If you’ve decided to form a limited liability company (LLC) in the state of Delaware, this is an exciting time for your business.
You’re probably ready to build up your LLC and operate the business you’ve always dreamed of!
However, before you get started, it’s important to understand all of the various fees and other expenses that come with forming a Delaware LLC.
Most entrepreneurs understand that they’ll have to pay the state a fee in order to get their LLCs formed. However, we find that some people are often unaware of all the potential additional expenses, like LLC formation service fees, registered agent service fees, Annual Report fees, taxes, and more. Let’s take an in-depth look at all the possible expenses you’ll encounter when forming a Delaware LLC.
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Forming an LLC has a lot of steps involved, some of which can be complicated. That’s why many entrepreneurs hire a service like ZenBusiness and LegalZoom to take care of the LLC formation process.
However, hiring us at ZenBusiness will get you more value and will save $79+ on your LLC formation.
The Required Upfront Costs of Forming a Delaware LLC
Let’s start by discussing the absolute essentials. You cannot form an LLC in Delaware without first filing the Certificate of Formation. The Certificate is the document that officially forms your business within the state. This filing will cost $90 to file.
The Certificate requires some important information about your business, including the name of your business, the address of your registered office, your effective date of dissolution, and more.
But what if you’re not forming a brand-new business in Delaware, and instead you’re expanding a pre-existing LLC into the state? In that case, you would need to file the Certificate of Registration of Foreign Limited Liability Company form instead. This document is similar to the Certificate of Formation, but it also requests information about where your LLC was originally formed. The fee for this form is different, too: $200.
Next, Delaware requires a general state business license for every new business. This license is obtainable on Delaware OneStop, and the annual expense is at least $75. However, if you have more than one location, you will pay an additional $25 for each extra location.
For many LLCs, these are the only upfront expenses that are required. That said, your Delaware LLC will certainly have other costs down the line, and there are some optional expenses as well. Understanding how many of these fees will apply to your business is the key to figuring out exactly how much it will cost to form your Delaware LLC.
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The Optional Upfront Costs of Forming a Delaware LLC
The first optional expense for a Delaware LLC is name reservation. The only time you need to reserve a business name for a Delaware LLC is if you’re not yet ready to form the business but you want the name to be available when you are ready. It costs $75 to reserve a business name in this state, which gives you exclusive rights to the name for 120 days.
However, considering that you can simply form your business instead, the $75 name reservation fee is usually unnecessary.
Another expense that may or may not apply to your business is an LLC formation service fee. While some entrepreneurs choose to fill out and file their own Certificate of Formation, and others opt for the much more expensive route of hiring an attorney to handle it, our preferred option is hiring a business formation service.
These companies can provide the professionalism and peace of mind you receive from having a true expert forming your LLC while charging significantly lower prices than any lawyer you’ll ever find. We’ll discuss LLC formation services again in a bit to help you figure out which of the many companies you should hire.
Many LLCs also hire registered agent services, and these companies also charge their own fees. Every LLC needs a registered agent, as this is the LLC’s point of contact for the state. If the state needs to send you any important documents (like service of process), they will deliver them to your registered agent, who will inform you and forward the documents to you.
We like to bundle registered agent and LLC formation services, as there are some formation services that will throw in a full year of registered agent service at no extra charge. For the most part, these companies charge an average of roughly $150 per year for this service, although rates can vary widely based on which company you choose.
You may also want to secure your business domain name and website, which will add another expense to your list. We always advise our readers to claim their domain names as soon as possible after filing the Certificate of Formation because it’s important to get the URL you want for your website. Especially considering how much the business world operates online these days, getting the domain name you want is almost as important as securing your desired LLC name. The cost of a domain name can vary a bit, but for the most part, this should cost you $20 per year or less.
The Required Ongoing Maintenance Costs of a Delaware LLC
Most states require LLCs to file an annual report, a document that updates the state on vital information about your LLC. And in most states, the report is accompanied by a pretty substantial filing fee. Delaware, however, does not require an annual report. However, they do charge an annual franchise tax, a flat fee of $300.
Depending on your LLC’s business pursuits, you will almost certainly need to pay other forms of ongoing business taxes as well. For instance, if your business sells any products or services, you’ll probably need to register for sales and use taxes in order to properly start a business.
If your LLC has employees, it will also need to pay unemployment insurance tax. Based on the nature of your business, there could be additional taxes on top of these, so make sure you check with the Delaware Department of Revenue to make sure you’re paying all of the taxes you should be.
The Optional Ongoing Maintenance Costs of a Delaware LLC
Much like you can hire an LLC formation service and a registered agent service, many of these same companies offer annual report services. If you’d like a reputable company to draft and file these reports on your behalf, you’ll need to pay their yearly service fees, on top of Delaware’s state fees.
Business insurance is another ongoing expense that many, but not all, LLCs will require. It’s very difficult for us to get into much detail on this topic because there’s so much variance from business to business regarding insurance coverage needs.
Still, for example, any business that serves customers from a physical retail location should have business liability insurance to protect against common risks like slip-and-fall accidents. Depending on the nature of your business, this may be just the tip of the iceberg when it comes to your insurance responsibilities.
Next, in addition to the general state business license (which requires annual renewal), depending on the nature of your business, you may still need to obtain professional or industry-specific licenses. There are many different licenses and permits that might apply to your Delaware LLC, and some of them might cost you money when you apply for or renew them, so this is another potential expense you’ll need to keep an eye out for.
The Potential Penalties for Avoiding These Costs
At this point, the costs are really adding up for some Delaware LLCs. You might be wondering what the consequences would be for avoiding some or all of these expenses. In short, it’s certainly not in your LLC’s best interests to skip out on any necessary fees.
If you don’t pay your Certificate of Formation filing fee, your LLC will never exist to begin with. If you fail to pay your Annual Franchise Tax in a timely manner, the state can administratively dissolve your business. Meanwhile, failing to pay your taxes in full can lead to some severe penalties for you and your business.
While it might seem that these expenses add up quickly, paying these fees is still a far better option than the alternative. If there is simply no way to cover these LLC formation costs, a secondary option is to operate as a sole proprietor.
The Best Delaware LLC Formation Services
Does the LLC formation process sound like a hassle? Would you rather pay someone else to form your LLC while you focus on actually growing your business? Fortunately, there are plenty of reputable LLC formation services out there that can provide professional assistance for a mere fraction of a lawyer’s fees.
There are dozens of different companies that offer LLC formation services these days, and it can be difficult to discern which of them is your best option. That’s why we put together our comprehensive guide to the top-rated business formation services available online. We encourage all of our readers to check out that guide and choose the right company for your specific situation. In addition, we’ll briefly run down a couple of our favorite options here.
We think ZenBusiness is the most well-rounded business formation service available today. It’s tough to beat the ZenBusiness pricing model, as this company charges just $49 to form your business and provide a full year of annual report service. In addition, ZenBusiness has outstanding customer feedback, with more than 10,000 reviews available online and nearly all of them being positive in nature.
We also appreciate ZenBusiness because this company gives back to the communities it serves. ZenBusiness partners with Kiva.org to provide loans to low-income individuals, and also donates money to help build businesses owned by women and minorities. Doing good while providing helpful business services is the ZenBusiness way!
Northwest Registered Agent
You don’t need us to tell you that Northwest’s $39 entry-level price point is a good deal. What does Northwest Registered Agent do that makes them stand out? In short, Northwest has the best customer support we’ve ever experienced in this industry.
While most of its competitors have rather mediocre customer service departments, staffed by outsourced call centers, Northwest has highly trained professionals answering its phones at all times. These experts can help answer many tough questions that competing companies’ support teams won’t have a clue how to answer.
In addition, Northwest also offers its customers a year of registered agent service, just like Incfile. However, only Northwest locally scans every document it receives as your agent, while Incfile only scans the government forms they’re legally required to scan.
Incfile is one of a very small handful of companies in this industry that will form an LLC or corporation with no service fees. All you need to do is pay your state’s fee and Incfile will take care of everything else. That’s not the only piece of good news we have regarding Incfile’s business formation services though.
Like ZenBusiness, Incfile also receives excellent feedback from its customers, with around 27,000 positive reviews available online and just a few negative reviews.
The main reason we rank Incfile behind ZenBusiness is that Incfile has more third-party offers and upsell attempts than ZenBusiness does. However, if you don’t mind promotional partnerships and upsells, Incfile could be a great fit for your new LLC or corporation.
Frequently Asked Questions
What is the absolute minimum cost to form a Delaware LLC?
The cheapest possible price tag for LLC formation in Delaware is $165, which covers the cost of Certificate of Formation and the state business license. All other upfront expenses for a Delaware LLC formation are optional.
How much does it cost to form a corporation in Delaware?
In many states, it’s more expensive to incorporate a business into a corporation than it is to form an LLC. That may or may not be the case in Delaware since the fee varies based on the total stock you issue. The minimum fee is $89, but it increases for corporations that exceed the minimum stock amount.
How long does it take to form my Delaware LLC?
The Division of Corporation’s office can take up to 15 business days to process your LLC formation paperwork. If you need faster processing, Delaware offers next-day service for $50-$100. Same-day processing costs as much as $1,000.
How much does ongoing LLC maintenance cost per year in Delaware?
The exact annual expense to maintain your LLC will vary depending on the professional licenses you need. But as a minimum, you’ll spend $75 for your state business license and $300 for your annual franchise tax. Other fees will vary based on your business’s unique features.
Where can I find more information about expenses for Delaware LLCs?
The Delaware Division of Corporations provides a comprehensive list of every possible corporate fee on this page.
How many small businesses are there in Delaware today?
There are close to 80,000 small businesses currently operating in Delaware. These companies make up roughly 98% of businesses in the state. These businesses employ about 45% of Delaware’s workforce.
What are the top official state resources for entrepreneurs?
The Delaware Division of Corporations offers a helpful Business Resource Connection page. This searchable database offers a one-stop location to find every possible state resource for businesses at every stage of the game, from pre-launch to well-established.
We’ve discussed many Delaware LLC costs in this article, some of which will apply to all LLCs in the state. As you can see, there are also plenty of expenses that will only affect certain LLCs. The most important takeaway is that you shouldn’t try to find loopholes to get out of paying these fees, as the consequences are potentially severe and easily avoidable.
That said, there are still some ways you can make financially smart decisions on your LLC formation and maintenance costs, like choosing an affordable business formation company to oversee your Certificate of Formation filing and provide registered agent service.