New business owners commonly choose the Limited Liability Company structure for their new entity because they’re typically easy to establish, pay less taxes, and aren’t hard to maintain. It’s also great because you can protect your personal assets, while raising money from investors and reaping the benefits from taxation as an LLC rather than a corporation. All of the benefits typically sound too good to be true for new business owners, but how long does it take to get an LLC in Delaware? We’ll cover what to expect during the formation process, as well as formation times in the state of Delaware in this guide.
Discovering Delaware
Delaware’s nickname is “The First State”, due to the fact that it was the first of the 13 colonies to become a state. It was also dubbed “The Diamond State” by Thomas Jefferson because of its strategic military position on the Eastern Seaboard. There’s lots of waterfront scenery in Delaware, with the Atlantic Ocean in the east, the Delaware River, and the Delaware Bay. There are three forests in the state, too. When it comes to natural resources, Delaware has really fertile soil which is perfect for farming, and magnesium, gravel and sand are mined in the state, as well.
Economic Overview of Delaware
Delaware’s Gross State Product (GSP) is $66.5 billion in 2023, and it’s grown 14.5% over the past 5 years. The biggest industries in the state according to revenue are Credit Card Issuing, Commercial Banking, Chemical Wholesaling, Private Equity, Hedge Funds and Investment Vehicles and drug, Cosmetic and Toiletry Wholesaling. The largest employers in the state are ChritianaCare, Jpmorgan Chase, Amazon.com, Bank of America and the University of Delaware. And the sectors that contribute the most to the state’s overall GSP are Finance and Insurance, Real Estate and Rental and Leasing, Healthcare and Social Assistance, Manufacturing, and Professional, Scientific and Technical Services.
People sometimes call Delaware the Chemical Capital of the world because of all of the chemical manufacturing, including things like plastics, industrial chemicals and pharmaceuticals. In fact, DuPont is headquartered in Delaware, and it’s one of the world’s leading chemical manufacturing businesses.
Business Environment in Delaware
The Usnews.com’s list of best states ranked Delaware’s business environment #3 in the whole country, and its business growth in 23rd place. It’s #22 in terms of higher education, #21 in economic opportunity, and #30 in affordability. It’s also ranked #1 for equality, which isn’t surprising given the large LGBTQIA+ community in the state.
The state’s median household income is $71,091, which is nearly $1,400 more than the national average, and the cost of living index is 97.7, as opposed to the nation’s standard of 100.0. That means that citizens tend to have extra money to spend.
Delaware is well-known for being business-friendly, and there are some investors that won’t even consider investing in a company unless they’re formed in Delaware.
State-Specific Regulations and Incentives for Forming an LLC in Delaware
Here are some of the regulations and incentives for forming an LLC in Delaware.
- Delaware Limited Liability Companies Act (DLLC Act): This act regulates the management, formation and dissolution of LLCs. But the biggest advantage that you need to know about here is that LLCs in Delaware are largely left to govern themselves through member contracts, but if you wish to opt out of any particular LLC regulations in Delaware, you’re allowed to do so through your LLC Operating Agreement.
- Delaware Strategic Fund: This is the major fund that the Delaware Division of Small Business uses to help businesses stay in the state or expand by providing them with grants or loans.
- Delaware’s State Small Business Credit Initiative-Funded Programs (SSBCI): This is one big program that’s designed to provide small and fledgling businesses with the capital they need, especially in underserved and targeted areas. There are four other programs that fall under the SSBCI’s umbrella: The Accelerator and Seed Capital Program, The Early-Stage Venture Capital Program, The Loan Participation Program, and The Delaware Capital Access Program (DCAP).
- Modernization Investment Support Initiative (MISI): This provides grants to businesses that require modernization because they’re dealing with competitive forces on a global, national or regional scale that could interfere with their business operations in terms of regular business activities or employment.
- Workforce Training Grant: This is a program that will match funds up to $100,000 for specialized training for businesses.
The Division of Revenue also offers the following tax credits:
- Research and Development
- New Business Facility
- Green Industries/Brownfield
- New Economy Jobs
- Historic Preservation
- Business Finder’s Fee
- Land and Historic Resource Conservation
- Neighborhood Assistance
- Vocational Rehabilitation Hiring
For more information and to apply for grants and incentives, click here, and to apply for grants, click here.
Pros and Cons of Establishing an LLC in Delaware
Delaware is one of the most business-friendly states in America. It has some statutes, such as the Limited Liability Company Act, and the Delaware General Corporation Law, which are updated regularly and are kept relevant to businesses by consulting corporate lawyers. Business laws in Delaware are so great that business students are often required to study them, and other states use them as models for their own laws.
Going to court as a business owner in Delaware isn’t as difficult as it is in other states, either. The Delaware Court of Chancery is equipped with judges who are experts in corporate law. Not only are they known for knowing business law inside and out, they’re well known for making timely decisions, which saves you money on legal costs.
There aren’t sales taxes or income taxes to pay if you don’t do business in the state, which is great for many business owners. But there’s also no tax on intangible income, which refers to income made from intellectual property, like film rights, books, etc.
Delaware is the only state that allows business owners to form “Series LLCs”. This is an LLC with other LLCs within it. It’s made up of a parent company and a number of series that branch off of it. Often these series are used to sort out and separate different properties or assets. Lots of real estate companies create series LLCs in Delaware to isolate liability of their multiple properties.
Many venture capitalists and angel investors won’t consider doing business with your company unless it’s created in Delaware. This is because of all of the tax breaks they get in the state.
There are downsides of forming an LLC in Delaware, too.
You’re required to pay a Franchise tax annually. The fee is $300 per year. That’s not the highest annual business tax in the country, but it’s high enough for you to do some research into other states if Delaware isn’t your first choice.
Since series LLCs are only accepted in Delaware, it could mean trouble for you if you have to go to court in another state. Courts in other states may not recognize the structure of your business entity, or honor the organization of your assets.
And although there are loads of tax benefits for businesses in Delaware, they usually don’t provide many benefits for small to medium-sized businesses.
Procedure of Establishing an LLC in Delaware
You need to know how to form a Limited Liability Company to properly understand formation time frames. Here are the steps to starting an LLC in Delaware.
- Obtain a Certificate of Formation Form: This is the primary document necessary for LLC formation, and can be obtained from the Delaware Division of Corporations.
- Properly Choose a Business Name: You’re required by Delaware state law to have a business name that is unique to your LLC. It must also meet the requirements of the state for an LLC name. And it can’t be too close to another business’s name. To check if your chosen business name is available, simply go to the Division of Corporations website and run a business name availability search.
- Designate a Registered Agent: This is a legal term for a person who will accept government and legal mail (like service of process) on behalf of your company. You can choose someone you trust, or hire a professional registered agent service.
- Choose Your Address: The address for your business is just as important as your LLC name. It’s on the public record so that government agencies, customers, and legal agencies can track it down. But due to its public nature, it may not be wise to list your personal address here. Because of privacy concerns like this, you could look into a virtual address or office.
- Sign and Submit Your Certificate: This is another thing you’ll need to consider carefully. Signing the Certificate of Formation for your company means your information is now on the public record. You can get around that by having someone else sign and file for you, or by hiring an LLC formation service.
There are also a number of things you’ll have to do once your LLC is formed. To learn more about post-formation duties, read How to Start an LLC in Delaware.
Necessary Documentation for Filing an LLC in Delaware
The formation process can go a lot faster and be a lot easier for you if you have the required documents on hand when filing.
You’ll need your Employer Identification Number (EIN) from the IRS (Internal Revenue Service), which you can receive for free on their website. You need your name reservation application and your Certificate of Formation, as well as your LLC Operating Agreement. You’ll need your initial report paperwork, and all the required tax registration and business license applications. And if you’re filing by mail, you’ll need a cover letter in addition to your Certificate of Formation.
Legal Requirements for Starting an LLC in Delaware
Here are some of the things you’ll be required to do when you start an LLC in Delaware.
You’re required to have a registered agent, and to maintain one. That’s not specific to Delaware, but most every state in the U.S.
And in Delaware, LLCs are required to pay a yearly franchise tax. The fee is $300 per year.
Time Frame for Establishing an LLC in Delaware
Here’s the section that you’re most excited to read! We’ll tell you all about the time frame for forming a Delaware LLC.
How Long Does the Initial Paperwork Take in the State of Delaware?
If you’re filing by mail, approval times can be as long as 3-4 weeks, while online filing approval times are between 2-3 weeks. Delaware doesn’t email your documents to you with online filing, but sends them by mail instead, unless you pay for specific types of expedited processing. That means you’ll have to account for mail times even if you file online.
Processing Times in the State of Delaware
“Processing time” is how long it takes the Delaware Division of Corporations to review your documents and filing. “Approval time” accounts for processing time and is the total length of time it takes for your filing to be approved.
Processing time for mail and filings in Delaware is 10 days plus mail time, and processing time for online filing is 10 business days.
Common Delays in the LLC Formation Process in Delaware
Several things can affect the speed of your formation. Here are just a few.
The Time of Year: It’s not unusual for the state to experience more business filings at both the beginning and the end of the year. This can cause a backlog of filings, and when that happens it can delay the formation process until the agency catches back up.
Type of Filing: If you choose the mail filing option, then it’s understandably going to take longer to be approved than online filing. This is partially due to delays in the postal service.
Document Correctness: If you haven’t submitted all of the proper documents required by the state, or if your business name doesn’t meet all of the state’s requirements for LLC names, then your filing will likely be denied. And if the information you’ve listed on your filing isn’t correct, it could delay the process or cause your filing to be denied. There are some LLC formation services that offer 100% accuracy guarantees because of this.
The Complexity of Your Business Entity: If you have a load of LLC members, then you’ll need to list each member as well as their job and their shares, and their information on your Operating Agreement- all of which needs to be reviewed by the Division of Corporations. Furthermore, taxation complications can hold up the formation process. Like, if you have a Limited Liability Company but choose to be taxed as a corporation.
Expedited Processing for LLC Formation in Delaware
If you want to form an LLC in a flash, then expedited processing probably sounds like music to your ears. Here’s what you need to know about Delaware’s expedited processing.
What Are the Expedited Options Available?
There are actually several expedited processing options available from the Delaware Division of Corporations.
- One Hour: Required to be received by the office by 9pm EST and processed within an hour of receipt.
- Two Hour: Required to be received by the office by 7:00 pm EST, and processed within two hours of receipt.
- Same Day Service: Required to be received by the office by 2:00pm EST and processed the day of receipt.
- Next Day Service: Required to be received by the office by 7:00 pm EST and processed the next day, excluding weekends and holidays.
Additional Costs for Expedited Services in Delaware
Since expedited processing is an additional service, you’re required to pay fees in addition to the standard filing fee for the convenience. Here’s a schedule of the expedited processing fees offered by the Division of Corporations.
- One Hour: $1,000
- Two Hour: $500
- Same Day: $100-$200
- Next Day: $50-$100
Comparing LLC Formation Time Frame in Delaware with Other States
Looking at the formation time frames of other states can give you a better picture of how fast or slow Delaware’s formation time is.
Brief Comparison with Key States
The processing time for LLC filing by mail is 10 days, which is the same for online LLC filing. The offer expedited processing in as little as an hour, as well.
When it comes to expedited filing, you won’t find options faster than an hour, so Delaware excels there. But when it comes to online filing, several states have immediate processing times such as: Alabama, Alaska, Colorado, Kansas, Kentucky, Minnesota, Missouri, New York, South Dakota, Tennessee, Wisconsin and Wyoming. And in regards to mail filing, Ohio has a one-day processing time, which trumps Delaware by an entire nine days.
There are slower states, too. Maryland, for instance, is slower in terms of expedited processing (7 days), mail filings (5-8 weeks) and online filings (2 weeks).
So, Delaware has one of the fastest expedited processing times, but when it comes to mail or online filing, it’s pretty average.
Why is Delaware a Favorable Place for Forming an LLC?
Delaware is a business-friendly state with a lot of natural beauty and business opportunities. Their LLC-friendly laws and low taxes make it a haven for business owners and investors, alike. Plus, if you choose their expedited processing options, then you can get your LLC quick!
