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A Delaware Corporation is a legal entity that is typically composed of people who hold stock in the corporation. There are many benefits to forming a corporation in Delaware, including a business-friendly court system as well as favorable case law and statutes. But what is a Delaware Corporation, exactly, and how do business owners form one? This information will help you determine if the Delaware Corporation meets your business needs, plus how to get started.
Delaware Incorporation Services
Incorporate a Delaware Corporation in only a few minutes with IncNow®!
• Enjoy the predictable and fair legal environment afforded to businesses incorporated in the State of Delaware
• Protect the assets of stockholders against claims of the business’s creditors
• Rely on IncNow’s 50 years of experience
• Start a Delaware Corporation today with our Now Incorporation package for our 1-business day turnaround service
5 Steps to Start a Delaware Corporation
- Step 1.) Choose a Business Name
You can give your Delaware corporation any name that you want. However, your business name has to follow two rules:
1.) Your business name has to be unique:
The name of your corporation cannot conflict with any other business registered in Delaware.
2.) Your business name needs a corporate ending:
The name of your Delaware corporation needs to include one of the following corporate endings:
- Inc. – or “Incorporated”
- Co. – or “Company”
- Corp. – or “Corporation”
IncNow‘s Incorporation Specialists can check if your preferred business name is available in Delaware before you incorporate.
Submit an order to IncNow and we will check the name that business day.
Or, give us a call at 1-800-759-2248 or email email@example.com, where a representative can check if your business name is available at no charge.
Can I Change My Delaware Corporation Name?
You can always change your Delaware corporate name in the future. IncNow can help you file a Name Change Amendment.
- Step 2.) Choose a Delaware Registered Agent
Delaware law requires you to pick a Delaware Registered Agent for your Delaware corporation. If you are located outside of Delaware, you can hire a company, like IncNow, to be your Registered Agent in Delaware.
What Is A Delaware Registered Agent?
The purpose of a Delaware Registered Agent is to receive important legal notices and documents, called “Service of Process”, on behalf of a corporation. These documents include:
- Official court filings,
- Subpoenas; and,
- State tax notices.
A Delaware Registered Agent needs the following:
- Have a physical mailing address (not a P.O. Box) in the State of Delaware, and
- Be available between 9:00 A.M. and 5:00 P.M., Monday through Friday.
If you want to start a Delaware corporation, but are not located in Delaware, you will need to appoint a Delaware Registered Agent service, like IncNow to act as your agent.
Why is a Delaware Registered Agent Important?
Your Delaware corporation needs a Delaware Registered Agent to forward you any legal notices, like a summons or subpoena, that are served on your company. These types of legal documents are important and require urgent responses. A Delaware Registered Agent needs to be reliable and forward any legal documents to you so that your corporation avoids penalties or judgments.
- Step 3.) File a Delaware Certificate of Incorporation
Registering a corporation in Delaware requires filing a Certificate of Incorporation with the Delaware Secretary of State’s office. The Certificate of Incorporation is the public document that brings your Delaware corporation into existence.
What is Included on a Delaware Certificate of Incorporation?
The Certificate of Incorporation for a Delaware corporation includes:
- The name of the corporation,
- The name and address of the Registered Agent,
- A statement of the corporation’s business,
- The number of shares of stock authorized by the corporation,
- The par value of each share of stock,
- Important clauses and legal provisions.
Delaware does not require corporations to list the names or addresses of the company’s directors or officers in the Certificate of Incorporation. However, director and officer information will need to be included in the company’s publicly filed Annual Report.
How Do You File a Delaware Certificate of Incorporation?
IncNow will file a Delaware Certificate of Incorporation with the Delaware Secretary of State to register your Delaware corporation and sign as the authorized person. Once your corporation is filed, we forward the officially stamped Certificate of Incorporation to you via email and priority mail.
How Many Shares Should a Delaware Corporation Have?
The Incorporation Specialists at IncNow recommend starting a Delaware corporation with 1,500 shares of voting stock. This is to help minimize both the filing fees and the Annual Franchise Tax fee that the company will have to pay.
- Step 4.) Prepare Company Documents and Stockholder Agreement
IncNow’s Delaware corporation packages include the necessary documents that you need to run your company
The following corporate documents come included in IncNow’s Now Corporation and Complete Corporation packages:
- Stock Certificates,
- Corporate Minute Book,
- Corporate Bylaws,
- Action of Directors to appoint officers and issue stock.
What is the Delaware Corporation Stockholder Agreement?
If your Delaware corporation has more than one stockholder, you should have a Stockholder Agreement.
Having a Stockholder Agreement can minimize potential problems related to company valuations, stock buybacks and stock transfers to unwanted parties. A well prepared Stockholder Agreement should do the following:
- Set out the powers and rights of each stockholder in the corporation,
- Place restrictions on who stock can be transferred to,
- Define the process for how stock can be sold.
A corporation needs to include a notice on its corporate stock certificates if the shareholders have a Stockholder Agreement with one another.
A Stockholder Agreement can be added to any IncNow Delaware corporation package for $199. IncNow’s Delaware corporation Stockholder Agreement is written by A-rated Delaware business attorneys and includes the extra rights and provisions that you need to protect your Delaware corporation in the future.
- Step 5. ) Get an EIN Number
A Delaware corporation can obtain an Employer Identification Number (EIN) from the IRS after the company has been officially incorporated.
A corporation needs an EIN number in order:
- Pay U.S. federal taxes,
- Hire employees in the U.S.,
- Open business bank accounts; and,
- Apply for licenses.
IncNow can obtain an EIN number for your corporation. Our Incorporation Specialists complete and submit the Form SS-4 application to the IRS for you.
What Is an EIN Number?
An “Employer Identification Number”, or EIN, is a unique number assigned by the IRS to identify a business entity, like a corporation. Think of an EIN number like a social security number for a business.
A corporation needs an EIN number to pay federal taxes and complete important business tasks, like opening business bank accounts and tracking payroll. A corporation also needs an EIN number to legally hire employees, apply for business licenses and permits, and apply for certain business-related tax benefits.
How Do You Get an EIN for a Corporation?
A corporation can apply for an EIN number through the IRS website or by mail. Applying for an EIN requires completing the IRS Form SS-4.
Completing the Form SS-4 for a corporation requires providing the following information:
- The legal name of the corporation, as well as any trade names (DBAs);
- The name and Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) of a responsible party;
- The corporation’s mailing address;
- The corporation’s nature of business or industry; and,
- The corporation’s accounting period and tax year.
What is a Corporation, and What Does Incorporating Mean?
A corporation is a business that stands on its own – separate from the people who own, run, and work in it. Incorporating, or incorporation, is the act of filing the necessary paperwork to register a business as a corporation.
The people who own a corporation are ‘shareholders’. Shareholders usually put in money to start the business and in return, have a financial stake in the company.
Most corporations are known as ‘general corporations’ and have a three-level structure:
Level 1.) Shareholders:
Shareholders own parts of the corporation and often put in money to launch the business. They pick the people who sit on the corporation’s board of directors.
Level 2.) Directors:
Directors are like the corporation’s captains – they keep the business on track. They’re chosen by the shareholders to make strategic decisions for the business. A corporation’s Board of Directors will meet a few times a year to make important decisions and choose the corporation’s Officers. Delaware law requires Directors to hold one big Annual Meeting each year by state law.
Level 3.) Officers:
Officers handle the daily business tasks of the corporation. They have titles like “President”, “Treasurer”, or “Secretary”. The board of directors is in charge of hiring and firing the officers.
A corporation provides its Shareholders, Directors and Officers with limited liability protection. Limited liability means that the owners and employees of a company are not personally responsible for the debts and other liabilities of the business.
Why Incorporate in Delaware?
Delaware is a leading hub for corporations in the United States. It is home to top industry players from sectors including credit card services (like Discover, Bank of America), tech giants (like Google, Apple), and famous restaurant chains (like McDonald’s, Chipotle).
Here’s why you should consider incorporating your business in Delaware:
- Delaware Benefit #1) Unmatched Corporate Protection
The primary reason businesses incorporate in Delaware is strong corporate protections, often referred to as the ‘corporate veil’. Delaware is known for providing Shareholders, Directors and Officers with the best personal legal protections from business related liabilities.
- Delaware Benefit #2) Pro-Business Government Services
Delaware’s government is highly supportive of businesses. Its specialized Court of Chancery and well-established case law make it a preferred destination for resolving business disputes. Delaware’s business litigation system has been recognized by the U.S. Chamber of Commerce for its fairness and expertise.
- Delaware Benefit #3) Operate Globally with a Delaware Corporation
Take advantage of the protections of Delaware while operating from anywhere. Delaware Corporations can conduct business across all states and nearly all countries. All you need is a Registered Agent to handle Delaware’s annual and legal notices.
You do not need a bank account or business address in Delaware to register a Delaware corporation.
- Delaware Benefit #4) Predictable Ownership and Management Laws
Delaware’s consistent laws regarding ownership and management structure allow you to confidently run your business. Even one-person businesses can enjoy the protection of a corporation.
- Delaware Benefit #5) Lawsuit Protection for Directors and Officers
Delaware allows business officers and directors to make decisions without worrying about shareholders’ second-guessing. They are protected from personal liability unless the decisions were entirely self-serving.
- Delaware Benefit #6) No Income Tax Returns for Out-of-State Operations
Delaware corporations operating outside Delaware are not required to file Delaware income tax returns.
- Delaware Benefit #7) Tax Benefits
Corporations are typically taxed as C-Corporations but can choose to be taxed as an S-Corporation, potentially saving thousands in self-employment taxes with a 50/50 split between self-employment income and an “S-Dividend”.
- Delaware Benefit #8) Quick Document Approval and Filings
Delaware’s Secretary of State’s office offers extended filing hours and can approve documents within an hour for additional fees.
- Delaware Benefit #9) Versatile Corporate Usage
Delaware corporations can range from a one-person consultancy to a multi-million dollar tech company. They are generally not suggested for holding passive assets like real estate.
- Delaware Benefit #10) Fair Courts and Laws
The U.S. Chamber of Commerce has consistently ranked Delaware’s business dispute resolution and incorporation climate as the nation’s best. Delaware’s rich history of incorporation offers a large body of case law that provides quick and predictable legal solutions.
C-Corporations vs. S-Corporations
Many entrepreneurs say that they want to register their business as an S-Corp or C-Corp. However, it’s crucial to understand that these are not business entity types, but only tax designations.
The IRS taxes a corporation as a C-Corp by default once the company is incorporated. However, the business can opt for the S-Corp tax election by submitting a Form 2553 to the IRS.
The “C” vs. “S” discussion should not impact your pre-incorporation decision. While corporations are C-Corporations by default when they are incorporated, it is very easy to change classifications between C-Corp and S-Corp.
Both C-Corp and S-Corp tax structures offer various advantages that can be more suitable for different types of businesses. A corporation’s choice between the two will depend on which structure offers the most benefits in line with the company’s needs and objectives.
Start a Delaware Corporation the Right Way
As the trusted experts in Delaware Corporations, IncNow is committed to helping you incorporate your business effectively and efficiently.
Over the years, we have successfully helped incorporate tens of thousands of businesses. Established by Delaware’s first tax lawyer, our team possesses unmatched expertise in business incorporation and maintenance.
What sets us apart at IncNow is our team of Incorporation Specialists, expertly trained and guided by leading industry attorneys to ensure exceptional customer service.
As your dedicated incorporation partner, IncNow promises to:
- Draft and submit your Certificate of Incorporation
- Conduct the Incorporation Minutes to appoint one or more directors
- Formulate Bylaws to regulate your corporation
- Draft the Unanimous Action of Directors to appoint officers and authorize stock issuance to one or more shareholders
- Design stock certificates for one or more shareholders
We also offer our attorney-crafted Shareholder Agreement as an optional service to protect your stock from being inadvertently transferred to undesirable third parties. This service is highly recommended for corporations with multiple shareholders.