To form a corporation in Delaware, you need to take the steps set forth below. You can also use Nolo's Online Corporation service, which will form a corporation for you with everything you need.
Your corporation's name must include the word "association," "company," "corporation," "club," "foundation," "fund," "incorporated," "institute," "society," "union," "syndicate," or "limited" (or an abbreviation thereof, with or without punctuation). Alternatively, it can include a word or its abbreviation of similar meaning in another language, provided it is written in Roman characters or letters.
Your corporation's name must not be deceptively similar to the names of other business entities already on file with the Delaware Secretary of State. Names may be checked for availability by searching the Delaware Secretary of State business name database. You can reserve a name online through the Delaware Division of Corporations website.
Your corporation is legally created by filing a Certificate of Incorporation - Stock Corporation with the Delaware Secretary of State. 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). There is a $89 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 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; its purpose; and the name and mailing address of the incorporator.
The preprinted articles form on the Secretary of State's website also includes a line to list the par value of the corporate shares. However, 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 Secretary of State's website: One includes an optional directors liability provision which protects directors from personal liability for breaches of their duty of care.
Every Delaware corporation must have an agent for service of process in the state. This is an individual or corporation that agrees to accept legal papers on the corporation's behalf if it is sued. The agent should agree to accept service of process on your corporation's behalf prior to designation.
The agent may be (1) an individual Delaware resident, or (2) 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 may act as its own registered agent. There is a list of Delaware Registered Agents on the Delaware Division of Corporations website.
Bylaws are an internal corporate document that set out the basic ground rules for operating your corporation. They are not filed with the state. Your corporation is not legally required to have corporate bylaws, but you should adopt them because they (1) establish your corporation's operating rules, and (2) help show banks, creditors, the IRS, and others that your corporation is legitimate. For corporate bylaw forms, see Nolo’s website or Incorporate Your Business, 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 can be a simple three ring binder or corporate records kit you order through a corporate kit supplier. Keep it at your corporation's principal office.
The incorporator—the person who signed the articles—must appoint the initial corporate directors who will serve on the board until the first annual meeting of shareholders (when the board members who will 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.
The first meeting of the corporation's board of directors should be held at which the directors can 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, see Nolo’s website or refer to Incorporate Your Business, by Anthony Mancuso (Nolo).
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 cannot be sold--it has nothing to do with the stock's actual value. It is an antiquated legal concept used in some states. See Nolo's article "What is Par Value Stock." 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 Nolo's 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.
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 Delaware Division of Corporations no later than March 1st of each year. Foreign corporations are required to file an annual report by June 30 of each year.
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.
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 for not filing a completed annual report on or before March 1st is $100. 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.
The annual report is filed online. A Notification of Annual Report and Franchise Taxes due is sent to all Delaware registered agents in December of each year.
Additional tax and regulatory requirements apply to your corporation. These include:
S Corporation Filing: If the corporation wants to elect S corporation status for tax purposes, it must submit Form 2553 Election by a Small Business Corporation (signed by all the shareholders). The election should be filed within two months and 15 days after the beginning of the corporation's first tax year. See the IRS S Corporation Fact Sheet for details.
Business Licenses: If your corporation actively conducts business in Delaware, it must obtain a Delaware business license from the Delaware Division of Revenue. The license can be obtained online using the Delaware One Stop Licensing and Registration Service; or by mailing the Combined Registration Application Form (Form CRA). Your corporation may also need a local business license from the town, city, or county in which it is located; see the Delaware Business First Steps website for more information.
All corporations organized outside of Delaware must register with the Delaware Secretary of State to do business in Delaware. Foreign corporations must appoint a registered agent for service of process physically located in Delaware. To register, file the State of Delaware Qualification Certificate of a Foreign Corporation. The completed certificate must be accompanied by a Certificate of Existence, dated within 6 months prior to the filing of the certificate, from the foreign corporation's home state.