Starting a Corporation in Delaware | What You Need to Know

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
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Start a Corporation in Delaware

In Delaware, starting a corporation can benefit entrepreneurs looking to establish a separate legal entity for their business. Incorporating your business provides liability protection for its owners and offers potential tax benefits and a professional image. This comprehensive guide will walk you through Starting a Corporation in Delaware, from choosing a corporate name to fulfilling ongoing compliance requirements. Some people consider starting a corporation since it has advantages and benefits rather than Starting an LLC in Delaware.

Webinarcare Editorial Team will help you gain knowledge in starting a corporation with thorough research and market study. It would be best to cross-check all the factors in this article before forming a corporation.

What is a Corporation in Delaware?

A corporation in Delaware is a business organization recognized as a separate legal entity from its owners, also known as shareholders. When a corporation is formed, shareholders invest capital by purchasing shares of stock and, in return, become partial company owners. The corporation is managed by a board of directors elected by the shareholders to oversee the company’s operations and make important decisions. Corporations in Delaware are required to have at least One directors. One of the main advantages of a corporation in Delaware is that it provides limited liability protection to its shareholders, meaning their assets are not at risk if the corporation incurs debt or is legally sued.

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Common Types of Corporations

Before you start with a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation

C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.

S-Corporation

S-Corporation in Delaware is set up similarly to a C-corporation but has different tax implications and owner limits. An S-Corporation has no more than 100 stockholders and is not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.

Nonprofit Corporation

Religious, educational, and charity institutions frequently use nonprofit businesses to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations.

It is recommended to Start a Corporation in Delaware if you would like to provide limited liability protection to your shareholders rather than Delaware LLC. However, you may want to consult to LegalZoom’s Business Attorney before starting a business.

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How to Start a Corporation in Delaware

To start a corporation in Delaware, you must follow the below steps that, include choosing a corporate name, hiring a Registered Agent, appointing directors, filing for Certificate of Incorporation, creating corporate bylaws, holding the initial board of directors, issuing stock, obtaining required licenses and permits, registering with state tax agencies, and annual reporting and ongoing compliance. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choosing a Corporate Name

The first step in starting a corporation is choosing an available name that complies with Delaware naming rules. Most states require that the name of a corporation be distinguishable from other registered business names and include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or an abbreviation thereof.

Here are some guidelines you must follow while naming your corporation in Delaware-

  • Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
  • Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

To check the availability of your desired corporate name, you can search the Delaware Secretary of State‘s business name database and Business Name Search in Delaware. If the name is available, you may choose to reserve it for a specific period of 120 days by filing a name reservation application and paying the online name reservation fee of Not available and mail name reservation fee of $75. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.

The DBA filing can be done by two methods, by mail and in person, which costs around $25. In addition, the DBA’s validity in Delaware is Indefinite, which you can file in Delaware Secretary of State.

You can check out How to File a DBA in Delaware for clearer understanding.

Step 2: Hire a Registered Agent

Hiring a Registered Agent is essential in starting a corporation. Registered Agent is a person or company responsible for receiving important legal documents, tax notices, and other correspondence on behalf of your corporation. They ensure that your corporation remains compliant with state regulations and requirements. There are Delaware Registered Agent Services to check in forming Delaware Corporation. We reviewed some of the best-registered agent services and provided features as an add-on with their packages.

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Step 3: Appointing Directors

Corporations in Delaware are required to have at least One directors, though some states may require more. Directors are responsible for overseeing the corporation’s management and making major decisions on behalf of the company. In Delaware, directors must be at least 18 years old and do not need to be state residents.

When appointing directors, it is essential to consider individuals who are knowledgeable, trustworthy, and capable of making sound business decisions. Maintaining a record of appointed directors, including their names, addresses, and terms of service, is also a good idea.

Step 4: Preparing and Filing Certificate of Incorporation

After you appoint the initial board of directors in your Delaware corporation, the next step is to write and file a Certificate of Incorporation. In writing, the Delaware Certificate of Incorporation, the corporation name, principal place of business, the purpose of business, Registered Agent contact information, and the names and addresses of incorporators and initial board members, should be written.

To officially form your Delaware corporation, you must prepare and file Certificate of Incorporation with the Delaware Secretary of State. The Certificate of Incorporation is a legal document that outlines essential information about your corporation, such as its name, address, purpose, and details about its stock.

The specific requirements for Certificate of Incorporation vary by state, but generally, the document must include the following:

  • The corporate name
  • The purpose of the corporation
  • The name and address of the registered agent
  • The names and addresses of the initial directors
  • The number of authorized shares and their par value
  • The name and address of the incorporator(s)

Once the Certificate of Incorporation are complete, please submit them to the Delaware Secretary of State’s office, along with the required filing fee. Fees vary by state, but in Delaware, the Certificate of Incorporation filing fee costs around $89 for filing online, fax and by mail. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything.
  • Offline filing: Send the form by mail to Delaware Division of Corporations, 401 Federal Street, Suite 4 Dover, DE 19901 or Fax it to 302-739-3812

Step 5: Creating Corporate Bylaws

Now you are done filing Certificate of Incorporation in Delaware, the next step is to draft corporate bylaws. While not always required by law, creating corporate bylaws is essential in establishing Delaware corporation. Bylaws are the internal rules and regulations that govern the corporation’s operations and management. They outline the rights and responsibilities of directors, officers, and shareholders and provide guidelines for holding meetings and making decisions.

Key provisions to include in your corporate bylaws may include:

  • The corporation’s purpose and principal place of business
  • The roles and responsibilities of directors, officers, and shareholders
  • The process for appointing and removing directors and officers
  • The procedures for holding annual and special meetings
  • The methods for amending the bylaws and Articles of Incorporation
  • The procedures for issuing stock and maintaining shareholder records

Once the bylaws are drafted, they must be adopted by the corporation’s board of directors. Keeping a copy of the bylaws with your corporate records and updating them to reflect changes in the corporation or applicable laws is essential.

Step 6: Holding the Initial Board of Directors Meeting

The initial board of directors meeting is a crucial milestone for your Delaware corporation. During this meeting, the directors will adopt the corporate bylaws, elect officers, and make other key decisions to set the foundation for the corporation’s operations.

The agenda for the initial board meeting may include the following:

  • Adopting the corporate bylaws
  • Ratifying any pre-incorporation actions taken by the incorporator(s)
  • Electing corporate officers (e.g., president, vice president, secretary, treasurer)
  • Designating a corporate bank account
  • Authorizing the issuance of stock
  • Approving necessary licenses, permits, and tax registrations

It is essential to keep detailed minutes of the initial board meeting, documenting the decisions made and actions taken. These minutes should be stored with your corporate records.

Step 7: Issuing Stock

Corporations in Delaware are required to issue stock to their owners, also known as shareholders. When preparing to issue stock, you must determine the number of authorized shares and their par value, as outlined in your Certificate of Incorporation. You may choose to issue different classes of stock, each with its rights and privileges, such as voting rights and dividend preferences.

The process for issuing stock typically involves the board of directors approving a stock issuance resolution, determining the price per share, and recording the issuance in the corporation’s stock ledger. Maintaining accurate and up-to-date records of all stock transactions, including transfers and cancellations, is crucial to ensure proper ownership tracking and compliance with securities laws.

Step 8: Obtaining Required Licenses and Permits

Depending on the nature of your corporation’s activities and location, you may need to obtain various licenses and permits to operate legally. These may include federal, state, and local requirements, such as:

  • A Federal Employer Identification Number (EIN) for tax reporting and employee withholding purposes.
  • State sales and use tax registration, if your corporation sells taxable goods or services
  • Professional or occupational licenses for specific industries (e.g., healthcare, construction, food service)
  • Delaware Business Licenses, zoning permits, and health department approvals

Researching and obtaining all required Delaware licenses and permits before commencing operations and maintaining compliance with any ongoing renewal or reporting requirements is essential.

Step 10: Registering with State Tax Agencies

In addition to obtaining licenses and permits, your Delaware corporation may also need to register with various tax agencies. This may include registering for sales and use tax, obtaining an Employer Identification Number (EIN) in Delaware for payroll tax purposes, and filing state income tax and franchise tax returns.

An EIN will serve as the tax ID for your Delaware corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Delaware can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Each state has tax requirements, so consult a tax professional or Delaware Division of Revenue for guidance on your specific obligations.

Step 11: Annual Reporting and Ongoing Compliance

Once your Delaware corporation is up and running, you must fulfill ongoing reporting and compliance requirements to maintain good standing. This may include filing Annual Report with the Delaware Secretary of State, updating your corporate records to reflect changes in directors or officers, and staying current on any required licenses or permits.

In addition, it is essential to stay informed about changes in corporate laws and regulations that may impact your business and to seek professional advice when needed.

Paying Your Taxes in Delaware

Even if you have established your corporation in Delaware, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Delaware has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Delaware are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Delaware

In forming a corporation in Delaware, a filing and Annual fee must be paid. Without it, your corporation won’t operate. A corporation’s initial filing fee may vary from state to state. However, in Delaware, it costs $89 for filing online, fax and by mail. The corporation in Delaware also has to file an Annual Report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly.

FAQs

Why should I consider starting a corporation in Delaware?
Delaware is known for its favorable corporate laws, allowing for flexibility and minimizing shareholder liability.
Do I have to be a resident of Delaware to start a corporation there?
No, anyone can start a corporation in Delaware.
What’s the minimum number of people required to start a corporation in Delaware?
Only one person is required to start a corporation in Delaware.
How do I choose a name for my corporation?
Check the Delaware state website to see if your desired name is available and meets all requirements.
What are the requirements for the registered agent in Delaware?
The registered agent must be a legal resident of Delaware with a physical address in the state.
What are the fees associated with starting a corporation in Delaware?
The fees vary depending on the type of corporation and can range from $204 to $239.
What documents are required to start a corporation in Delaware?
You need to file the Certificate of Incorporation, which outlines the basic information about the company, with the Delaware Division of Corporations.
How do I take advantage of Delaware’s tax laws?
You need to operate within Delaware to take advantage of the tax laws and regulations.
How do I file the Certificate of Incorporation in Delaware?
You can file it online, by mail, or in-person at the Delaware Division of Corporations.
How long does it take to receive confirmation of my incorporation?
You’ll receive a confirmation email from the Delaware Division of Corporations processing your certificate within three to ten business days.
Do I need to file an annual report for my corporation in Delaware?
Yes, all corporations must file an annual report and pay a fee.
What are the consequences for not filing my annual report on time?
Late fees and potential suspension of your corporation can occur.
Can I change my registered agent in Delaware?
Yes, you can change your Delaware registered agent at any time by filing the necessary paperwork.
What are the advantages of appointing a Delaware-based attorney as the registered agent?
It ensures that you have access to legal and business services in Delaware.
What types of corporations can I start in Delaware?
You can start a C corporation, S corporation, LLC, or limited partnership.
How many authorized shares do I need to register in Delaware?
There is no minimum or maximum, as the amount can be adjusted at any point.
Is there a residency requirement for the board of directors in Delaware?
No, there is no residency requirement for the board of directors in Delaware.
Can I run my Delaware corporation from a different state or country?
Yes, Delaware’s corporate laws and regulations allow corporations to operate from anywhere.
What are the initial incorporation costs in Delaware?
The minimum cost is typically around $90 and includes filing fees and the registered agent fee.
What does Delaware’s separation of ownership and management mean for corporations?
The shareholders hold ownership and appoint the board of directors who determine management and operations assignment.
Can I convert an LLC to a corporation in Delaware?
Yes, you can convert an LLC to a corporation in Delaware.
Are anonymous incorporations available in Delaware?
No, Delaware corporations require registered individuals, and incorporators cannot remain anonymous.
What are the IRS requirements for corporations in Delaware?
IRS requirements such as articles of incorporation, contact information, and EIN must be provided like other states.
Are there additional corporate filing requirements in Delaware?
No, there are no additional tax requirements in Delaware as there is no franchise tax.
Do I have to pay a franchise tax in Delaware?
Yes, corporations in Delaware must pay a franchise tax once they make a profit.
What happens if I do not follow all the rules and regulations for a Delaware corporation properly?
You can lose your corporation status and shareholders’ limited liability protection if you do not comply with regulations.
How long does it take to dissolve a corporation in Delaware?
Corporations can be dissolved within a week once all requirements are met, including financial statements submission.
Why is America’s largest institution incorporated in Delaware?
Due to The Court of Chancery stability, Delaware’s tax laws, and pro-business policies, a significant number of companies flock for financial gains, including M&As.
Why should I start a corporation in Delaware?
Delaware’s legal framework favors corporations and offers tax benefits.
How much does it cost to incorporate in Delaware?
The filing fee for incorporation in Delaware is $89.
Can I incorporate in Delaware if I’m not a resident?
Yes, you can form a corporation in Delaware even if you don’t live there.
What types of corporations can I form in Delaware?
You can form a non-profit, stock, or close corporation in Delaware.
How long does it take to incorporate in Delaware?
Incorporation in Delaware is usually processed within 24 hours.
What documents do I need to file to incorporate in Delaware?
You need to file a Certificate of Incorporation and pay the filing fee.
Do I need a registered agent to incorporate in Delaware?
Yes, you must appoint a registered agent to incorporate in Delaware.
Can I be my own registered agent in Delaware?
Yes, you can be your own registered agent as long as you have a physical address in Delaware.
How do I choose a name for my Delaware corporation?
Your name must be unique and can’t already be in use by another company in Delaware.
Can I trademark my corporation’s name in Delaware?
Yes, you can trademark your corporation’s name through the USPTO.
Do I need to establish a physical address in Delaware to incorporate there?
No, you don’t need to establish a physical address in Delaware to incorporate there.
Can I raise capital by selling stock in my Delaware corporation?
Yes, you can raise capital by selling stock in your Delaware corporation.
What is the minimum number of shareholders required to incorporate in Delaware?
You only need one shareholder to form a corporation in Delaware.
What is the maximum number of shareholders allowed in a Delaware corporation?
There is no maximum limit to the number of shareholders in a Delaware corporation.
Do I need to hold annual meetings for my Delaware corporation?
Yes, you must hold annual meetings for your Delaware corporation.
Can I issue more stock in the future if I need to raise more capital?
Yes, you can issue more stock in the future to raise more capital for your Delaware corporation.
Do I need a business license to operate my Delaware corporation?
Yes, you must obtain a business license to operate your Delaware corporation.
What is the corporate tax rate in Delaware?
The corporate tax rate in Delaware is 8.7%.
Does Delaware tax out-of-state income earned by a corporation registered in Delaware?
No, Delaware does not tax out-of-state income earned by a corporation registered in Delaware.
Can my Delaware corporation own real estate?
Yes, your Delaware corporation can own real estate.
Can I elect for my Delaware corporation to be treated as an S-Corporation for tax purposes?
Yes, your Delaware corporation can elect to be treated as an S-Corporation for tax purposes.
Can a Delaware corporation issue different classes of stock?
Yes, a Delaware corporation can issue multiple classes of stock with different voting rights.
Do I need to have directors who are Delaware residents?
No, you don’t need to have directors who are Delaware residents.
Can I change the legal structure of my Delaware corporation after incorporation?
Yes, you can change the legal structure of your Delaware corporation after incorporation.
Are there any annual filing requirements for my Delaware corporation?
Yes, you must file an annual report to maintain your Delaware corporation’s good standing.
Can I dissolve my Delaware corporation if it is no longer needed?
Yes, you can dissolve your Delaware corporation if it is no longer needed.
How do I close my Delaware corporation?
You must file Articles of Dissolution and pay the filing fee to close your Delaware corporation.
Do I need insurance for my Delaware corporation?
It is recommended to have insurance for your Delaware corporation, but it is not required.

Also Read

How to Save Money While Forming Your Delaware Corporation

First and foremost, it is crucial to conduct thorough research before proceeding with any steps. Understanding the process of forming a Delaware Corporation, the legal requirements, and necessary documentation can save you from unexpected expenses and delays. By educating yourself and seeking advice from reliable sources, you can ensure that you won’t have to engage expensive legal or consulting services unnecessarily.

When it comes to incorporating your business, you have several options available. While it may be tempting to hire an incorporation service provider, doing so can swiftly drain your financial resources. Considering the relatively straightforward process of forming a Delaware Corporation, it’s often better to take matters into your own hands. By completing the paperwork yourself, you can save on the considerable fees charged by incorporation service providers and redirect that capital towards your core business operations.

Being mindful of ongoing costs is equally important. Opting for inexpensive registered agent services can help you comply with Delaware’s legal requirements without breaking the bank. Rather than choosing well-known and oftentimes costly registered agent providers, consider exploring alternative, reliable options that offer competitive prices. Redirecting these savings back into your business can help bolster your growth and expand your operations.

Moreover, maintaining good financial practices from the outset will contribute to long-term success. Keeping your personal and business finances separate, right from the beginning, is essential. Opening dedicated business banking accounts will not only ensure a healthier financial picture for your company but will also simplify accounting and tax obligations. By maintaining financial integrity, you can avoid costly errors or overlooked expenses that may accumulate over time.

Taking advantage of scalable and cost-effective technology solutions is another way to save money when forming your Delaware Corporation. Cloud-based software and platforms can streamline numerous business functions, reducing the need for physical infrastructure, expensive licensing fees, or software installations. From accounting software to project management tools, an array of affordable digital solutions can ensure efficiency while saving you a significant amount of money in the long run.

In addition to managing your financial infrastructure, seeking economical office spaces is crucial during these formative stages. While having a physical office space might seem like a marker of success, it can easily become a financial burden. Considering flexible alternatives like co-working spaces or remote work arrangements can significantly reduce overhead costs, allowing you to direct resources towards growing your business instead.

In conclusion, saving money while forming your Delaware Corporation is entirely possible with careful planning, research, and financial prudence. By taking matters into your own hands, leveraging technology, and making thoughtful choices, you can reduce unnecessary expenses and redirect that capital towards building and scaling a successful business. Remember, every penny saved during this process contributes to the foundation and future growth of your Delaware Corporation, ensuring a solid financial standpoint for years to come.

Conclusion

Starting a corporation in Delaware involves several critical steps, from choosing a corporate name to fulfilling ongoing compliance requirements. Following the steps outlined in this guide and seeking professional advice when needed, you can successfully establish your Delaware corporation and enjoy the benefits of limited liability, potential tax savings, and a professional business image.

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