How to Form a Corporation in Delaware

You've likely done your research and decided that forming a corporation is the right choice for your business. After choosing your business structure, the next step is to officially start your company.

Should You Incorporate in Delaware?

Delaware is a popular state to form a corporation because it offers many benefits. Many larger corporations have chosen to incorporate in Delaware—usually setting up their headquarters in another state.

The primary reason so many companies decide to incorporate in Delaware is the state's friendly tax laws. Corporations that don't do business in Delaware don't have to pay the state's corporate income tax, even if the company is incorporated there. Instead, corporations pay a small franchise tax.

Additionally, Delaware doesn't have a state sales tax or property tax, lowering the cost for many corporations who do decide to do business in the state. Even corporations that do business within the state can avoid paying corporate income tax.

Moreover, Delaware's laws around corporations are more developed than other states. Delaware even has a separate court system, the Court of Chancery, that handles cases related to corporate matters.

8 Steps to Forming a Corporation in Delaware

To form a corporation in Delaware, you need to take the steps set forth below.

1. Choose a Corporate Name

Your corporation's name must include at least one of the following (or an abbreviation):

• "association"
• "company"
• "corporation"
• "club"
• "foundation"
• "fund"
• "incorporated"
• "institute"
• "society"
• "union"
• "syndicate," or
• "limited."

Alternatively, your corporation's name can include a word or its abbreviation of a similar meaning in another language, provided it's written in Roman characters or letters. Your corporation's name can't be deceptively similar to the names of other business entities already on file with the Delaware Secretary of State (SOS). (Del. Code tit. 8, § 102 (2023).)

You can check whether your proposed business name is available by searching the SOS's business name database. You can apply online to reserve a business name for 120 days through the Delaware Division of Corporations (DOC) website.

2. Appoint a Registered Agent for Your Corporation

Every Delaware corporation must have an agent for service of process in the state. This agent is an individual or corporation that agrees to accept legal papers on the corporation's behalf if it's sued. The agent should agree to accept service of process on your corporation's behalf prior to designation.

The agent can be an individual Delaware resident or a business entity authorized to do business in Delaware. The registered agent must have a physical street address in Delaware. However, if your corporation is physically located in Delaware, it can act as its own registered agent. There's a list of Delaware Registered Agents on the DOC website.

3. Prepare and File a Certificate of Incorporation

Your corporation is legally created by filing a Certificate of Incorporation - Stock Corporation with the SOS. Articles can be filed online or by postal mail and you must include a Filing Cover Memo (this is created automatically when you file online).

As of 2023, there's a $109 minimum filing fee for:

1. up to 1,500 shares of no par value stock, or
2. up to $75,000 of par value stock.

After these thresholds, the fee increases based on the number of shares of no par stock or the value of par value stock. (See the Delaware Corporate Fee Schedule.)

The articles of incorporation must include:

• the corporation's name
• the registered office street address and name of the agent for service of process at that address
• the number of shares the corporation is authorized to issue;
• the corporation's purpose; and
• the name and mailing address of the incorporator.

(Del. Code tit. 8, § 102 (2023).)

The preprinted articles form on the SOS website also includes a line to list the par value of the corporate shares. However, the use of par value is optional in Delaware (see "Issue Stock" below). If you want to issue shares without par value, cross out the line "a par value of $___ per share" on the form and add "no par value."

There are two sample Certificate of Incorporation forms on the SOS website: One includes an optional directors liability provision which protects directors from personal liability for breaches of their duty of care.

4. Prepare Corporate Bylaws

Bylaws are an internal corporate document that set out the basic ground rules for operating your corporation. They're not filed with the state, and your corporation isn't legally required to have them. Nevertheless, you should adopt bylaws for your corporation because they:

• establish your corporation's operating rules, and
• help show banks, creditors, the IRS, and others that your corporation is legitimate.

You might want to consult with a business attorney to help you create your bylaws. If you want to draft your bylaws yourself but need some extra help, check out Incorporate Your Business: A Step-by-Step Guide to Forming a Corporation in Any State, by Anthony Mancuso (Nolo). Corporate kits also typically contain sample bylaws.

Keep your bylaws, meeting minutes, and other important corporate papers in a corporate records book. This book can be a simple three-ring binder or corporate records kit you order through a corporate kit supplier. Keep these important documents at your corporation's principal office.

5. Appoint Directors and Hold the First Board Meeting

The incorporator—the person who signed the articles—must appoint the initial corporate directors who'll serve on the board until the first annual meeting of shareholders (when the board members who'll serve for the next term are elected by the shareholders). The incorporator must fill in an "Incorporator's Statement" showing the names and addresses of the initial directors. The incorporator must sign the statement and place a copy in the corporate records book. The statement need not be filed with the state.

At the first meeting of the corporation's board of directors, the directors should:

• appoint corporate officers
• adopt bylaws
• select a corporate bank
• authorize the issuance of shares of stock
• set the corporation's fiscal year, and
• adopt an official stock certificate form and corporate seal.

The directors' actions must be recorded in corporate minutes prepared by the incorporator or any of the directors and approved by the board of directors. Additionally, if the corporation will be an S corporation, the directors should approve the election of S corporation status. For sample Incorporator's Statement and corporate meeting minute forms, refer to Incorporate Your Business, by Anthony Mancuso (Nolo).

6. Issue Corporate Stock

Issue stock to each shareholder in return for their capital contributions of cash, property, services, or all three. Small corporations usually issue paper stock certificates. Enter each shareholder's name and contact information in the corporation's stock transfer ledger.

Delaware gives corporations the option of establishing a par value for their stock or issuing no par value shares. Par value is a set amount below which the stock can't be sold—it has nothing to do with the stock's actual value. Par value is an antiquated legal concept used in some states. If the shares are issued with no par value, "no par value" should be printed on the stock certificates.

A share of stock in your corporation is classified as a security under state and federal securities laws that regulate the offer and sale of corporate stock. However, federal law exempts "private offerings:" a non-advertised sale to a limited number of people (generally 35 or fewer). See our Corporations FAQ for more details.

Delaware exempts from state registration unadvertised share sales to any number of accredited investors, provided the shares are purchased for investment. Accredited investors include corporate officers, directors, and wealthy investors (those worth at least $1 million or who earn $200,000 per year if single, $300,000 if married).

If shares are sold to 35 or fewer unaccredited investors in an unadvertised sale, no registration is required but the corporation must file Form LOE, Notice of Limited Offering Exemption with the Investor Protection Unit of the Delaware Department of Justice within 15 days of the first sale. No filing fee is required. (For more information, see the Investor Protection Unit of the Delaware Department of Justice.)

7. File Annual Report and Pay Franchise Tax

All corporations incorporated in Delaware must file an annual report and pay a franchise tax along with it. The taxes and annual reports must be received by the DOC no later than March 1 of each year. Foreign corporations are required to file an annual report by June 30 of each year. The annual report is filed online.

As of 2023, the annual report filing fee for domestic corporations is $50 plus franchise taxes due upon filing of the report. The filing fee for foreign corporations is $125.

As of 2023, the minimum franchise tax is $175 with a maximum tax of $200,000. Corporations owing $5,000 or more pay estimated taxes in quarterly installments with 40% due June 1; 20% due by September 1; 20% due by December 1; and the remainder due March 1. Consult the Delaware Franchise Tax Calculator for details.

The penalty, as of 2023, for not filing a completed annual report on or before March 1st is $200. Interest at 1.5% per month is applied to any unpaid tax balance. Foreign corporations are assessed a penalty of $125 if the annual report is not filed.

8. Obtain an EIN for Your Corporation

Your corporation must obtain a federal employer identification number (EIN). You can obtain an EIN by completing an online application on the IRS website. There's no filing fee.

Additional Guidance About Forming Your Delaware Corporation

When forming a corporation, you'll need to make important decisions such as how many shareholders your company will have, how your corporation will be taxed, and what to put in your corporate bylaws. Many business owners make these decisions and file the appropriate paperwork across the various departments and agencies on their own. However, it can be helpful to consult with an attorney on one or more of these topics, such as drafting corporate documents.

You can also use our online corporation service service, which will form a corporation for you with everything you need. For answers to questions about our service, check out our online Delaware corporation FAQ.