How to Incorporate in Delaware

Planning Your Incorporation

Decide where to incorporate your business. One of the first decisions you will make prior to incorporating is what state you want to be the “legal home” of your company. You could form your company in the state in which your business is physically located, or you could form your company in a state with a reputation for being advantageous to business incorporation. 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 business there, but this does not mean you have to create a new company in every state you transact business in. You can choose one state to create your company in, and can then apply for permission for that company to do business in additional states.

Think about the advantages of incorporating in Delaware. You have most likely already heard about the advantages of forming your business or holding company in Delaware. The Delaware Chancery courts ensure a predictability of results given their vast amount of precedence. The overall process of incorporating in Delaware is very fast and affordable, and their customer service has a reputation of being excellent and they answer calls until 8pm. See the Qualification section of the Delaware Incorporation Handbook to determine whether you can incorporate in Delaware.

Consider that investors like Delaware Corporations. A lot of investors (particularly Angel investors and venture capitalists) prefer companies incorporated in Delaware because the state is less prone to litigation. 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. In fact, over 285,000 companies are registered at a single business address in Delaware.

Select an entity type. The next options to consider for your incorporation are the available options for “entity type.” Stock corporations, LLCs, limited partnerships, and sole proprietorships are all examples of different entity types. Different rules, laws, and taxes may apply to each type of entity. The deciding factors are usually: the type of liability protection, the method of taxation, and the complexity of administration. Consult a corporate attorney to determine the best entity type for your business needs. Factors such as number of shareholders, plans for future growth (including capital investments), and tax considerations combine to determine what entity may be the best option for your circumstances.

Choose a company name. Before you draw up your business’s paperwork, check to see if the name you would like for your new company is available in Delaware. Your company name must be unique. To check whether or not a name is already taken or reserved, just visit the website for Delaware Division of Corporations here and run a check on the name ideas that you have.The website will let you know whether the name has been taken or reserved.

Select a registered agent. If you reside outside of Delaware, you will need to name a representative who is physically located within the state of Delaware who can receive official business paperwork on your behalf. A list of registered agents can be found online. Many attorneys who regularly incorporate companies in Delaware will have a go-to registered agent that they use, so you won't have to worry about finding one if you use an attorney for the filing. Be aware that you may have to pay an annual registered agent fee of $50-$200 in order to maintain your Delaware incorporation.

Completing the Appropriate Paperwork

Hire a corporate lawyer if possible. Though you can file all of the articles of incorporation yourself, a corporate attorney is a worthwhile investment to ensure that the paperwork is completed accurately. A lawyer will help you determine the best business entity for your situation and file all of the necessary paperwork on your behalf.

Decide how much information to disclose publicly. The Certificate of Formation (or Certificate of Incorporation) which is registered and filed with the Delaware Secretary of State can contain the names of the initial directors or members of the company. Alternatively, it can be filed anonymously; that is, without naming the directors or members on the certificate. Many people elect the anonymous option to preserve their privacy. If you elect to have an “anonymous” certificate, obtain a private document (not filed with the Secretary of State) which names the initial directors or members. You will need this for purposes such as opening bank accounts and entering contracts. If you form a stock corporation or not-for-profit, you will be required to name the officers and directors of the corporation when the annual report is due, even though you are not required to name them on the Certificate of Incorporation. 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 can remain private. Some people prefer to have the names of the initial members or directors printed on the publicly filed Certificate of Formation. This is sometimes done for reasons of prestige or to facilitate the process of registering the Delaware company in a foreign jurisdiction.

Obtain a Federal Employer Identification Number (EIN). An EIN number is required for tax purposes and for opening a business bank account, which you may need to do. Getting an EIN on the IRS's website is quite easy. Follow the instructions and provide the information requested by the detailed questionnaire here.

Open a bank account. 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 an EIN to open a bank account, regardless of whether the company will actually have any employees. The other documentation requirements vary by bank and by location.

File for incorporation. Now that you understand the requirements, you can file for your business’s incorporation. There are three ways that you can file for incorporation in Delaware. You can file the documents online by yourself by obtaining all the required paperwork from the state website. An attorney can file all the paperwork for you based on the information you provide. They can also give you legal advice regarding the actual formation (such as appointing the right board, calculating the minimum par value of shares, and organizing bylaws or an operating agreement). You can use a document filing service that can file the document for you. However, agents at a service like this would not be able to provide you with legal advice.