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All companies, whether small or large, must comply with government regulations after incorporation to remain in good standing. Delaware LLCs are no exception to this, LLCs incorporated in Delaware also need to comply with several compliance requirements.However, Delaware is known for its favorable business policies and the support that the state provides is exceptional. Due to which it is relatively easier for companies to comply with Delaware regulations than other states or countries. It can still be overwhelming for new entrepreneurs to understand what to or not to do. In this guide we will try to ease things for you and provide you with information about important compliance requirements for Delaware LLCs.
Delaware LLCs do not need to pay corporate tax unless they have elected to be taxed as a corporation. LLCs that have not elected to be taxed as corporations pay income tax through the LLC members. In simple words instead of the company itself its owners submit income tax on their income.
While there is no corporate tax for LLCs, there is a flat rate fee of US$300 that all Delaware LLCs need to pay to maintain their good standing. It is not a tax on income but rather a fee for the privilege of being incorporated in Delaware. This is referred to as Annual Franchise Tax.
All LLCs trading or dormant must submit the Franchise Tax every year by June 1st. If not paid the LLC will be charged a penalty of US$200 plus 1.5% interest per month on the outstanding amount. Non-payment of franchise tax could result in the LLC being marked as "Not in Good Standing" or even be administratively dissolved by the state after a prolonged failure in payment.
So it is important to ensure that you do not miss the deadline to avoid any unexpected incidents such as company dissolution.
You might ask, how to pay? Well the payment can be made online via the Delaware Division of Corporations website or else you can get help from company formation agents, your registered agent, etc.
Beneficial Ownership Information Report commonly known as BOI report was introduced under the Corporate Transparency Act (CTA). BOI report mandates that certain business entities report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), which is a division of the U.S. Department of the Treasury. The BOI Report is basically a disclosure form that most U.S. and foreign entities must submit to FinCEN, providing details about individuals who ultimately own or control a company.
BOI Report has been introduced to prevent financial crimes such as money laundering, tax evasion, and fraud by increasing corporate transparency.
The BOI report includes:
Deadlines to submit the BOI report vary depending on when the company was formed. Companies Formed on or after January 1, 2025 need to submit the report within 30 days of formation / incorporation.
There are heavy penalties for non submission of the BOI report and the owners can even face jail time. Therefore, it is one of the very important compliance requirements which all businesses must be aware of.
The BOI Report must be submitted online to the Financial Crimes Enforcement Network (FinCEN) via the BOI E-Filing System on their official website. To ensure correct and timely submission you can ask your registered agent or corporate service provider to help.
Employer Identification Number commonly known as EIN is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses operating in the United States. It is also known as a Federal Tax ID Number and is used for tax reporting, banking, and hiring employees.
While EIN may not be required legally for all business entities, most of the businesses would require it sooner or later. As it is used for various purposes such as applying for a bank account, business loans, licenses, or permits. Multi member LLCs are also required to acquire an EIN.
There are several ways to apply for an EIN i.e. online, via fax, via mail and via phone. The best way to apply will depend on the residency of the LLC members as non-US residents do not have Social Security Numbers (SSN) or Individual Taxpayer Identification Numbers (ITIN) which is required for some methods of application for example an online application or an application via phone.
Although we have listed this at number 4 in this article it is the 1st thing that a Delaware LLC must consider as it is mandatory for Delaware LLCs to appoint & maintain a registered agent for receiving legal documents, notices, etc. It is also a legal requirement to update any changes to the Registered Agent with the state. A registered agent must have a physical address in Delaware and should be licensed to do business in Delaware. Both an individual and an entity can be a registered agent.
LLCs must appoint a registered agent before incorporation as the details of the registered agent are included even in the Certificate of Formation when filing with the Delaware Division of Corporations.
Every business operating in Delaware which is physically located, having employees, or selling to customers in Delaware is required to have a Delaware business licence issued by the Delaware Division of Revenue.
Moreover a business may require local permits and licenses from the County or City it is operating in depending on the business activities. Delaware has three counties: New Castle County, Kent County & Sussex County.
Each county and city/town within the state may impose permits or licenses such as: Zoning Permits, Municipal Business Licences, Health Department permits, Building permits, Fire safety inspections, Alcohol or tobacco sales licences, Professional licences, etc.
If your Delaware LLC is not physically operating in Delaware you usually do not need a Delaware state or local business licence. However, you may need licenses in other states where your business is operating.
An operating agreement is a legal document used by business owners, particularly in Limited Liability Companies (LLCs), to outline the management structure and operating procedures of the company. It serves as the internal framework for the LLC, detailing how the business will be run, the responsibilities of the members (owners), and how profits and losses will be distributed.
An operating agreement typically includes Ownership Structure, Management and Voting, Profit and Loss Allocation, Member Responsibilities and Duties, Dispute Resolution, etc.
While not always legally required (depending on the state), having an operating agreement is highly recommended as it helps prevent misunderstandings and disputes among members and provides clear guidelines for the business’s operation. It also helps maintain the LLC’s limited liability status by showing that the business is being run according to agreed-upon procedures.
While these are some of the important compliances there are several other things that a business or business owners may need or should consider such as maintaining records, custom requirements, federal and state tax implications for business owners, banking compliance, etc. It is not always easy to manage all sorts of compliance requirements and manage business operations together especially for new business owners or startups. Seeking help from corporate service providers, registered agents, accountants, etc. to better manage compliance is always an ideal option for companies.
If you also need help with any of your business requirements from incorporation to compliance reach us at [email protected]
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