How to Incorporate in Delaware and How to form a new Delaware LLC
Understanding New Company Formation, Made Easy
DISCLAIMER: The following article is intended to provide general information about how to incorporate in Delaware or form a new Delaware LLC and is intended for informational purposes only. It is not intended to replace the advice of an attorney or tax accountant and does not constitute individualized legal advice, legal service, or tax advice.
Forming a new company requires some advanced preparation, but that doesn't mean it has to be difficult! This information is intended to familiarize you with the process of chartering a new company, in other words, how to incorporate a business or how to form an LLC. When we say "chartering a new company" "incorporating a business" or "forming a new company" we are referring to the process of filing the required documents and registering the name of the company with the state authority which controls and oversees corporations. DBI can help with every step of this process; in fact, we'll do most of it for you! When this process is complete, the new company is granted an official charter authorizing it to operate as a business in the state where it registered, enabling it to transact interstate business in the US, and to be recognized as a business entity in foreign countries. You could think of the "charter" as being similar to a license.
Selecting a State to Register In
When you decide to form a new company you have a lot of options to choose from. One of the first decisions you will make is what state you want to be the "legal home" of your company charter. You could form (charter) your company in the state where your headquarters or home office will be located, or you could form your company in a state with a reputation for being more advantageous. The deciding factors are usually what corporate laws and taxes apply for a given state. If you have a presence within a state, such as an office or employees, you will usually be required to obtain the permission of that state to transact intrastate business there, but this does not mean you have to charter a new company in every state you transact business in. You can choose to charter your company in one state, and can then apply for permission for that company to transact intrastate business in additional states.
See the Qualification section of the Delaware Incorporation Handbook for more information about this topic.
You have most likely already heard about the advantages of forming your business or holding company in Delaware. As of March 1, 2016, more than 1,000,000 U.S.-based and offshore companies had chosen Delaware as their corporate home. Over 60% of the Fortune 500 firms and more than 50% of the companies traded on the New York Stock Exchange and NASDAQ are chartered as Delaware corporations.
See the Why Incorporate in Delaware section of the Learning Center tab to learn more about the advantages of chartering your new corporation or LLC in Delaware.
Of all the advantageous reasons to form your company in Delaware, if your young business has limited cash flow and you will not be seeking to raise capital from venture capitalists or angel investors, you may be considering forming your company in your home state. This option is popular with sole proprietors who do not transact interstate business and who feel that they would benefit more from the economy of single state registration and franchise taxation than from the protections and benefits of registering as a Delaware chartered company. Although we specialize in registering Delaware charters, our Incorporation Specialists are experienced in performing registrations and business filings in all 50 US States. We would be happy to provide you with a quote for incorporation service if you are thinking of chartering you new Corporation or LLC in your home state.
Selecting an Entity Type:
The next options to consider are the available options for entity type. Stock Corporations, LLC's, Limited Partnerships and Sole Proprietorships are all examples of different entity types. Let's substitute the word "company" for "entity" to make it easier. Different rules, laws and taxes may apply to each type of company. When we create your new company, we will identify what type of company we are forming when we register with the state; so we will need to decide which type of company is the best fit for you. The deciding factors are usually: the type of liability protection, the method of taxation, and the complexity of administration.
Limited Liability Companies (LLCs)
The kind of company (entity type) our customers select most often is the Limited Liability Company (LLC). Below are some of the features of Delaware LLCs:
- A Delaware LLC is not required to file an Annual Report or hold Annual Shareholder Meetings.
- Delaware LLC's offer multiple options for management structure and distribution of profits and losses.
- By default, the profits and losses of an LLC will be declared on the owners' personal income tax returns, in which case the LLC does not file a Corporate return (Multi-Member LLC's will file a partnership statement). But LLC's are also eligible to elect to be taxed as an S-Corporation or C-Corporation. Electing a particular tax status does not change the entity type, for example: An LLC which has elected to be taxed as a C-corporation is still an LLC.
- The liability of all Members (owners) is limited to their investments in the LLC (unless they personally guarantee debt incurred by the LLC, comingle funds or commit certain crimes such as fraud).
- Non-resident, Non-citizens are eligible to form an LLC in Delaware.
- The Delaware LLC Tax is currently $300 a year and is a flat rate not dependent on any other factors such as income or assets.
See the article "About LLC's and Series LLC's" in the LLC Features section of the Learning Center tab for more information about LLCs including more information about tax treatment of LLCs.
The other common entity type is the Stock Corporation (aka General Corporation). This kind of company is popular with start-up companies who hope to raise capital from investors.
- Stock corporations also provide the means to limit an owner's personal liability to the money they have invested in the company (unless they personally guarantee debt incurred by the corporation, comingle funds or commit certain crimes such as fraud).
- Unlike LLCs, corporations can be publicly traded on stock exchanges.
- Non-resident non-citizens are eligible to have a stock corporation chartered in Delaware (but are not eligible to elect "S-Corporation" tax status).
- The Delaware Franchise Tax is currently a minimum of $125 for corporations authorizing less than 5,000 shares.
Selecting a Name:
Before we register your new Corporate charter or LLC charter, DBI will check to see if the name you would like for your new company is available in Delaware (and/or any other state). You may request a Name Availability Check for up to three proposed names by submitting a request or contacting an Incorporation Specialist; there is no charge for this service. We strongly caution you against registering a domain name, applying for a Tax Id or submitting an application for a business license before it has been determined that the name you desire is available in the state(s) in which you intend to register.
See the article "Naming Your Company" in the Frequntly Asked Questions section of the Learning Center tab for more information about naming conventions (rules) and tips on how to get the name you want.
One of the unique benefits of chartering your new Corporation or LLC in Delaware is having the luxory of deciding how much information about yourself to include in the public record. The Certificate of Formation (or Certificate of Incorporation) which is registered and filed with the Delaware Secretary of State can state the names of the Initial Directors or Initial Members of the company, or can be filed without naming the directors or members on the certificate. Many of our clients elect this option to preserve their privacy. If you elect not to have your name printed on the certificate we will furnish you with a private document (not filed with the Secretary of State) which identifies the person authorized to open bank accounts, issue stock or share certificates and enter into contracts on behalf of the company.
If you form a stock corporation or not-for-profit, you will be required to name the officers and directors of the corporation and one officer when the annual report is due, even though you are not required to name them on the Certificate of Incorporation. You will not be required to name the shareholders/owners/beneficial owners.
If you form a Delaware LLC, you will not be required to file an annual report in Delaware and the names of the members of the company will not be Public Record of the Delaware Division of Corporations.
Opening a Bank Account and the Employer Identification Number (EIN):
If you plan on opening a bank account in the name of your new company it is a good idea to contact the bank you wish to use to find out what documentation they require before you place your order for new company formation. All US banks will require a company to have a Federal Employer Identification Number (EIN) to open a bank account. This is required for US bank accounts regardless of whether the company will actually have any employees or not. The other documentation requirements vary by bank and by location.
See the article "Opening a Bank Account" in theFrequently Asked Questions section of the Learning Center tab for more information and for a worksheet you can refer to when interviewing prospective banks.
See the article in the Frequently Asked Questions section of the Learning Center tab for more information about EIN's.
Placing Your Order:
The following section pertains to ordering Delaware incorporation services, other processes and time frames may apply for other states. If you are interested in forming in a state other than Delaware, contact an Incorporation Specialist for more details.
If you are a US Resident:
We're constantly striving to offer our clients the most relevant services at competitive prices. The Economy packages are appropriate for attorney's and experienced do-it-yourself types who are competent to draft their own By-Laws or Operating Agreement. The Economy Plus package offers low cost incorporation service together with model By-Laws or Operating Agreement. The Essential Package is designed to get you ready to open a business bank account with Employer Identification NUmber (EIN) Obtainment Service and a Certificate of Good Standing included; this package is very popular with internet-based businesses and consultants. The Executive Package features full-service incorporation including city business license and county permit applications and is designed to get you ready to open for business.
See the Corporations and Limited Liability Company sections of the New Company Registration tab to browse incorporation and LLC formation service packages.
If you live outside the US:
Few service companies are as prepared to meet the special needs of international businesses and offshore investors. We have designed each service package with international success in mind. The Silver package offers full compliance with Delaware laws and best practices at minimal shipping expense with electronic delivery of documents. The Gold Package is popular with international businesses that want to sell in marketplaces such as Amazon or the App Store without opening a base of operations inside the US. The Platinum Package includes a Virtual Office in the US with available Delaware local and US Toll Free phone and fax upgrades that enable international businesses to enter the US marketplace with a presence that US customers will find trust-worthy and convenient and empowers offshore investors to enjoy an advantageous tax climate with complete privacy.
Ordering and Payment Methods
For your convenience, you may place your order through our website, by fax, by phone, by email or by mail. If you place your order online we will not require you to sign an order form. If you order by phone, fax email or mail we will provide you with an order form to sign and return to us with payment or credit card authorization. You are welcome to return the order form by fax, email, mail or courier. Incorporation Specialists are available to help you complete the order form and place your order. We accept Visa, MasterCard, American Express, Discover, wire transfer, and Western Union for online orders. Other payment options are available, contact an Incorporation Specialist if you would like more information about alternate payment methods.
Once we receive payment for your order, we will be taking care of all the documentation required to form and register your new Delaware company. We will prepare the required documents and it will not be necessary for you to sign any documents or come to Delaware (1). We will then create and register your new company electronically through our direct computer connection to the Delaware Corporate Registry System. The company can be registered in as little as an hour from when payment is received (2). The company will have legal existence from the date of registration, but it typically takes the Delaware Secretary of State's office one to three business days to return the filed copy of the Certificate of Formation (or Certificate of Incorporation) (3). We will email you a scanned copy of your formation documents as soon as we receive them from the State. Corporate kits shipped to US addresses are typically delivered in 2 business days by UPS.(4) Corporate kits shipped outside the US are typically delivered by FedEx International within 5-7 business days or less.
See the Ordering FAQ for more information about placing an order and order fulfillment.
*The word "Franchise" as used here in "Delaware Franchise Tax" means "a special privilege granted to an individual or group ; especially : the right to be and exercise the powers of a corporation" and does not mean "a chain of businesses licensed by the original store and operated per the original store's pattern under the original store's trade name".
(1)If you order by phone, fax, email or mail you will be required to sign our order form. All information provided on the order form is kept strictly confidential.
(2) While most orders received during regular business hours are filled within an hour, processing time may vary due to volume. Orders received before 3:00PM EST M-F are guaranteed to be filled within 24 hours.
(3) Expedited service is available for an additional fee if you need the official document within 24 hours. Contact one of our Incorporation Specialists to request Expedited.
(4) If you do not receive your new Delaware company documents or corporate kit within 5 business days please contact an Incorporation Specialist for immediate assistance.
Disclaimer: The following article is intended to provide general information about how to incorporate in Delaware or form a new Delaware LLC and is intended for informational purposes only. It is not intended to replace the advice of an attorney or tax accountant and does not constitute individualized legal advice, legal service, or tax advice. No representations or warranties, express or implied, are given regarding the legal, tax or other consequences resulting from the use of our services, including but not limited to information and/or forms. The information supplied by DBI is supplied only with the understanding that DBI and its employees, agents and/or representatives are not engaged in rendering legal services, legal advice, or tax advice. DBI expressly disclaims any liability, loss or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this information.