Here’s an overview of the key steps you’ll need to take to start your own business in Delaware.
The most common legal structures for a small business are:
There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of liability protection you want and the best tax, financing, and financial benefits for you and your business. Check Choose Your Business Structure on Nolo’s website for more information on how to choose the best ownership structure for your business.
For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the Delaware Division of Corporations (DOC). You can check for available names by doing a business name search on the DOC website. You can reserve an available name for 120 days by filing a Name Reservation Application either online or on paper. You can also renew (re-reserve) a name reservation after first applying for one. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Company” for corporations). See How to Form an LLC in Delaware andHow to Form a Corporation in Delaware for more information.
Is your business a sole proprietorship or partnership that uses a business name that is different from the legal name of the business owner (for a sole proprietorship) or surnames of the individual partners (for a partnership)? If so, you must file a trade name certificate with the county where your business is located. File with the Prothonotary’s office located in the county’s Superior Court.
If you plan on doing business online, you may want to register your business name as a domain name. See Choose and Register a Domain Name for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See How to Do a Trademark Search for more information.
Tax Registration. If you will be selling goods in Delaware, you must register with the Division of Revenue (DOR) and, if liable, pay the state’s gross receipts tax. If your businesses will have employees, you must register with the Division of Revenue (DOR) for employer withholding taxes. You can register for both kinds of taxes online using Delaware’s One Stop Business Registration and Licensing System. You can also register on paper using Form CRA,Combined Registration Application.
EIN. If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.
State business license. Every Delaware business is required to get an annual state business license. The license is issued by the Division of Revenue. You can register for the license online at the One Stop Business Licensing and Registration Service. Depending on your specific type of business you may also need other licenses or permits issued by specific state agencies, such as the Division of Public Health within Delaware Health and Social Services. In addition, some required licenses are issued locally, so be sure to check the websites for any cities or counties where you will do business.
Professional and occupational licenses. These cover people who work in various fields. The Division of Professional Regulation (DPR) oversees the state’s many professional regulatory boards. The homepage of the DPR website lists virtually all of the regulated professions.
You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking municode.com.
Delaware taxes every kind of business. This includes a special state tax that applies to LLCs and most partnerships. See Delaware State Business Income Tax for more information on state business taxes in Delaware.
Sole proprietorships. Pay state taxes on business income as part of their personal state income tax returns (Form 200-01).
Partnerships. Partners pay state taxes on partnership income on personal tax returns. In addition, Delaware partnerships also must file Form 300, Partnership Return.
LLCs. Members pay state taxes on their share of LLC income on personal tax returns. In addition, LLCs themselves have to file an additional state tax form — either a partnership return or a corporation return. The specific form used will depend on how the LLC is classified for federal tax purposes. Unlike most states, Delaware does not require LLCs to file annual reports. However, the state does require LLCs to pay an annual tax. See Delaware LLC Annual Filing Requirements for more information.
Corporations. Shareholders must pay states taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on his or her personal state tax return. Moreover, the corporation itself is subject to Delaware corporation taxes. And, finally, corporations must file an annual report with the Delaware DOC (which is associated with payment of the state’s franchise tax).
If you have employees, you must also deal with state employer taxes.
And, apart from Delaware taxes, there are always federal income and employer taxes. Check IRS Publications 334,Tax Guide for Small Business, and 583, Taxpayers Starting a Business, available at irs.gov.
Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check Obtaining Business Insurance for more information.