Delaware earned its official nickname as “The First State” for being the first out of the 13 original states to ratify the U.S. Constitution way back on December 7, 1787. Fast forward to the present, Delaware has gained quite a reputation as the number 1 choice for everything from big corporations to startup entrepreneurs when it comes to where they want to start their respective businesses. No wonder more than 66% of the Fortune 500 companies have chosen Delaware as their legal home!
Delaware is truly a business-friendly state and its laws offer a lot of attractive benefits for companies of all sizes. Case in point, registering a business is fairly easy in Delaware plus there are certain tax advantages only available in the state.
If you’ve been wanting to begin your own entrepreneurial journey, read on and we’ll share with you several useful pointers to help you learn more about company formation in Delaware.
Some interesting facts about Delaware’s corporate laws
Known as a “tax haven,” what sets Delaware apart from other states is that first and foremost, state-registered corporations that do not actually do business there are not required to pay any taxes. Moreover, shareholders who do not reside in the state also do not have to be taxed at all.
So yes, a corporation’s directors, officers, and shareholders do not even have to be Delaware residents. Businesses also aren’t required to disclose the names of their directors and officers. Moreover, state laws permit an individual to be a company’s director, officer, and shareholder at the same time, which makes this ideal for small startups.
Delaware also has the Court of Chancery, a dedicated court that specializes in handling business-related cases. The court has offices in three locations across the state, namely New Castle County, Kent County and Sussex County.
And as mentioned above, required paperwork is usually processed quickly in Delaware.
The documents and requirements you need to form a Delaware business
To get started in your company formation, your first step is to decide your business’ entity type. You can file as a domestic corporation, exempt corporation, foreign corporation, limited partnership, limited liability company, limited liability partnership, partnership, limited liability limited partnership, or statutory trust.
You can seek advice from a legal professional or a certified public accountant familiar with Delaware company formation laws to learn which entity best suits your business.
Next, you need to choose a business name. This really has to be done right because selecting the wrong one can possibly lead to future problems. To make sure your chosen name is still available in Delaware and in your area (if you’re located outside the state), you may do a quick search on Google and other search engine platforms. You could likewise check with the Department of State: Division of Corporations’ business name database. Remember that you want to use a unique business name since having something similar with another existing company may eventually cause conflict.
Once you’ve cleared a name, you can now proceed with registering your business. When forming an LLC, you will be asked to complete the Corporate Forms And Certificates For A Limited Liability Company with the Delaware Department of State Division of Corporations. To incorporate, you have to file the Corporate Forms And Certificates For A Corporation (Articles of Incorporation) with the same agency.
Also, keep in mind that having a registered agent who lives in Delaware is a must for all businesses. This agent, who may be an individual or a business entity, will represent your company in the state and will forward legal documents you may need.
All types of trades and businesses in the state also have to get a State of Delaware Business License issued by the Delaware Division of Revenue. Go to the state’s One Stop Business Licensing and Renewal service for this.
If you are operating with employees, you should also file registration with the Delaware Department of Labor’s Division of Unemployment Insurance and the Division of Workers
Compensation. Otherwise, you can skip this part.
Lastly, you will have to create a bank account for your business and obtain business credit cards from the bank of your choice. This will help you keep your personal money separate from your company’s finances and will also help you down the line if you want to boost your credit profile to apply for loans.
Best of luck in your Delaware company formation and we wish you success with your venture!