How to Incorporate in Delaware

Understanding New Company Formation, Made Easy

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 in Delaware 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.
• You have most likely already heard about the advantages of forming your business or holding company in Delaware.
• As of September 1, 2017, more than 1,200,000+ 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.
• 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.

Corporations

• 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.

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.

Included in all incorporating services:

• Company Name Check Verification & Availability
• Preparation & Filing of Articles of Formation
• Same Business Day Processing
• Registered Agent (1st Year FREE)
• Email Reminders & Alerts
• Lifetime Customer Support

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