How to Incorporate a Business in Delaware

Posted by on Friday 9 Nov 2012

Incorporating a business in the state of Delaware is not complicated, but you must know the rules and fees associated with the process, and follow them to the letter. You must acquire and accurately fill out the necessary paperwork, and send it to the Department of State. This post shall serve as a step-by-step guide as to how to accomplish these steps, and to be on the way to a successful entrepreneurial experience in the state of Delaware.

I. Get a Registered Agent

This entity must be a person or business with a physical street address in Delaware, as opposed to a post office box or Internet website. It can even be you, or your company, provided that such an entity conducts business from the State of Delaware.

II. Establish/Reserve Your Name

The state of Delaware has stipulations for the choice of a name of which you should be aware. According to the Active Filings website, your corporation names must contain one of the following endings: “Association;” “Company;” “Club;” “Corporation;” “Union;”” Society;” “Syndicate;” “Foundation;” “Fund,” or “Limited.” Or the name must end with such abbreviations as “Ltd,” “Co,” “Corp,” or “Inc.” Do not attempt to use “Trust” as a name ending; it is illegal to do so in Delaware, unless you are doing it as a corporation under the supervision of a bank commissioner.

Although the establishment of an entity name is required, registration of your name is not. However, it is wise. For if you have a preferred corporation name, you should ensure that no one else is able to take it. What name reservation does is to place a 120-day guarantee on your business entity name. By law, nobody can use it within that period. According to the State of Delaware website, you can do this by accessing https://delecorp.delaware.gov/tin/EntitySearch.jsp. You can also enter your desired name there to see if anyone else already is doing business under your chosen name. Remember, however, that there is a fee — $75.00. The Delaware Department of State takes all major credit cards, Visa, MasterCard, Discover, and American Express.

III. Locate the Correct Forms

Go to http://corp.delaware.gov/newentit09.shtml to find sample forms to submit for the incorporation of your business in the State of Delaware, plus a schedule of fees. This step is important, for you must fill these forms out completely, and provide the correct amount of money, or your forms will be sent back by first class mail. Follow the instructions on these forms very carefully to speed up their approval of your entity as a corporation.

IV. Include a Cover Sheet

Indeed, one of the required forms on any business incorporation application in the State of Delaware is a cover sheet. This document must include your name or that of the business, the return address, and telephone number. This form is available at http://corp.deleware.gov/cvrmemo/shtml.

V. Know Financial Institution Requirements

As the State of Delaware website points out, some financial institutions mandate that you include a Good Standing Certificate, or a certified copy of your new business filing. If you’re applying for incorporation in Delaware — or any other state, for that matter — it’s advisable to check with the financial institution with which you are setting up your business account to find out if these forms are required by them.

There is a fee for such certificates. You order them at the time you file for incorporation by writing in the Comments section of your application that you need such forms. The cost is $50.oo per certificate for a short form certificate of status, and $175 for a long form. If you wish to expedite the processing of your request, the fees are even more.

VI. Become Familiar With the Tax Laws

The State of Delaware charges an Annual Franchise Tax, to be filed no later than March 1, covering business you have conducted in the previous year. The minimum amount of money you’ll owe is $75, according to the Bizfilings website, while the maximum tax is $180,000. If you owe $5,000 or more, you may pay in quarterly installments — 40 percent by Sept. 1, 20 percent by Dec. 1, with the balance payable by March 1st of the next year. If you happen to be a tax-exempt organization, such as a non-profit, you must still file an annual report, due in to the Department of State by March 1st. The penalty for not filing the report is $100, with interest for nonpayment at 1.5 percent.

Also important are rules governing authorized shares. The State imposes taxes on such shares, according to their worth. According to Active Filings, for up to and including 3,000 shares, your cost will be $30.oo in taxes; you will owe $50 for 3,000-5,000 shares. For shares between 5,000-10,000, the cost is $90, plus $50 for every$10,000 shares after the first 10,000.

Another significant tax in the state of Delaware that you should know about is the income tax. For all business entities — including corporations — operating inside the state of Delaware, that tax is 8.7 percent, according to the Active Filings website.

VII. Other Considerations

Depending on the profession of your business, the State of Delaware may also require you to apply for certain licenses. As the Active Filings website advises, you should check with the Department of State to see what these rules are, as well as the fees associated with such certification.

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