Entrepreneurship is exciting—the thrill of developing a winning product or service, bringing that idea to life, and making life better for your clients—it’s fun. But unfortunately, it’s not free. Long story short: starting a business has a price tag. LLCs are no exception.
If you’re hoping to start an LLC in Delaware, you’ll quickly learn that you’ll have a pretty long list of fees for forms, licenses, and applications that you’ll need to get started. Some of those are optional fees, and some are unavoidable. In this guide, we’ll walk you through all the costs you can expect when starting a Delaware LLC. By the end, you’ll have a clear picture of how your new business will impact your wallet.
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What’s the least amount I have to pay to form an LLC in Delaware?
If you’re crunching the numbers before diving right in, good on you! Planning ahead is a surefire way to start your business off on the right foot. But let’s make one thing clear: the phrase “cost to start an LLC” is a bit deceptive. That’s because you don’t want to get stuck focusing on the “day one” expenses of business.
That’s right—when budgeting for start-up costs, you need to account for the costs you’ll pay today and the costs you’ll pay a year or two down the road.
So let’s talk start-up costs and ongoing costs for your Delaware LLC. But to keep things simple, here we’ll cover the non-negotiable costs. Later on, we’ll talk about services that are nice to have (but you can live without if you have to).
DE LLC Start-up costs
There are two primary start-up costs in Delaware. The most important one is the Certificate of Formation. The fee for it isn’t too high ($90, which is higher than some states but lower than others). But whether that cost seems like a drop in the bucket or one you’ll have to pinch pennies for, you can’t avoid it. The Certificate is what officially forms your business in the state. Without it, you’re not a recognized business.
All Delaware LLCs will also need to get a Delaware Business License in order to do business in the state. At first, applying for it sounds complicated: you have to handle registering with the Division of Revenue, Division of Unemployment Insurance, and Office of Workers’ Compensation all at once. But since Delaware OneStop allows you to register for all three at once (and get your license in the process), it actually couldn’t be simpler. There is a $75 fee for your business license (plus $25 for each additional location).
Many Delaware LLCs will also need to obtain professional licenses in addition to the state business license. It’s nearly impossible for us to list all of the possible licenses and fees, though. Thankfully, the state does provide an index of licensed professions at Business First Steps. There you can find links to different licensing boards so you can get started on your applications.
Ongoing costs for an LLC in DE
If your business lasts (and we’re confident it will), then you’ll have several ongoing costs. These include license renewals, annual reports, and taxes. Let’s dig into those prices and fees.
License renewals
Each year, you’ll need to renew your Delaware Business License for another $75. That’s pretty simple. What’s more complicated is the renewal procedure for the state’s professional and occupational licenses. That’s just because each board has its own guidelines and fees. When you first obtain your professional licenses (if applicable), we recommend taking note of the renewal requirements for your industry so none of the fees surprise you.
Annual taxes
Delaware is one of the most tax-friendly states in the entire country. There are no income taxes for LLCs—not in the traditional sense, anyway. The only real tax that LLCs have to pay is the annual franchise tax. This is a flat fee of $300, and you’ll need to pay it by June 1.
Unlike a lot of states, Delaware doesn’t charge a traditional sales tax. Instead, they charge a gross receipts tax. This tax caps out at 2% each year on your taxable goods and services. You can learn more about this tax at the Division of Revenue.
There’s also a good chance that you’ll need to pay some industry-specific taxes. For example, the state levies unique taxes on airline sales, door-to-door sales, and more. For more information on these miscellaneous business taxes, check out Business Taxpayer Services.
Annual report
Most states require LLCs to file some version of an “annual report,” or a document that informs the state about the current standing of your business. This document is usually required in addition to annual tax reports, since it usually includes information about your business address, members, your registered agent, and so on.
Delaware requires annual reports for most business types, but LLCs are the exception. Instead of an annual report, you’ll simply file your Annual Franchise Tax by June 1st. It acts a lot like your annual report.
What are the discretionary costs to form a Delaware LLC?
When you’re starting your business, your budget is usually pretty tight. Prioritizing costs can get tricky. The costs we listed above are unavoidable. Well, technically, you can avoid them, but you’ll be heavily penalized if you do. And there’s not much point to spending all that money on starting a business only to knowingly let it be dissolved because you didn’t pay your ongoing costs.
But if you can help it, doing the “bare minimum” is probably not the best way to start your business. There are plenty of discretionary costs you can pay for certain services that make life easier. Here, we’ll dig into those costs—and why you might consider paying them.
1. Name reservation application
Naming things can be a bit tricky; after all, sometimes inspiration is a little lacking! And since Delaware doesn’t allow you to use a name that someone else has already claimed, you have to work even harder to pick one that’s unique, memorable, and just right for your business.
It’s a multi-step process, really: you have to brainstorm name ideas, choose just the right words, meet state name requirements, and of course, ensure that the name isn’t already in use (you can check using a General Information Name Search).
If you’re like a lot of people, you probably want to ensure that your hard work doesn’t go to waste once you’ve created the perfect name. So you have to lay claim to your new business name. You can do so either by filing your Certificate of Formation, or by filing an Application for Reservation of Limited Liability Company Name. You should only file this form if you’re not yet ready to file your Certificate. Otherwise, you’d be wasting your hard-earned cash. Connecticut requires a $75 filing fee for this Application for Reservation, but it protects your name for 120 days. If you need even more time than that, you can re-reserve for another $75.
2. Obtaining a DBA
Wait—didn’t we just cover business names? Yes. But there’s a distinction: your business name, which you’ll write in on your Certificate of Formation, is the legal name of your business. A DBA, sometimes called an assumed name or a trade name, is like a nickname for your business. For example, your legal name might Joseph Smith, but your friends call you Joe for short. Joe is a perfectly valid name, but you can’t put it on legal paperwork. You’d have to legally change your name to do so.
A DBA acts kind of like a nickname for your business; some LLCs and corporations also use DBAs to establish new product lines or new “businesses” under the LLC “parent company.” But regardless of why you use a DBA, if it differs from your legal name, you need to register it before you can use it.
Unlike many states, Delaware allows only one business to claim each DBA. So before you can register your DBA, you need to ensure that your name is available for use. You can do so by searching the Trade, Business, & Fictitious Names Database. Once you’ve done that, you can file a Registration Certificate. But you won’t file it with the Secretary of State; it goes to your county prothonotary, and there’s a $25 fee. For more information on this process, check out our guide to Delaware DBAs.
3. LLC formation services
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Paperwork is a massive hassle. And unless you’re starting an LLC to help other Delaware residents with their paperwork, odds are you don’t want to deal with much paperwork yourself.
The bad news? Paperwork is an unavoidable part of starting a Delaware LLC: the Certificate of Formation, annual franchise tax reports, license applications—the list goes on and on. The good news? You can hire an LLC formation service to do the pesky paperwork for you.
Of course, there’s some cost involved. And while there are a lot of great LLC formation services, they aren’t all created equal. And they all have different price points.
Many LLC formation services offer a wide variety of packages, with basic options starting at low prices like $39 from Zen Business (one company, Incfile, even offers a starter package for $0). But if you’re willing to shell out some serious cash for comprehensive assistance, you’ll find package prices going as high as $799.
These services are completely optional; you can DIY your Delaware LLC formation. But many entrepreneurs find the time saved is worth the money. If you do opt to hire a service, please make sure you take the time to understand what you’re buying. Some services charge one-time fees, and others tack on “free services” that will cost you next year. If you don’t read the fine print, you can get slapped with unexpected service fees. And surprise bills are never fun.
4. DE Registered agent services
Delaware law clearly states that every LLC must designate a registered agent to act as a middleman between your business and the state. Long story short, the registered agent accepts service of process (and any other official communication from the state) on your behalf.
Technically, this is another thing you can DIY; Delaware allows you to serve as your own registered agent. However, in our opinion, it’s worth the expense to hire a registered agent.
Why? For starters, a registered agent’s address becomes part of the public record; anyone in the state can find that address. That leads to spam mail (sometimes worse). Plus, a registered agent must be present at the registered address during all standard business hours. If you serve as your own, you’d be tied down to your location constantly. A registered agent service prevents those annoyances. A service will also help you keep track of annual filing requirements, license renewals, and more.
These services typically charge an annual fee. For example, annual fees for our top 4 Delaware registered agent services range from $99 to $299 per year depending on the service you choose. That said, some offer the first year free if you use them as an LLC formation service.
Quick Note: If you need to later down the line, you can always change your registered agent.
5. Expedited filing fees
In Delaware, it usually takes up to 15 business days for your LLC paperwork to be processed. Granted, that time can vary based on order volume, time of year, and so on. But that’s the window of time you can expect to have your paperwork approved.
If that sounds like too long to wait, Delaware gives you plenty of expedited filing options…for a price. They start at $50-$100 for next-day service and as high as $1,000 for one-hour service. No matter how short your timetable is or how big your budget is, Delaware has an expedited option for you.
6. Business attorneys
Starting a business is a complicated process. And it’s a legal one. We do our best to make the process seem less daunting with guides like this one. But at the end of the day, we can’t write a guide that would cover every single question every business will ever face. That’s because your business is unique.
Business attorneys, however, can talk you through all the nuances of forming and running your business. In many cases, the advice of an attorney can save you thousands by helping you avoid expensive legal mistakes.
However, the upfront costs of hiring a business attorney can be pretty pricey. For example, many attorneys charge per hour, with rates ranging between $150-$350. Others offer “LLC formation packages” for flat rates that fall between $500-$2000. And of course, those fees vary based on the attorney’s experience, location, and so on.
If you’d like to hire one, we recommend checking out sites like Avvo.com. Their database is nearly comprehensive, so it’s a great way to search Delaware business lawyers. You can also narrow results by location, cost, overall satisfaction rating, and more. It’s the best place to look to find the right legal consultation for your business.
Conclusion
Long story short: starting a Delaware LLC can be a pretty pricey endeavor. If you look at each cost separately, it doesn’t seem too bad (perhaps with the exception of some of the expediting fees). But when you add them all up or tack on some additional services, the total price tag grows pretty quickly.
Thankfully, since you’ve read this guide, you know what you’re up against. And sometimes, knowing is half the battle—and now you’re armed with all the information you need to budget the start-up costs so you can start your Delaware LLC off on the right foot. We wish you and your new business the best!