How To Incorporate In Delaware
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1. Choose a name for your Delaware corporation
Check on Available Names in Delaware: The first step before incorporating your new small business is to select a name for the corporation and making sure that it is not already taken. You can do a preliminary search of whether a name is available for incorporation on the Delaware Secretary of State website here https://delecorp.delaware.gov/tin/EntitySearch.jsp
Reserve a Corporate Name: Delaware allows you to reserve a name to make sure no one else takes it before you officially incorporate in Delaware. However, if you are going to incorporate immediately, this is probably not necessary. Name reservations are good for 120 days and costs $75.
Filing Trademarks and Doing a Corporate Name Search. It is important to understand that just because a name may be available in Delaware online, it does not mean that another company is not using that name somewhere else in the country or that there will not be other restrictions on whether you can use that name for incorporation. See the article on how to choose a name for your corporation.
Delaware corporate name requirements. Generally, Delaware’s rules on corporate names are more flexible than other states. The corporation must contain one of the following: "association," "company," "corporation," "club," "foundation," "fund," "incorporated," "institute," "society," "union," "syndicate," or "limited," (or abbreviations thereof).
2. Find a Registered Agent in Delaware. Every Delaware corporation must have a registered agent within the State of Delaware that acts as an agent for service of process. Basically this is so if anyone sues the company or if the State needs to take some action against the corporation it can serve the notice of the dispute with the registered agent in Delaware who will then give the notice to the corporation. There are many different services available for annual fees of between $75 and $150 that can act as registered agent. It is required to get a registered agent before forming the company as it must be named in the Certificate of Incorporation. The Delaware Secretary of State has a list of various registered agent companies in Delaware online here http://corp.delaware.gov/agents/agts.shtml
3. File a Certificate of Incorporation with the Delaware Secretary of State
For a normal stock corporation, a Certificate of Incorporation must contain the following
Registered Agent (see below)
Total number of authorized shares and par value (careful as this could impact the amount of tax you pay)
Name and address of the incorporator
Other Delaware legal provisions. Standard clauses that are normally added for most corporations include a provision that the corporate directors will have limited liability to the corporation. Certificates of Incorporation can be very complex when there are outside investors involved. It is best to consult a lawyer. If you will be operating a small business without complexities the Delaware Secretary of State provides a sample incorporation form to use at the following location http://corp.delaware.gov/corpformscorp09.shtml.
Where to submit it:
Delaware Division of Corporations 401 Federal Street – Suite 4 Dover, DE 19901
The basic corporate filing fee is $89, but increases based on the total number of authorized shares of stock the company will have, and there are also fees for the number of pages of your initial Certificate of Incorporation. Other types of fees may apply if you need a certified copy, or if you need to use quick filing services. Delaware offers same day filing services, including 2 hour or even 1 hour service (for $1,000). A list of filing fees and a spread sheet for how to calculate the initial filing fee based on the total stock of the company can be found here. Delaware Incorporation
4. Create Other Delaware Incorporation Documents (Corporate Kits)
Once the Delaware corporation has been formed by filing the Certificate of Incorporation, the corporation must take certain actions, such as appointing officers and directors, adopting corporation bylaws, issuing stock certificates to owners, obtaining a tax ID number, and making other regulatory filings. A typical list of the corporate formation documents that are required for a new start-up company are:
- Action by sole incorporator (appointing directors and adopting the bylaws)
- Initial Board Meeting Minutes (issuing stock, appointing officers, etc.)
- Stock Certificates
- Securities Filings (Many states have laws that require filing a document with the State regarding the number of shares of stock issued and at what price)
- IRS EIN (Obtained through the IRS. See the IRS Website here
- Business License (Search for how to get a business license in your city through our online guide here http://www.cityapplications.com/business-licenses.html)
There are many other types of corporate documents to also consider, especially if there are multiple owners of the company, such as buy-sell agreements, or shareholders agreements to determine when stock can be sold, what happens if the owners want to go their separate ways, etc. It is highly recommended that these documents be drafted by a lawyer. There are various state legal requirements that must be followed when preparing these documents.
Many of the above documents can be obtained through a corporate service company who can make all of the filings for you and provide you with all of the form documents you need for a fixed fee.
5. Qualify your Delaware corporation to do business in other states
It is also good to remember that if your main corporate office is not in Delaware, that you should check whether you need to register or qualify the corporation to do business in you home state. Most states require this and require that you pay taxes in your home state. Most companies that incorporate in Delaware do not have Delaware as their headquarters and so almost always Delaware corporations are required to register in another state and make annual filings and pay annual franchise taxes to another state. See our article on Qualifying to Do Business in Other States.
6. Make annual filings and pay annual fees and taxes in Delaware
All Delaware corporations are required to file an annual report by March 1 of each year in Delaware online and pay an annual tax. The annual report asks for the names of the officer and directors of the corporation, as well as the agent for service of process in the state and the corporation address.
The annual report’s filing fee is $50, plus the corporation must pay an annual franchise tax of a minimum of $75, or a minimum of $350, depending on which of the two methods of calculating the tax a company uses. Be careful on doing this, as sometimes mistakes can result in a corporation owing thousands of dollars in taxes in Delaware for simply filling out the information wrong. The annual tax can be paid in Delaware online. For information about how to calculate the tax go to the Delaware corporation division website here http://corp.delaware.gov/frtax.shtml.
Corporations can be fairly complicated, especially where more than one person is involved. You should consult an accountant and an attorney before forming a corporation to make sure that it is right for you and that all paperwork is processed correctly.
This article is for informational purposes and does not constitute legal, financial or tax advise. This information is derived from various sources and should not be relied on as an official source of information. All information should be independently verified. You should consult a legal or accounting professional before incorporating your business.
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This site is for informational purposes only and does not constitute legal, financial or tax advise. The information on this site should not be relied upon as an official source of information and should be independently verified.