limited income, that’s usually not a wise use of your funds.
A wealthy LLC owner, though, could benefit from having an attorney if their business was at all complicated. For that reason, a few choose this option.
Despite the expense, sometimes hiring a lawyer is the best choice.
- Lawyers help you manage risk. An LLC with complicated legal issues needs a lawyer. Let’s say that Larry wanted to open a cannabis dispensary instead of a kilt store. In that case, the additional laws and regulations might require him to get a lawyer to make sure everything is okay.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
For most people, getting an attorney comes with considerable downsides that outweigh any benefits.
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very caring people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Many people, after searching the Internet for the information they need, decide to try forming their new LLCs themselves. This process can make you an expert, but remember that time is money. If you are spending hours on your business formation, that’s time you’re not spending on the substance of your business.
In most instances, then, it is more cost-effective to just pay an LLC formation service, with confidence that everything has been done correctly, rather than try to reinvent the wheel yourself.
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t figure out the value of your time, a DIY solution is the cheapest option.
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that then costs them more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Delaware LLC Fees: How Much Will it Cost to Maintain your LLC?
Once you’re off the ground, you will have to pay money every year to keep your company in good standing with the state. You’ll also have to pay money to make sure that your LLC gets the services it needs. The items you will need to pay for include:
- Delaware Franchise Tax: $300
- Business licenses: $250 and up
- Registered agent service fee: $100
- Domain name: $20
LLCs do not need to file an annual report in Delaware. Keep in mind, though, that the failure to timely pay the state franchise tax can empower the state to get a court order stopping your LLC from doing business after as little as three months! So, it is very important to stay in regular contact with the state about tax and filing requirements.
Also, keep in mind that any small business should have an accountant. Costs for accounts vary significantly, but you should spend an average of $2,000 to $3,000 per year on an accountant in most cases.
How Much are LLC Taxes in Delaware
In most cases, Delaware treats LLCs as pass-through entities. This means that they do not pay income taxes themselves, but the members are taxed on the income that passes through to them.
Multi-member LLCs can be treated as corporations for state income tax purposes if your LLC is also set up to be taxed that way at the federal level. If you wish to have this different tax treatment for your business, you’ll need to talk to an accountant or lawyer licensed in Delaware.
LLCs also have to pay an annual franchise tax of $300. That tax is due starting June 1st of the year following the one in which you formed your LLC. See the DOR website for more information.
There are two more important tax issues that you need to handle sooner rather than later. If your business has employees, you’ll need to withhold employment taxes. You’ll also need to figure out and pay a gross receipts tax for your LLC.
Delaware LLC Formation Costs Quick Links
- Delaware County, City & Town Licensing and Permits
- Delaware Code, Title 6, Chapter 31 — Trade Names/DBAs
- Delaware Courts — Form Trade Name/DBA Certificate
- Delaware Division of Corporations (DOC) — Expedited Services
- Delaware DOC — Fee Schedule
- Delaware DOC — Form Certificate of Formation
- Delaware DOC — Name Reservation Applications
- Delaware Division of Professional Regulation
- Delaware Division of Revenue (DOR) — Business Registration
- Delaware DOR — Employer Tax Information
- Delaware DOR — Franchise Taxes
- Delaware DOR — Gross Receipts Taxes
- Delaware DOR — Licensing and Registration
- Delaware DOR — Personal Income Tax Forms
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Town of Bethany Beach — Application for Business License Within Town Limits
Delaware LLC Formation Costs FAQs
How much does it cost to start an LLC in Delaware?
The minimum cost is $90. You have to pay this to file the certificate of formation for your Delaware limited liability company.
What is the cheapest way to start an LLC in Delaware?
A do-it-yourself approach will have the lowest price tag, but it isn’t the cheapest in terms of your time. The best balance of price and time, for most people, is to use an LLC formation service.
Do I need to hire an attorney to form an LLC in Delaware?
No. Most people will not need to invest the considerable expense and time of hiring a lawyer. A formation service or a DIY approach will work for most business owners.
Can I pay to form an LLC more quickly in Delaware?
Yes. Formation services will generally complete formation tasks faster than business owners acting on their own. You can also pay extra to the state to get your documents filed more quickly, even within the same day if you wish.