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What exactly is an LLC Delayed Effective Date?
An LLC delayed effective date is a specific day in the future when your LLC officially is created.
Usually, when you submit a filing with the state it goes in to existence whenever the state gets around to reviewing your submission and approving the formation.
However, a delayed effective date lets you “push out” or “delay” the day your LLC is officially created.
Here’s an example: Lets say today is December 1st, 2020:
- If you specify a delayed effective date of January 1st, 2021, your LLC will be “created” on January 1st, 2021.
- If you submit your LLC filing normally, then as soon as the state approves your filing, your LLC will go in to existence, which, based on most states turnaround times will be in a week or two so in December, 2020.
Lastly, you might see several terms for this and they are all interchangeable:
- Delayed Effective Date
- Delayed Filing
- Future Effective Filing
- Future File Date
- Delayed File Date
- Delayed Future Effective Filing Date
Okay I made that last one up by combining all of the above words but you get the point, they all mean the same thing!
How you can save some serious cash by using a delayed effective date
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A delayed filing is most advantageous when you select a delayed effective date in the beginning of the new year.
Why? By doing this you can avoid several things:
- You can avoid paying the state franchise fee tax. You can’t avoid it forever but you can save yourself one payment! This fee is due every calendar year; for example, in Delaware, the annual state franchise fee tax is $300. By selecting a delayed effective date in the new year, you can avoid paying $300 “twice” (vs just paying for the upcoming year).
- You can avoid the backlog of applications the state faces in the new year. There are many other founders out there who want to create an LLC in the new year for the above reasons. Therefore states face a major backlog at the beginning of the year. By submitting your filing “early” you effectively can “skip the line.”
- You can avoid any annual filing reports. Similar to #1, you can avoid an annual filing report, due each calendar year by delaying your filing to the upcoming year! For example, in Wyoming, there is a $50 annual filing fee due each calendar year. By selecting a delayed effective date in the new year, you can avoid paying $50 “twice” (vs just paying in the upcoming year).
Let’s give an even more extreme example using the state of California.
Note: As of June 2020, the $800 franchise tax fee has been waived in the first year in California. However the below example still applies for other states! Read more here.
California has an annual franchise fee tax of $800. This fee is due every calendar year, not every 12 months.
- Calendar Year: January – December
- Every 12 Months: 12 months from Today
So this means if you were to start an LLC that was “born” or “officially created” on December 31st, 2020, you would be responsible for paying the full $800 franchise tax fee for the year of 2020!
Fast forward to January 1st, 2022, one year and one day later, even though essentially only one year has passed by, instead of owing $800 to the state of California… you will owe $1600!
To make things worse, the first annual franchise tax fee payment is due within the first 3-4 months from when your LLC is formed, and from then on, due by April 15th each year. So if you were to create a California LLC that went in to existence on December 31st, 2020, you would have to pay $1600 in the first 5 months!
Okay, so enough about how a delayed effective date works.. how do you select one / in what states can you select one?
Can I select a delayed effective date in Delaware?
Yes! Here’s how to do it:
- Fill out a Filing Memo. In the “COMMENTS/FILING INSTRUCTIONS” section enter in your delayed effective date
- Fill out a Certificate of Formation of a Limited Liability Form
- Merge the two PDFs together
- Select “Document Upload” on the state of Delaware’s website and follow the steps to submit it to the state of Delaware:
- Complete your payment and the state will send you back your documents by regular US Mail (unless you select expedited shipping) within 1-3 weeks.
Now it is possible to do all of the above on your own… but if you’re strapped for time or want someone to handle the above for you so you can focus on what you do best = growing your business… let Doola file your Delaware delayed effective filing for you today!
Can I select a delayed effective date in Wyoming?
Yes! Here’s how to do it:
Note: Once you start the process online you only have 30 minutes to do it. As the state says: “Once you begin this Wizard, you will have 30 minutes to complete your filing due to name availability complexities.”
- Go to the Wyoming Business Center website and click “Start Now!”
- Choose “Limited Liability Company (Domestic)” in the drop down menu
- Check off the “I Attest That” box
- Enter your LLC name of choice twice in the “Business Entity Name” box and the “Confirm Name” box.
- You can leave “Additional Designation” blank if you’re creating a regular LLC
- Select a “Period of Duration.” Most select “Perpetual” here meaning YOUR LLC LIVES FOREEEEEEEEEVER
- Delayed Effective Date: Select the date you want your LLC to officially go in to existence here! If you want your LLC to be approved as fast as possible then you can leave this box blank.
- Select your registered agent / enter their information
- Enter your LLCs address and mailing address (it can be any address in the US)
- Enter the information of the “Organizer” of the LLC
- You can leave the “Additional Articles” / “Articles of Organization” blank!
- Review your information and click “Continue”
- Check the terms and conditions, check off the “Penalty for filing false documentation” section, and enter the name of the filer (a person or organization) who is “filing this LLC” aka you! Click “Next” when you’re done here.
- Complete the payment process online!
Now it is possible to do all of the above on your own… but if you’re strapped for time or want someone to handle the above for you so you can focus on what you do best = growing your business… let Doola file your Wyoming delayed effective filing for you today!
Feature Image by Nathan Dumlao on Unsplash