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Delaware
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DELAWARE COMPANY INCORPORATION
Delaware Company incorporation is popular due to its tax benefits and low setup and maintenance costs. Delaware corporations with business activities outside of the state do not have to pay corporate taxes on revenue generated outside of Delaware. Additionally, incorporating a company in Delaware can be completed within two working days. Delaware division of corporation acts as the Delaware companies registry.
However, it’s worth noting that if you register a company in Delaware, some authorities may view it as a tax haven company. Despite this, Delaware corporations are still well-regarded in the international business community and are often accepted by international banks.
Key Requirements for Incorporating Delaware Company
TIMELINE OF DELAWARE INCORPORATION
Shareholder and Shares
To register a corporation in Delaware, there are no restrictions on the background of shareholders. Both individual and corporate shareholders are allowed, and the shareholder’s information is not listed in the Certificate of Incorporation, providing anonymity for investors.
Share Capital
The minimum requirement for paid-up capital to register a corporation in Delaware is US$1. Share capital can be increased anytime by communicating with the registered agent.
Directors
Delaware requires the appointment of at least one director for the corporation. The director can be a resident and nationality of any country.
Resident Agent
Delaware corporations must list the name and address of a registered agent with a physical address (no post office boxes) in Delaware. They must be available during normal business hours to accept important legal and tax documents for the business. Delaware does not require a resident director.
Registered Office Address
Companies incorporated in Delaware must have a registered agent and registered office in Delaware. These are the minimum requirements. It is common for the registered agent to provide the registered office address for the corporation.
TYPES OF DELAWARE BUSINESS ENTITIES
C-CORP
A C corporation will be taxed as a separate entity, and the company must report its profits and losses annually through the corporate tax return filing. Whereas the shareholders are not taxed on the Corporations’ profit. The Shareholder will be liable for personal tax only if the C Corp has paid him or her dividends/remunerations during the year.
S-CORP
An S-Corp is the opposite of a C-Corp in that shareholders are taxed based on their share of the corporation’s profit, while the S-Corp itself is not subjected to any tax. One of the main advantages of an S-Corp is that shareholders can offset losses incurred by the S-Corp in their income tax return, resulting in lowered taxes if the S-Corp experiences losses.
Public Benefit Corporations
This type of corporation has to include its altruistic goals in the Certificate of Incorporation, and the corporation is legally mandated by the state to act responsibly, morally, and ethically. Most business owners who run a socially conscious business with the main objective of serving the public good will choose this type of structure.
Limited Liability Corporations
This structure is viewed as a separate legal entity. The members will not be personally liable for any debts or obligations incurred by the business. It also has a lower cost structure as compared to others. Under an LLC structure, the company will require at least one or more members.
The law does not restrict the residency of the members and managers, allowing individuals from any country to be shareholders and managers. Profits and losses generated from an LLC are taxed together with the individual.
Statutory Trust
Delaware’s most flexible business entity, also known as a statutory trust, is an unincorporated association. The setup can be completed by filling out a certificate of trust with the Delaware business registry. Once set up, the trust acts as the governing body of the business, and Delaware allows for the perpetual existence of its trusts.
Limited Partnership
This is a legal entity formed by a group of partners. The partnership must choose one general partner who will be liable for a certain amount of liability. Limited partners are subject to liability and debts up to the amount of their contribution. Limited partners typically do not have management participation benefits in the company.
STEP BY STEP TO INCORPORATE A COMPANY IN DELAWARE
Incorporating a company in Delaware involves several steps, including choosing a name, preparing a certificate of incorporation, appointing a registered agent, creating corporate bylaws, appointing directors, and issuing stock.
Step 1: Appoint a registered agent prior to forming a Delaware corporation
Every Delaware corporation is required to appoint a registered agent, also known as an agent for service of process, who is responsible for receiving legal documents and official notices on behalf of the company. This is a mandatory requirement set by the state of Delaware and the agent must be available during normal business hours to accept these documents.
The registered agent can be either an individual who resides in Delaware or a business entity licensed to operate in Delaware. The agent must have a physical address within the state and must have consented to act as the registered agent for the corporation.
A corporation may also serve as its registered agent if it has a physical presence in Delaware. It is important to note that a post office box cannot be used as the registered agent’s address. Relin Consultants can act as your Delaware registered agent.
Step 2: Choosing a name for the company and decide on the company structure
The word “association,” “business,” “corporation,” “club,” “foundation,” “fund,” “incorporated,” “institute,” “society,” “union,” “syndicate,” or “limited” must appear somewhere in the name of the company. Alternatively, if it is written in Roman characters or letters, it can include a word or its acronym with a similar meaning in a different language.
The company’s name cannot be similar to another company with the same name already registered with the Delaware Secretary of State. By searching the Delaware Secretary of State’s business name database, names can be verified for availability. The applicant can reserve a name through the Delaware Division of Corporations website.
At this stage you must determine the most appropriate type of company structure you should incorporate in Delaware based on your personal circumstances and business activities.
Step 3: Register the company
The company will be formally established by submitting a certificate of incorporation to the Delaware secretary of state.
The name of the corporation, its objective, the number of shares it is authorized to issue, the registered office street address, and the name of the agent for process service at that location, as well as the name and mailing address of the incorporator, must all be included in the articles during the registration.
Relin Consultants will assist our clients in preparing all the required documents and complete the registration by liaising with the Delaware registry.
Step 4: Getting corporate bylaws ready
Corporate bylaws are a set of internal rules and regulations that govern a corporation’s operations and management. They are adopted by the corporation’s board of directors and serve as a guide for the corporation’s management and shareholders. In Delaware, corporate bylaws are not legally required, but they are highly recommended as they help establish the corporation’s legitimacy and provide a framework for the corporation’s operations.
Corporate bylaws typically include provisions such as the corporation’s purpose, the number and qualifications of directors, the process for holding meetings and elections, the responsibilities of officers, and the procedures for amending the bylaws. These bylaws are not filed with the state and are kept within the corporation’s records. It also assists in demonstrating the company’s legitimacy to lenders, creditors, the IRS, and other parties.
Step 5: Appointing Directors and Hold First Board Meeting
The original corporate directors must be chosen by the incorporator—the person who signed the articles—and will serve on the board until the first annual meeting of shareholders (when the shareholders elect the board members who will serve for the next term).
The incorporator must complete an “Incorporator’s Statement” containing the first directors’ names and addresses. The declaration must contain the incorporator’s signature, and a copy must be kept in the corporate records book while forming a corporation in Delaware.
The corporation’s board of directors shall convene at its first meeting to elect corporate officials, create bylaws, choose a corporate bank, approve the issuing of stock, and establish the corporation’s fiscal year and adopt an official stock certificate form and corporate seal.
Step 6: Issuing stock
In exchange for each shareholder’s capital contribution of money, an asset, a service, or a combination of all three, issue shares to them. Paper stock certificates are typically issued by small firms. The business must complete the corporation’s stock transfer ledger with each shareholder’s name and contact details.
Delaware allows firms to choose between setting a par value for their stock and issuing shares with no par value. The par value, which has nothing to do with the stock’s actual value, is a predetermined limit beyond which it cannot be sold.
Step 7: Filing an annual report
Every corporation formed in Delaware is required to submit an annual report and pay a franchise tax with it. The Delaware Division of Corporations must receive the taxes and annual reports no later than March 1st of each year. An annual report must be submitted by foreign firms by June 30 of every year. You can refer to Delaware company annual requirements for additional information on a Delaware company’s compliance requirements.
Step 8: Obtaining an EIN (Optional)
Obtaining a federal employment identification number is required for the business (EIN). By submitting an online application on the IRS website, the applicant can get an EIN. There isn’t a filing charge.
PROS AND CONS OF INCORPORATING A COMPANY IN DELAWARE
PROS
Tax Benefits
Delaware government offers income tax exemptions to corporations that do not do business inside the state. (i.e, offshore corporations).
Delaware is known for its business-friendly tax laws, which include no corporate income tax for companies that do not conduct business in Delaware and a low franchise tax for companies that do conduct business in Delaware.
Privacy
In business registration Delaware, it is not mandatory to disclose the company directors’ and officers’ names to the authorities during the incorporation. Hence it allows anonymity to shareholders who do not wish their information to be publicly available while starting a business in Delaware.
Simple structure and requirements
A Delaware corporation does not need a resident director/shareholders. Delaware Company incorporation can be completed in two business days with minimal requirements.
Ease of Incorporation
The process for incorporating a company in Delaware is relatively simple and can be completed quickly.
Flexible business structures
Delaware offers a variety of business entity options, such as C-Corp, S-Corp, LLC, and statutory trust, which allows businesses to choose the structure that best suits their needs.
CONS
No real benefits for US Citizens
A US Citizen with a Delaware corporation will still need to meet and declare his/her Delaware income in the other US states where the person is residing. Hence, it might not be as beneficial considering the cost involved.
State fees
Delaware has relatively high fees associated with incorporating and maintaining a company, which can be a deterrent for some businesses.
Complexity in certain regulations
While Delaware has a pro-business legal environment, certain regulations can be complex, which can make it difficult for some businesses to navigate the incorporation process.
Why Choose Relin Consultants To Register Your Company In Delaware
Relin Consultants is a professional firm that specializes in helping businesses incorporate in Delaware. Our team of experienced consultants has a thorough understanding of the laws and regulations surrounding company incorporation in Delaware, and we can provide expert guidance and support throughout the process.
We understand that incorporating a company can be a complex and time-consuming process, that’s why we offer comprehensive business incorporation services to make it easy for you.
Our team will handle all the paperwork and documentation, allowing you to focus on your business operations.
We can help you determine the most appropriate type of company structure for your business based on your specific needs and goals. We’ll provide guidance on the legal and financial implications of different structures and assist you in the incorporation process.
Our team can also provide ongoing support and advice for maintaining compliance and ensuring the continued success of your business. We can provide a one-stop solution for Delaware company registration for non-residents.
Contact us at Relin Consultants to learn more about how we can assist you with incorporating a business in Delaware.
FAQs
Can a foreigner incorporate a company in Delaware?
Yes, a foreigner can incorporate a company in Delaware. There are no restrictions on the nationality of shareholders, directors, or officers of a Delaware corporation.
This means that individuals from any country can own shares in a Delaware corporation and serve as directors or officers. The only requirement is that the corporation must appoint a registered agent with a physical address in Delaware to receive legal documents on behalf of the corporation.
Additionally, the company will be required to comply with all the legal requirements of the state of Delaware, regardless of the nationality of the shareholders, directors, or officers, after setting up a Delaware corporation.
How long does it take to form a corporation in Delaware?
It typically takes 2-3 business days to form a corporation in Delaware if you submit the incorporation articles through the mail or in-person. This time frame can be shorter if you submit the articles of incorporation online and if you are using a professional service like Relin Consultants, as they will have knowledge of the process and be able to handle the paperwork and documentation efficiently.
However, it’s important to note that the Delaware company formation of a corporation is just the first step in setting up a business. Other tasks need to be completed such as obtaining licenses, and permits, registering for taxes, and more, which may take additional time. In addition, you should also consider the time it takes to prepare the required documents, such as the certificate of incorporation, bylaws, and other required forms.
How much does it cost for registering a business in Delaware?
The cost of registering a business in Delaware can vary depending on the type of business entity you choose and the services you require. Here are some of the costs that you can expect:
- The filing fee for the certificate of incorporation: The fee for filing the certificate of incorporation with the Delaware Secretary of State is $89 for standard processing and $199 for expedited processing if you are submitting the articles of incorporation online. If you are submitting the articles of incorporation through the mail or in person, it’s $90 for standard processing and $200 for expedited processing.
- Registered Agent fee: A registered agent service is required for all Delaware corporations and LLCs. The fee for this service varies depending on the provider
- Annual Report fee: All corporations and LLCs are required to file an annual report with the Delaware Secretary of State. The fee for this report is $50 for standard processing and $100 for expedited processing.
- Franchise Tax: Delaware’s Franchise Tax is a fee that all corporations and LLCs are required to pay annually. The fee is based on the number of authorized shares of stock and can range from $75 to $200,000.
- Other costs: Other costs to consider include the cost of professional services such as accounting, legal and consulting services, which can vary depending on the specific services required.
What does it mean by Delaware franchise tax?
In Delaware, a franchise tax is a fee that all corporations and LLCs are required to pay annually to the state government. This tax is separate from income tax and is based on the number of authorized shares of stock for a corporation or the number of members for an LLC. The franchise tax is calculated as a percentage of the value of the authorized shares or members.
The Delaware franchise tax rate for a corporation is $75 for the first 5,000 shares or $175 for the first 10,000 shares and $250 for the first 25,000 shares and $300 for every additional shares.
For LLCs, the franchise tax rate is $300 for the first $5,000 of revenue and $75 for each additional $1,000 of revenue, up to $200,000.
It’s important to note that the franchise tax is an annual fee, and failure to pay it may result in penalties and fines. Also, the rate may change over time depending on the state’s budget and economic situation.
How do I know if my Delaware business name is available?
On the Delaware Secretary of State website, you can perform a name search. This will inform you of the availability of your chosen name for Delaware business incorporation and whether or not it is not already in use by another company.
Do I need to create corporate bylaws in Delaware?
Although corporate bylaws are not mandated by all states to register a company in Delaware, it is still a good idea for any company to have them. The fundamental guidelines for running your organization are outlined in the bylaws, which are internal corporate documents.
They describe the procedures and policies of the board of directors and assist in demonstrating your corporation’s legitimacy to banks, creditors, the IRS, and other parties. It is advisable for all companies to prepare a corporate bylaws.
How to register as an S Corporation?
Form 2553 election by a small business corporation must be submitted if the corporation wishes to elect S corporation status for tax reasons. The form must be signed by all the shareholders. The election form must be filed within two months and fifteen days from the start of the corporation’s first tax year.
Does my corporation need a business license in Delaware?
In Delaware, whether or not your corporation needs a business license depends on the type of business you are operating and the location where you will be operating it.
Most businesses in Delaware are required to have a business license. However, certain types of businesses, such as professional service providers (e.g. attorneys, accountants, engineers, etc.) and certain retail businesses (e.g. hair salons, grocery stores, etc.) may be required to have additional licenses or permits.
It’s important to note that even if your corporation is based in Delaware, if you conduct business in other states, you may be required to obtain additional licenses or permits in those states as well.
It’s advisable to check with the local government in the area where you plan to operate your business to find out if you need a business license. A professional firm like Relin Consultants can assist you in understanding the requirements and help you in obtaining the necessary business licenses in Delaware.
How can I register a foreign corporation in Delaware?
A Delaware foreign corporation is a corporation that is originally incorporated in a different state or country but has registered to do business in Delaware. This is also known as foreign qualification or registration of a foreign corporation.
All corporation formed outside of Delaware must obtain a certificate of authority from the Delaware Secretary of State, allowing it to conduct business in Delaware.
The process of registering a foreign corporation in Delaware typically involves filing an application for a certificate of authority, appointing a registered agent, and paying a filing fee.
By doing this, the corporation is subject to the laws and regulations of Delaware, including franchise taxes and annual report requirements. Once a foreign corporation is registered in Delaware it can conduct business in the state and is allowed to open a bank account, enter into contracts and it can be sued in the state of Delaware.
Do I need to form a professional corporation?
Whether or not you need to form a professional corporation in Delaware depends on the type of business you are operating and the specific regulations and requirements for that profession in Delaware.
A professional corporation is a type of corporation that is formed by licensed professionals, such as doctors, lawyers, accountants, engineers, etc. These corporations are formed to provide professional services and are subject to different laws and regulations than regular corporations.
In Delaware, certain professions, like doctors and lawyers, are required to form a professional corporation if they want to provide their services through a corporation. Other professions, like accountants and engineers, are not required to form a professional corporation but they have the option to do so.
How can I dissolve my Delaware corporation?
To dissolve a Delaware corporation, you will need to follow these steps.
- Hold a meeting of the board of directors: The board of directors must vote to approve the dissolution of the corporation and authorize the filing of articles of dissolution with the Delaware Secretary of State.
- File articles of dissolution: The articles of dissolution must include the name of the corporation, the date of the board of directors’ vote to approve dissolution, and a statement that all debts and liabilities of the corporation have been paid or adequately provided for.
- Obtain any necessary approvals: Depending on the nature of your business, you may be required to obtain the approval of shareholders, creditors, or regulatory authorities before dissolving the corporation.
- Pay any outstanding taxes and fees: The corporation must pay all outstanding taxes and fees, including franchise taxes and annual report fees, before the dissolution can be approved.
- Notify creditors and other interested parties: The corporation must notify all known creditors and any other parties who may have an interest in the dissolution of the corporation.
- File a final tax return: The corporation must file a final tax return with the IRS and the Delaware Division of Revenue.
- Close bank accounts and cancel any licenses: The corporation must close any bank accounts and cancel any licenses or permits that are no longer needed.
Why do so many companies incorporate in Delaware?
There are several reasons why many companies choose to incorporate in Delaware:
- Favorable business laws: Delaware has a highly developed and business-friendly legal system, with a specialized court (the Court of Chancery) that handles corporate disputes. This makes it a popular choice for companies looking to incorporate.
- Tax benefits: Delaware does not impose corporate income tax on companies that do not conduct business within the state. Additionally, there is no franchise tax for companies that are not publicly traded.
- Anonymity: Shareholders’ names do not have to be listed on public records, which allows for anonymity.
- Flexibility: Delaware law allows for a wide range of corporate structures, including LLCs, S-corporations, and C-corporations.
- Established reputation: Delaware has a long-standing reputation as a business-friendly state, making it a popular choice among companies looking to incorporate.
- Ease of incorporation: The process of incorporating in Delaware is relatively straightforward and can be completed quickly, making it an attractive option for companies looking to incorporate.
- Experienced professionals: Delaware has experienced and professional firms like Relin consultants that can help with the incorporation process and provide ongoing support and guidance for maintaining compliance.
- As a result of these factors, many companies, particularly start-ups and small businesses, choose to incorporate in Delaware.
Is Delaware still the best state to incorporate?
Delaware has long been considered one of the best states to incorporate in the United States. It is known for its business-friendly laws, tax benefits, and reputation as a business-friendly state. However, it is important to note that the best state to incorporate in will depend on the specific needs of your business.
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