LLC For Delivery Service: How To Start One In 2023?
If you own a delivery services business, you may or may not have formed a limited liability company[1] (LLC stands for it) for the business. The LLC is an effective option for the majority of businesses searching for asset protection, and it offers a wide array of other benefits as well. You can find everything you need to start an LLC for a delivery service business in this article!
How To Starting An LLC For Delivery Drivers In 2023?
- Choosing a name for your Delivery Service
- Choose your registered agent
- File articles of organization
- Creating an LLC operating agreement for your Delivery Service
- Obtaining an EIN
LLC For Delivery Service: How To Start One?
For LLCs, the formation process is different depending on the state you intend to form your company. However, this process has several common steps that have to be undertaken regardless of the state in which your delivery business is located. Here is a summary of the LLC formation process for any state:
Choose A Name For Your Delivery Service
The first step in the LLC formation service is choosing the ideal name for your novel entity. Here, you should ensure that the name represents your brand and what you do as a business. Also, you want to make sure that the name is not already in use. You can do so by checking the business database of your state.
Choose Your Registered Agent
Typically, the registered agent service for your LLC is responsible for receiving all the legal paperwork from the state (such as annual report reminders, service of process, tax purposes, etc.) on your behalf and submitting them to you. The registered agent makes sure that your state has a reliable and available point of contact for your company at all times.
File Articles Of Organization
Articles of organization are the forms used to form an LLC, although the name varies from state to state (some call it the Certificate of Formation). You must provide your state with basic information regarding your delivery business as well as its owners. In return, your state will create your LLC formally.
Create An LLC Operating Agreement For A Delivery Service
The majority of states in the US don’t necessarily need operating agreements but each LLC ought to have one regardless. An operating agreement is an internal document that explains the main operational aspects of a business. The role of an operating agreement is to avoid ownership conflicts down the line by clearly outlining how the company will be managed.
Obtaining An EIN
The Employer Identification Number (EIN) is the federal tax ID number that acts as the Social Security number for your business. AN EIN enables your company to hire staff workers, apply for bank loans, pay taxes, and so much more. You can obtain an EIN for free from the Internal Revenue Service (IRS).
More so, some states such as New York and Arizona require business owners to publish their LLC formation in the newspapers.
What Is An LLC?
First off, let’s dive quickly into what an LLC means. AN LLC is a formal legal entity that is usually taxed like a general partnership or sole proprietorship, in that the business owners include company profits and losses in their returns. The LLC doesn’t owe any income taxes. It can also decide to be taxed as a corporation, although this isn’t quite a common option.
LLCs also share some similarities with corporations, especially in terms of financial responsibilities. The owners or members of an LLC are typically not accountable for the financial position of the business. This means that if a person were to sue your LLC, your assets wouldn’t be at risk
Do I Need An LLC For A Delivery Service?
An LLC is an easy and cost-efficient way of protecting your assets and saving money on taxes. You should form an LLC if there is considerable risk involved in your delivery service company or when your delivery service company could benefit from increased credibility and tax options.
LLC Benefits For Delivery Drivers
When you form an LLC for your delivery services company, you can enjoy the following benefits:
- Limited liability protection to protect your savings and personal properties
- Access to more tax options and tax benefits such as exemption from double taxation and paying self-employment taxes
- Increase the credibility of your business and more.
Let’s discuss them in detail.
Personal Asset Protection
The main reason why business owners form LLCs is to access the personal asset protection that is offered by this business structure.[1] Whether you operate a full-fledged delivery service company or work as a part-time delivery driver or independent contractor who drops off a couple of packages with a delivery truck, you’ll require the limited liability protections that LLCs can offer.
On the other hand, if you form an LLC for your delivery service company before you deliver your first package, and you run that LLC in a compliance manner, the lawsuit’s scope will be limited to the business assets. Essentially, your personal properties will be protected.
Taxation
Another important benefit of forming an LLC for your delivery company is taxation. An LLC offers its owners a wide array of options to choose from, including how they’d like their LLC taxed. Forming an LLC can help to save money rather than just operating as an informal business entity.
General Partnership/ Sole Proprietorship
A delivery LLC is usually taxed as a general partnership (multi-member LLC) or as a sole proprietorship (single-member LLC), which is the default choice. This tax structure helps to prevent from paying taxes – instead, the profits go through the company and you pay taxes when you’re filing your taxes, just like with a sole proprietor or general partner.
C Corporation
LLC owners can elect for their own LLC to be taxed as a C corporation. However, this option is very common as it subjects you to double taxation. This tax treatment means that your profits will be taxed on the corporate level as well as on the personal level when you receive them as the owner.
S Corporation
A few limitations exist for picking the S corp taxation, but the majority of delivery businesses based in the US can meet them comfortably. These limitations include, the business can only have less than 100 owners, these owners have to be either residents or citizens of the US, commercial driver’s license, and a few others.
S corporation taxation helps your business to save resources by decreasing the self-employment tax burden. Rather than pay a self-employment tax of 15.3% on the business’s taxable income, with S corp taxation, you can pay a reasonable salary to yourself for your role and reinvest the balance into your LLC without having to pay this tax.
Name Uniqueness and Enhanced Consumer Trust
Lastly, an LLC business structure can help to improve your delivery business’ credibility. Informal businesses don’t have exclusive assumed business names and are registered under the owners’ names.
With a limited liability company, the delivery service business not only possesses the rights to the exclusive use of a particular business name but also has the phrase LLC in its business name. This offers your delivery service company lots of respectability and consumer trust because clients do respect the professionalism that is shown by an LLC. Besides, a client will be at peace writing a check to a formal business instead of an individual.
The Top 2 LLC Services For Delivery Services
Three key options exist for forming your delivery LLC:
- You can use the DIY method
- Can employ the services of an attorney
- You can employ the services of an online LLC formation service
Using the DIY method can be a daunting task and if you’re not used to the process, it could be quite frustrating, especially the ongoing expenses. Also, when it comes to hiring the services of an attorney, many businesses with low startup costs cannot afford to spend thousands of dollars or such a change on an attorney.
This brings us to the third option – employing the services of an online formation service. There are myriads of renowned companies providing this service presently, and they can help you save money as compared to hiring an attorney. Moreover, although these formation companies don’t bear the same expertise and experience as an attorney does, they still offer more convenience as compared to using the DIY route.
If you’d like to take a look at some of the top options for forming an LLC for your delivery business, here are the top two LLC business formation companies with great accounting software that you should consider:
| ZenBusiness | Northwest Registered Agent | |
| Award | Best Overall Value | Best Premium Support |
| Detail | Read Review | Read Review |
| Link |
ZenBusiness
ZenBusiness is a business formation company that essentially offers everything a new delivery LLC needs. If you’re looking for the best value overall from a company that is socially conscious, then you should consider ZenBusiness. They usually charge a low LLC cost of $39 for business formation and they provide one year of registered agent services as well as a highly customizable operating agreement and business card. What’s more, they have reliable and responsive customer support.
Northwest Registered Agent Service
Northwest is quite costly compared to other players in the business formation market. However, they are more thorough with their work as they scan all the paperwork locally on behalf of your delivery LLC. If you’re looking for outstanding premium customer support from an established firm, then Northwest is your best bet – they have the best customer support, team. They also charge $225 to form your LLC while offering free registered agent service.
Final Thoughts
Limited liability companies are a great blend of tax benefits and protection with flexibility. They provide a wide array of taxation options while offering business owners personal liability protection. Delivery services LLCs are the best option for small businesses because there is minimal complexity and hassle in their functioning.
However, before you make the final call, you must consult your lawyer or accountant. You also want to use a dedicated business bank account for your delivery company to obtain personal asset protection. The reason for creating distinct bank accounts is that when you mix your business accounts and personal finances, your assets could be at risk if your business were to be sued.
The cost you’ll pay for the LLC service will vary depending on the state you’re in. However, you should note that the primary cost for your entity is the state filing fee. The state fee ranges between $40 and $500
LLC taxation is based on whether you run a single-member LLC (sole proprietorship) or a multi-member LLC (general partnership). The tax for your LLC depends also on your LLC tax classification. If your LLC is not classified as a business corporation, then you might have to fill Form 8832.
It is one of the advantages of forming an LLC. It means that the personal assets of the delivery service owner are protected should the company go into debt or issue.
Yes, it is. An LLC helps you not to mix business with your personal life by providing you with protection against prospective business risks such as personal liability protection. It also offers your delivery business credibility and more tax options.
Also referred to as personal asset protection, a corporate veil describes the limited liability protection that is offered by LLCs and corporations.