What Is a Delaware Corporation?
A Delaware corporation is a prestigious type of legal entity incorporated in Delaware regardless of the actual location of the firm’s headquarters. Delaware corporations can conduct business in all 50 states and more than 100 countries. According to the Wall Street Journal, firms incorporated in Delaware are valued more by investors (February 28th, 2000). A study by an NYU law professor concluded that companies incorporated in Delaware were worth 5% more than companies incorporated elsewhere. This is because Delaware corporate laws and courts are not only the best in the United States, they are the best in the world.
Delaware Corporations have long been used by large and small companies to maintain the legal separation of business and personal assets. The corporate laws of Delaware are respected for their consistent application based on a large body of case law. Many of the cases that are taught to law students in their corporations classes is Delaware law.
Delaware is the most popular state for corporate registrations in the U.S. and around the world: More than 50 percent of publicly-traded companies in the U.S.—including Google, AT&T, Walmart, General Motors, Ford and Berkshire Hathaway—are incorporated in Delaware.
There are a lot of different aspects and elements to learn about Delaware corporations, including how they’re typically structured and the types of Delaware corporations. But there’s a reason why this entity is a popular choice.
The Structure of the Delaware General Corporation
The Delaware general corporation has a formal governance structure that is defined under the Delaware General Corporation Law, Title 8 of the state code.
Every Stock Corporation is composed of three tiers:
- One or more Shareholders (owners) – Major Decisions
- One or more Directors (elected by owners) – Large Decisions
- One or more Officers (elected by directors) – Day to Day Management
All three “hats” can be worn by one person in a corporation with one owner and one manager, but formalities and meetings are still required, even in a one person corporation.
Shareholders are the owners of the corporation who own shares of stock in the corporation. Most corporations just have one class of stock: Common Stock. Common Stockholders have voting rights in the corporation and vote for the board of directors annually. They are also given their share of the profits when the corporation’s board of directors declares a dividend.
The board of directors oversee the company. They set the direction of the corporation and most large decisions. Directors make important managerial decisions about the business, such as the overall direction of the business and what the company will do with profits and when it will release dividends, if at all.
Officers are appointed by the board of directors and run the business’s daily operations. They generally hold titles such as “President,” “Treasurer,” and “Secretary.” However, the corporation bylaws can create any officers and define their roles.
Types of Delaware Corporations
There are four main types of Delaware corporations:
- General corporation
- The most popular form of a Delaware corporation, which is appropriate for most active small and large businesses.
- Close corporation
- Old fashioned way to streamline management and formalities before the LLC came into existence.
- The stockholders may be allowed to manage the business like a board of directors, if its certification of incorporation eliminates the Board of Directors.
- Non-stock corporation
- Non-stock corporations do not have shareholders and are run by members who elect the board of directors.
- These corporations may qualify as non-profit corporations with the IRS.
- For non-profits, the profits must go to charitable purpose.
- Activities are restricted for non-profits to maintain favorable tax determination.
- Public benefit corporation
- A newer type of corporation in the state of Delaware. Public benefit corporations do not need to maximize its profits to stockholders and may reduce its profits to promote a stated public benefit.
Learn more about the types of corporations.
Delaware Corporation Bylaws
The Delaware corporation bylaws are a required internal company document that sets the procedures for shareholder meetings, elections, the size of the Board of Directors and the officer titles and functions. It is a standard document typically adopted during the minutes of the meeting of the incorporator at the time the initial directors are named.
Every corporation’s bylaws should address the following:
- How voting will be conducted
- By whom the company funds will be handled
- Rules for meetings
- Meeting notice method and timing
- Including how many shares of stock must be represented for a quorum (the minimum number of stockholders needed to call the meeting to order)
- Stockholder Voting
- Whether proxy votes or electronic voting is allowed
- Director guidelines
- Including the number of board of directors, the procedures for their elections and the length of time a director will serve
- Officer guidelines
- Including how officers will be selected, and the titles and duties of each officer
- Rules for amending bylaws in the future
Bylaws may be added or amended in the future, typically with majority approval.
The Delaware Corporation Annual Report
Delaware corporations are required to file an annual report with the state of Delaware. The annual report is due by March 1 and includes the following information, per Title 8 Chapter 5 § 502(a) of Delaware General Corporation Law:
- The name and address of all the directors as of the time when the report is filed
- The name and address of the officer who signs the report
- The address of the corporation’s principal place of business
Learn more on filing the Delaware corporation annual report, plus how we can help!
How To File a Delaware Corporation
(Please note that corporations must include a corporate ending or abbreviation such as “Inc.,” “Incorporated,” “Company,” “Co.,” or “Corporation.”)
Once your order is complete, our team of incorporation specialists will do the following:
- Prepare and file your Certificate of Incorporation
- Execute the Minutes of the Meeting of Incorporator to elect one or more of your directors
- Prepare bylaws to govern your corporation
- Prepare the Unanimous Action of Directors to elect officers and direct stock to be issued to one or more stockholders
- Prepare stock certificates for one or more stockholders
We make the process easy for you! Get started and file your Delaware corporation now!