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 by filed by postal mail or fax and you must include a Filing Cover Memo.
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 and the par value per share; its purpose; and the name and mailing address of the incorporator. 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.
Set up a corporate records book in which you keep all of your corporation's important papers, including minutes of director and shareholder meetings, stock certificates, and stock certificate stubs. Keep your corporate records book at the principal office of your corporation. You can use a three-ring binder as the corporate records book or you can order a special corporate records kit through a corporate kit supplier.
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.
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. For a sample Incorporator's Statement, see Incorporate Your Business, by Anthony Mancuso (Nolo).
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 corporate meeting minute forms, see Nolo’s website or refer to Incorporate Your Business, by Anthony Mancuso (Nolo).
Issue stock to each shareholder. Although not legally required in most states, small corporations usually issue paper stock certificates. Enter each shareholder's name and contact information in the corporation’s stock transfer ledger.
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, the federal government and all states exempt most small corporations from these laws. For example, federal law exempts "private offerings:" a non-advertised sale to a limited number of people (generally 35 or fewer). Most states have enacted their own versions of this SEC exemption.
Visit your state securities office website for information about your state's securities laws. Links to all such offices can be found at the Contact Your Regulator webpage of the North American Securities Administrators Association.
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 $75 with a maximum tax of $180,000. 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:
EIN: Your corporation must obtain a federal employer identification number (EIN). You may obtain an EIN by completing an online application on the IRS website. There is no filing fee.
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: Depending on its type of business and where it is located, your corporation may need to obtain other local and state business licenses.
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.