How to form an LLC in Delaware

This guide is longer than our other state guides for a reason. Delaware is worth the extra attention — both because when it is the right choice it is emphatically right, and because the cost of picking it wrongly is a recurring tax bill that you'll keep paying every June for as long as your LLC exists.

The short answer

Form in Delaware if any of the following are true:

• You will raise institutional venture capital within 24 months. Every standard VC term sheet assumes Delaware. Conversion later is possible but expensive; better to start there.
• You will have multiple founders with complex economics (vesting, preferred equity, investor classes, drag-along rights). Delaware's Limited Liability Company Act gives maximum contractual freedom; other states' LLC acts constrain what you can put in an operating agreement.
• You operate a holding company, real-estate fund, or investment vehicle with sophisticated counterparties who will themselves require Delaware.
• You want series LLC structure for multiple properties or product lines. Delaware pioneered the series LLC and has the most-tested body of law around it. (Wyoming and a handful of others offer it too, but Delaware is the deepest.)

Form in your home state — not Delaware — if all of the following are true, which is the majority case:

• You are a single-member or small-multi-member LLC.
• Your customers, employees, or real estate are concentrated in one state.
• You are not raising institutional capital.
• You want the cheapest, simplest possible compliance footprint.

Forming in Delaware when you don't need to means paying the $300 annual franchise tax, paying a Delaware registered agent ($50–$300/year), and still paying to register as a foreign LLC in your home state with its own annual fees. You get none of the Chancery Court benefit because the Chancery Court mostly matters in high-dollar disputes that small LLCs don't have. It's a bad trade.

What the Court of Chancery actually does

The Court of Chancery is Delaware's non-jury equity court, established in 1792 and staffed by five chancellors who hear nothing but business disputes. A century of decisions — on fiduciary duty, merger consideration, appraisal rights, derivative suits, controller transactions — form the deepest body of corporate case law in the English-speaking world. When something unusual happens inside a company and lawyers need to know what the rule is, Delaware case law is the rule.

For a two-person LLC that files a Schedule K-1 and has no institutional investors, the Court of Chancery is an abstract benefit that never manifests. For a Series A-funded startup whose investors will one day want to force a sale, the Court of Chancery is an expected, specific, load-bearing feature of the deal.

This is the Delaware premium in one sentence: you are buying access to a court system, not a tax shelter. When the court matters, Delaware is cheap at the price. When it doesn't, the price is pure overhead.

The filing, step by step

Delaware's formation document for an LLC is the Certificate of Formation, filed with the Division of Corporations. You'll need:

• An entity name ending in "Limited Liability Company," "LLC," "L.L.C.," or an approved variant. Delaware has the most permissive naming rules in the country; check availability at the entity search. A $75 reservation buys 120 days.
• A Delaware registered agent. This is not optional — the state requires a physical Delaware address and a registered agent who is present during business hours. Commercial agents charge $50–$300/year; the cheap ones are fine for most purposes.
• The name of the authorized person filing the certificate.

That's it. Delaware intentionally requires less than almost any other state — no member names, no manager names, no principal office address, no purpose statement. This is a feature: privacy is a deliberate selling point, and members' names are not in the public record unless you add them to an annual filing (which Delaware LLCs do not have).

Standard filing is $110. Pay the state directly via the Delaware OneStop portal or through a formation service. Processing takes 3–5 business days standard; $50 buys 24-hour processing; $100 buys same-day; $500 buys two-hour; $1,000 buys one-hour. Most founders use standard.

After you file

1. Get an EIN from the IRS online application. Free, same day.
2. File the Beneficial Ownership Information report with FinCEN. The BOI reporting regime has been through extensive litigation; check FinCEN for current status before you file, but plan on being required to file within the current window.
3. Register as a foreign LLC in every state where you actually operate. This is the step most founders forget — forming in Delaware does not exempt you from registering in California, New York, Texas, or anywhere else where you have employees, offices, or substantial customer-facing business. Failing to register exposes you to back fees, penalties, and potential loss of standing to sue in that state's courts.
4. Draft an operating agreement. Delaware does not require one, and does not accept one for filing, but the LLC Act makes the operating agreement the single most important document in the entity's governance. Without one you default to statute, which is rarely what sophisticated parties want. A two-page form is strictly better than nothing; a ten-page negotiated agreement is strictly better than a two-page form.
5. Open a bank account in the LLC's name. Separately from personal accounts. The LLC liability shield assumes the entity is treated as separate; a court examining whether to pierce the veil will look at commingling first.

Ongoing compliance

Delaware LLCs do not file an annual report. Instead they pay a flat $300 annual franchise tax — formally called the "alternative entity tax" — due June 1 each year. Delaware corporations pay a separately calculated franchise tax that can be much larger; for LLCs, it is always $300, period. Pay at the Division of Corporations franchise tax portal.

Late payment triggers a $200 penalty plus 1.5% monthly interest. Two consecutive years of non-payment leads to loss of good standing and eventual administrative cancellation.

Delaware does not tax LLC income that is not earned from Delaware sources. Single-member LLCs with no Delaware-sourced revenue file no Delaware tax return. This is part of Delaware's appeal for holding-company and IP-holding structures — Delaware wants to be the home of record, not the collector of revenue.

Series LLCs, briefly

Delaware's series LLC (§ 18-215) lets a single Delaware LLC create internal series, each with its own members, assets, and liability shield. Real-estate investors with multiple properties use this to avoid filing a separate LLC per property. It's powerful but not free — case law on whether other states will respect the inter-series shield is still developing, and some banks, insurers, and title companies do not yet know how to handle series. Before committing, confirm that your counterparties will accept a series structure in your operating state.

The foreign-qualification trap

This is worth repeating because it is the single biggest surprise for founders who form in Delaware: a Delaware LLC doing business in another state must register as a foreign LLC in that state, and pay that state's fees. A California resident forming a Delaware LLC to run a California consulting business pays:

• Delaware $110 Certificate of Formation
• Delaware $300 annual franchise tax
• Delaware registered agent ($50–$300/year)
• California foreign-LLC registration ($70)
• California $800 annual franchise tax
• California statement of information ($20)

For the same business formed as a California LLC, the cost is the California fees only. The Delaware route costs several hundred dollars more per year in exchange for no practical benefit — the business still lives or dies under California law, because that's where it operates.

When Delaware is genuinely the right call

After all the warnings: Delaware earned its reputation. If you are building a company that will raise institutional capital, sell to a strategic acquirer, or face complex governance disputes, Delaware is cheap at the price. The state's corporate infrastructure is a public good that other states have repeatedly failed to replicate. For the right company, nothing else is close.

The test is whether your company is that company. Most aren't — and that's fine.

Fees at a glance

Item	Cost
Certificate of Formation	$110
Annual franchise tax	$300
Name reservation (120 days)	$75
Certificate of good standing (short)	$50
24-hour expedited filing	+$50
Same-day filing	+$100
Two-hour filing	+$500
One-hour filing	+$1,000

Fees are from the Delaware Division of Corporations fee schedule and current as of this writing.