How to Start a Business in Delaware Checklist
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How to Start a Business in Delaware:
Delaware is known for its business-friendly laws that include competitive tax rates, jury-free courts for business lawsuits, a swift corporate legal process, flexible formation laws, ownership privacy, and more. More than 50% of publicly traded Fortune 500 companies are incorporated in Delaware for these reasons.
Form your business.
Review Delaware formation options.
Delaware offers four main ways of forming your business. Review these closely and pick the one that fits your business best.
Name your business.
In Delaware, a business cannot operate under a fictitious name without first registering a DBA with the relevant county Office of the Prothonotary. A business is required to register a fictitious name if it intends to operate under a name that differs from its legal name.
Before you register your business under a chosen name, you need to check whether the name is available for use.
The requirements of each county may vary.
Go to the Delaware Courts website.
Under the "eServices" tab, select "Trade Names Database."
Enter your proposed name in the search box. Ensure that the county filter is "All."
Read through the search results which show you businesses that match your search or closely related names. Click on the filing number to read more about each registered business. If there are no results, the business name that you want is still available.
Also, check the Delaware Divisions of Corporations website to ensure that your business name is not the same or similar to another corporation registered in Delaware.
The name reservation fee is $75.00.
If you need help finding a business name, be sure to check out NameSnack's free business name generator.
Get an Employer Identification Number (EIN).
Nearly all businesses will need to register for federal taxes by applying for an Employer Identification Number.
Registering for an EIN is simple—all you need to do is go to the IRS website. You can complete the application online, and save your EIN confirmation notice once you receive a number from the IRS.
Register your business in Delaware.
Once you have chosen a business name and a legal structure, you can then register your business with the state.
Go to the Delaware One Stop Business Portal.
Click on "Register and license your business" at the bottom of the page.
Answer the questions and follow the prompts to register your business.
The registration fee can cost between $90.00 and $200.00 depending on the business formation type.
Obtain necessary permits and licenses.
The state of Delaware requires any person or business conducting a trade or business to obtain a Delaware business license from the Delaware Division of Revenue. In addition, you may need specific business licenses and permits depending on the type of business you start in Delaware.
You can refer to the Delaware One Stop Business Portal to view the most common types of businesses together with information on the licenses and permits required for those types of businesses.
Delaware business licenses can cost between $25.00 and $75.00. However, this cost could increase, depending on your business services and products sold.
Check the list of licenses that pertain to your profession or industry.
Search the list of licences and permits that are mandated by your county, city, or town.
Finally, read through the list of federal licences that you may need to acquire.
Register your business for taxes.
Register for unemployment tax.
In Delaware, businesses with employees are required to establish a Delaware unemployment insurance tax account with the Delaware Department of Labor. If your business is required to contribute towards unemployment insurance, you will be required to file quarterly reports.
Register with the Delaware Division of Unemployment Insurance.
Download and fill out the UC-1 report to determine your liability.
Register for franchise tax.
Entities legally recognized as businesses in Delaware are subject to franchise tax, a "privilege tax" for doing business in the state. Only sole proprietorships and partnerships owned by individuals are exempt.
Go to the Delaware Division of Corporations website.
Scroll to the bottom of the page and click the "Pay Taxes/File Annual Report" option.
Select the "Click Here to Pay Taxes / File Annual Report" button.
Enter your Business Entity File Number. This number can be obtained by running your business name through the Delaware Courts Trade Names Database.
Enter your business information and complete the payment. The minimum filing fee is $50.00.
The minimum Delaware franchise tax is $175.00. Businesses that file after the March 1 deadline must pay a $200.00 penalty and 1.5% interest on the amount owed.
Hire employees and report them to the state.
Register with the Delaware Directory of New Hires.
You will need to register new employees with the Delaware Directory of New Hires. Employees need to be registered within 20 days of starting. This does not apply to independent contractors.
Delaware employers need to issue every new employee an I-9 form to verify they are eligible to work in the U.S.
Go to the Delaware Directory of New Hires website.
Select "When and How to Report."
Under "Online Reporting," click the "Register here and start now" link (there are other methods for online reporting, including using your own HR software).
Fill out the form with your business details and click "Submit."
With reference to the pre-employment screening process in Delaware, an employer is entitled to view a job applicant’s criminal history and obtain the relevant records from the criminal justice system.
Obtain workers’ compensation insurance.
Delaware’s law requires all employers to provide workers’ compensation coverage to their employees. You can obtain more information from the Delaware Department of Labor website.
Health insurance isn’t a requirement for small businesses in Delaware.
Display mandatory posters in your place of business.
The Delaware Department Of Labor mandates that all employers display two main posters for the benefit of employees and customers.
- Labor Law Information Poster.
- Delaware Sexual Harassment Notice.
Other mandatory posters include:
- Minimum Wage Law.
- Wage Payment and Collection Law.
- Equal Employment Opportunity is the Law.
- Occupational Safety and Health Act
- Discrimination in Employment Law.
Delaware Business Types:
1. Sole proprietor.
Sole proprietorships are the easiest way to start a business in Delaware. Sole proprietorships offer ease of formation and complete ownership. Only form a sole proprietorship when you know all the risks associated with your business, as you are personally liable for business losses.
Sole proprietorships are not required to file with the Delaware Division of Corporations. If operating under a fictitious name, sole proprietors must register a Fictitious Name Certificate at their local county's Superior Court Prothonotary's office.
Forming a general partnership in Delaware is fairly simple. Partnerships are a good idea if your business partner can bring capital and expertise to the table that you cannot. The profits and risks are shared equally among partners and you don't pay business tax.
Partnerships in Delaware follow the same pass-through taxation laws as sole proprietors. Delaware partnerships must, however, have a registered agent who resides in the state and is authorized to do business there.
Registering as a corporation in Delaware takes more time and money, but the benefits are clear. A corporation is a standalone entity with shareholders. Corporations allow you to dip into a wider capital pool and afford you the protection of personal assets in the event of a business failure. Corporations need to pay business tax.
Corporations are required to file with the Delaware Division of Corporations. Articles can be filed online or by postal mail. There is an $89.00 minimum filing fee for businesses with up to 1,500 shares of no par value stock, or for businesses with up to $75,000 of par value stock. Fees increase relative to the number of shares of no-par stock or the value of par value stock.
Delaware corporations don’t need to disclose the names of officers or directors in their formation documents, affording corporations greater privacy.
4. Limited Liability Company.
Incorporate as an LLC in Delaware if you operate in a high-risk industry and you want more power over the operational activity of your company. LLCs afford you better profit distribution among members as well as limited ownership restrictions. It usually takes two weeks to register an LLC in Delaware.
LLCs are required to file incorporation documents with the Delaware Division of Corporations. They are not required to list member names and addresses in their filings.
Fees to Register a Business in Delaware:
Domestic For-Profit Corporation
Articles of Merger