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Delaware Corporation

Delaware Incorporation Services

How to Start a Delaware Corporation

1. Choose a Name

Choose a unique corporate name that is not registered with the Delaware Secretary of State. The name must include a corporate ending or abbreviation thereof (ex. “Inc.”, “Incorporated”, “Company”, “Co..”, “Corporation”, “Corp.”, “Association”, etc.) You can always file a name amendment in the future. For example, when we incorporated “Pinterest,” the original name was “Cold Brew Labs.”

2. Find a Registered Agent

Every Delaware Corporation is required to have a Registered Agent in Delaware. The Registered Agent will forward lawsuits and correspondence from the Delaware Secretary of State to you.

You do not need to visit or have an office or any other connection to Delaware to incorporate a corporation in Delaware. Select Agents and Corporations, Inc. (IncNow) to act as your Registered Agent.

3. Draft a Certificate of Incorporation

The Certificate of Incorporation officially brings the corporation into existence in the public record. IncNow will prepare a Certificate of Incorporation that includes:

• Name of the corporation
• Name and address of the Registered Agent of the corporation
• Statement of the type of business that the corporation will engage in
• Number of shares of authorized stock that the corporation will issue
• Par value of each share
• Name and signature of the incorporator
• Indemnification clause for breaches of Duty of Care
• Allowance for Director Amended Bylaws

The standard form from the Secretary of State leaves off recommended provisions, such as the director amended bylaws and relaxed director liability. These provisions must be included in the Certificate of Incorporation and cannot be enforced if included only in the Bylaws or elsewhere.

4. Annual Taxes and Fees

Similar to most states, Delaware Corporations pay a “franchise tax”, or annual fee. This fee is based either on the shares authorized by the corporation on its Certificate of Incorporation, or any Amendments to the Certificate of Incorporation that change the number of shares of stock the corporation is allowed to issue.

We recommend incorporating with 1500 shares of voting stock to minimize both filing and annual fees. If additional shares of restricted or non-Voting stock are desired or required in the future, the authorized number of shares can be amended.

5. Stockholder Agreement

If your corporation has more than one stockholder, it should have a Stockholder Agreement.

• Stockholder Agreements are optional, but recommended.
• They set out the powers and rights of stockholders, as well as their relationship with the corporation and must be executed by all stockholders.
• A Stockholder Agreement can place restrictions on transferring stock.
• Delaware law specifically allows certain restrictions on the rights of stockholders to sell their shares.
• In closely held corporations with very few stockholders, these agreements are especially important because they will govern the relationship between the stockholders.
• Notice of the Stockholder Agreement must also be on the stock certificates to provide notice to possible assignees of the restrictions.

Any corporation with more than one stockholder should have a Stockholder Agreement to minimize future problems of valuation, buyback, and unwanted third parties owning stock as transfers or assignees.

6. Stockholder Agreement Service

To the surprise of many business owners, Bylaws do not include provisions for rights of first refusal or buy-out provisions for stockholders. Corporation stockholders should consider a Stockholder Agreement — an important additional service to protect their stockholders’ expectations.

We offer a standard Delaware Stockholder Agreement for $199.

• A Delaware attorney developed this Stockholder Agreement in the course of practice.
• It has been modified for our customers to provide extra rights and protection for stockholders to prevent outsiders from becoming unwanted stockholders in their company in the event of a sale of stock or death of a shareholder.
• This document gives you a running start to future planning for your corporation.

What is a Corporation, and what does Incorporating mean?

Why Should I Incorporate in Delaware?

1. Delaware has the strongest Corporate Shield of any State

The main reason to incorporate in Delaware is to protect personal assets from your business’s liability. This protection is referred to as the “corporate veil” or “shield”, and is especially strong in Delaware.

2. Business-Friendly Government Services

Many of the businesses that chose to organize in Delaware have done so because of the business-friendly government in Delaware. Delaware’s Court of Chancery is a specialized business court. With its established body of case law, the Delaware courts are experts at resolving business conflicts. The U.S. Chamber of Commerce has ranked Delaware’s litigation system the best in the country for fairness every year.

3. Ability to Operate a Delaware Corporation in every State or almost any Country

With a Delaware Corporation, you have the ability to conduct business in every state and almost every country. Delaware Corporations do not need a bank account or business address in Delaware, they need only a Registered Agent to forward Delaware annual notices and legal notices.

4. Predictability in Ownership and Management Structure

Delaware’s predictable laws on ownership and management allow you to structure your business with confidence. You can even have the protection of a corporation for a one-person business. For example, one individual can be sole Director, President, Secretary, and Treasurer, as well as the sole shareholder.

5. Directors and Officers are protected from lawsuits

Business officers and directors have the ability to take risks and make routine business decisions without fear of having those decisions second guessed by stockholders. Even if losses result, as long as the decisions were not self-dealing, the officers and directors should be protected from personal liability.

6. No Delaware income tax returns for Corporations operating outside of Delaware

Delaware Corporations do not have to file Delaware tax returns if they do not conduct business in Delaware.

7. Tax Advantages

A corporation is taxed as a C-Corporation unless it elects to be taxed as an S-Corporation. If the stockholders are eligible and timely elect to be taxed as an S-Corporation with the IRS, it can save the stockholders thousands of dollars in self-employment taxes by splitting income 50/50 between self-employment income and an “S-Dividend”.

8. Delaware offers speedy document approval and filings

The Secretary of State’s office in Delaware maintains extended hours for filing and can approve documents in as little as one hour for additional fees.

9. A Delaware Corporation can be used to manage almost anything

Corporations can range from a one personal consulting company to a multi-million dollar technology business. Corporations are not recommended for holding passive assets, like real estate.

10. Delaware has the fairest courts and laws of any state

The United States Chamber of Commerce has recognized Delaware’s business dispute and incorporation climate by ranking Delaware’s litigation system #1 over the past 9 years. The advantage of having so many business disputes resolved in Delaware is that previous conflicts have established an extensive body of case law.

C-Corporations vs. S-Corporations

Conclusion

Start Your Delaware Corporation

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