Starting a Limited Liability Company (LLC) in Delaware has become a go-to choice for both U.S. residents and international entrepreneurs. Delaware is known for its business-friendly laws, privacy protections, and streamlined incorporation processes, making it a prime destination for forming an LLC. This guide will walk you through every step necessary to open an LLC in Delaware as a non-resident, with helpful tips to streamline the process.
Why Choose Delaware for Your LLC?
Delaware’s reputation for favorable tax laws, a robust legal system, and business-friendly policies make it a top choice. Here are some key advantages:
- Business-Friendly Legal System: Delaware has a specialized Court of Chancery, which focuses solely on business cases, allowing for faster, more predictable outcomes.
- Privacy: Delaware doesn’t require members or managers of an LLC to be listed publicly, providing extra confidentiality.
- Tax Benefits: Non-resident LLC owners who do no business in Delaware may not be required to pay Delaware state income tax.
Step 1: Choose a Unique LLC Name
Before you register your LLC, you must select a unique business name. Delaware law requires that your LLC’s name:
- Ends with “LLC” or “Limited Liability Company.”
- Doesn’t closely resemble any existing registered Delaware businesses.
Tip: You can use Delaware’s online business name search tool to verify that your desired name is available. Consider choosing a name that is easily brandable and suitable for your target market.
Step 2: Select a Registered Agent
A registered agent is required for all Delaware LLCs. This agent must have a physical address in Delaware and be available during standard business hours to receive legal documents on behalf of your business.
Since you’re a non-resident, hiring a professional registered agent service is your best option. Many registered agent companies operate in Delaware, providing services to handle your legal correspondence and ensure compliance.
Popular Registered Agent Services in Delaware:
- Northwest Registered Agent
- ZenBusiness
- IncFile
Fees for registered agents usually range from $50 to $200 annually.
Step 3: File a Certificate of Formation
The Certificate of Formation is the official document that establishes your LLC in Delaware. To complete this step, you’ll need to:
- File the Certificate of Formation with the Delaware Division of Corporations.
- Pay the filing fee, which is typically $90 for LLC formation.
This document only requires basic information about your LLC, such as its name, registered agent’s address, and the LLC type (member-managed or manager-managed).
How to File:
- Online: The Division of Corporations provides an online form for quicker processing.
- Mail: You can also mail the form to the Division of Corporations, but this will take longer to process.
Tip: To expedite the processing, Delaware offers a same-day processing service for an additional fee.
Step 4: Draft an Operating Agreement
An Operating Agreement is not legally required in Delaware but is highly recommended. This internal document outlines the ownership structure, management roles, and operational procedures of the LLC.
Key Elements to Include:
- Roles and responsibilities of members
- Voting rights and profit-sharing structure
- Procedures for adding or removing members
- Rules for dissolving the LLC
Step 5: Obtain an Employer Identification Number (EIN)
An EIN is required for tax purposes, banking, and hiring employees. Even if your LLC is a single-member entity, you’ll still need an EIN.
To obtain an EIN:
- Visit the IRS website, as the online application is the fastest and simplest method.
- As a non-resident, you can apply for an EIN by completing Form SS-4 and submitting it by mail or fax if the online system is not accessible.
This process is free, and the EIN is usually issued immediately if completed online.
Step 6: Open a U.S. Business Bank Account
Opening a U.S. bank account is essential for separating your personal and business finances. To open an account, you’ll typically need the following:
- Certificate of Formation
- EIN
- Operating Agreement
- Valid passport and possibly proof of address in your home country
As a non-resident, consider contacting major banks like Chase, Bank of America, or Wells Fargo in advance to ensure they can accommodate non-resident LLCs. You may also explore online banks that are more flexible with non-U.S. residents.
Tip: Some banks may require an in-person visit. If travel isn’t feasible, you may want to explore Fintech options, such as Mercury or Wise.
Step 7: Understand Delaware Franchise Tax
Delaware requires LLCs to pay an annual franchise tax, regardless of revenue. The minimum franchise tax for an LLC is $300, which must be paid by June 1 each year. Failing to pay the tax on time will incur penalties and may lead to the LLC’s status being revoked.
Tip: You can pay the franchise tax online through Delaware’s Division of Corporations website, simplifying compliance.
Additional Considerations for Non-Residents
- U.S. Taxation: Non-residents may be subject to U.S. federal taxes depending on the nature of their business activities within the United States. Consulting a U.S. tax advisor familiar with international clients is essential.
- Compliance: Ensure your LLC complies with annual reporting and tax filing requirements. Delaware LLCs do not require annual reports for non-resident businesses, but federal tax filings may still apply.
- Legal Advice: Non-residents should consider seeking legal guidance when setting up an LLC to navigate any potential legal and tax implications.
Summary Checklist
Here’s a quick checklist for non-residents forming an LLC in Delaware:
- Select a unique LLC name.
- Hire a Delaware-registered agent.
- File a Certificate of Formation.
- Create an Operating Agreement.
- Obtain an EIN.
- Open a U.S. business bank account.
- Pay the annual franchise tax.
By following these steps, non-residents can successfully establish an LLC in Delaware, gaining access to the U.S. market while benefiting from Delaware’s favorable business environment.
