Many U.S. citizens and foreigners choose to incorporate in Delaware because our state offers premium asset protection. Neither members/managers nor officers/directors are required to be listed on public documents, which means businesses can be formed quickly and securely.
How to Start a Business
Starting a business in Delaware requires filing formation documents with the Delaware Division of Corporations. But you’ll have to prepare several aspects of your business well before you file anything with the state. Here’s what to consider:
Business Structure
The most common business structures in the U.S. are corporations and LLCs (limited liability companies). Both entities can protect your personal assets from your business assets, which means you, the business owner, won’t be liable for any debts or losses accrued by your business.
Should I form a Delaware LLC or a corporation?
Business entities are not one-size-fits-all, but the advantages of Delaware LLCs and corporations are highlighted below:
| Delaware LLC Advantages | Delaware Corporation Advantages |
|---|---|
| Flexible tax structure | Prestige of a corporation |
| Low maintenance | Ability to raise capital through investors |
| Flat annual tax | Ownership is easy to transfer through stock |
| Minimal information requirements | Possibility of no inheritance tax on DE corporation stock |
| Easier to form |
Corporations tend to be more advantageous if you’ll be trying to attract investors and raise capital through the selling of ownership. Delaware LLCs often shine as smaller businesses with few owners who wish to keep their personal information secure.
Register Your Business
When you have a good understanding of how your business will operate, the next step is to register your company with the Delaware Division of Corporations. Here’s how:
Check if your Business Name is Available
You’ll want to check Delaware’s business archives online though the Business Name Search to see if your desired business name is available. Why? Because your application for registration will NOT be accepted by the state if your desired name is already in use.
Assign a Registered Agent
A Delaware registered agent must be listed on your formation papers when you register a business in Delaware. Your registered agent must have a physical address in Delaware and be available to receive service of process. As professional registered agents based right here in Dover, we’re here for you during regular business hours and forward all state and legal notices right away.
Register Your Business
To register your business with the Delaware Secretary of State, you’ll either have to file a Certificate of Incorporation (corporations) or Certificate of Formation (LLCs). The state charges a filing fee of $109 for corporations or $110 for LLCs. For an additional $45 (plus our $29 registered agent service), you can avoid all the hassle of figuring out these forms and hire us to form your company for you.
Apply for a Business License
Most businesses that operate in the state of Delaware must apply for a business license through the Delaware Division of Revenue. Even if your business is registered in a different state, you’ll need a business license if your business maintains property, hires employees, or transacts sales in Delaware.
If you’re unsure whether this applies to you, the Division of Revenue offers a NEXUS Questionnaire you can take to determine whether or not you’ll actually need a business license in Delaware.
Business Insurance
Not all companies have or need business insurance, but depending on the type of work you do it’s something to consider. Business insurance is not a singular purchase. Rather, you can get different types of insurance for your business depending on your business’s needs. For example, if you plan to hire several employees, you may want workers’ compensation insurance. Or, if you own your own building, you’ll probably need property insurance. Whether or not you buy insurance depends the needs of your company, as well as the amount of risk you’re willing to take.
Starting a Business With No Money?
No problem. While you certainly need money to start a business, you don’t necessarily need to dip into your own bank account to fund your new venture. There are several ways to obtain funding:
Business Financing
After you estimate your business start-up costs, one option is to reach out to organizations that can provide small-business loans. When you “finance” your business, you receive money you’ll eventually have to pay back in full (plus interest). Business financing can come from banks, credit unions, online lenders, or the U.S. Small Business Administration (in the form of an SBA loan). Though this money isn’t free, securing a loan can be the best way to get a business up and running when you’re starting from scratch.
Funding
Funding can come in the form of grant money—usually from a government source or a philanthropic institution—or direct donation. Either way, this is typically money you don’t have to pay back. These days, maybe people turn to online platforms like Kickstarter, Patreon, or GoFundMe to crowdfund their business ideas. But it can also work the old-fashioned way, through direct outreach to individuals via mail.
Banking
A common way for established businesses to secure financing is through traditional bank loans. These loans are typically available to businesses that have already been in operation for a year or two and have a proven track record of generating revenue. (You may also have to show that you, the business owner, have a strong credit history.) For these reasons, small-business loans from traditional banks can be more difficult to secure—especially in your company’s infancy. But they may be a helpful option down the line.
Keep Growing
Once your business is registered with the Division of Corporations, you’ll need to keep up with ongoing filings and annual fees. You’ll also want to revisit your business plan to help your company expand.
Stay in Compliance
Delaware requires corporations and LLCs to keep their business information up to date with the state. Here’s what to pay attention to:
Tools
Depending on your business needs, you may need to file new documents to update your information with the state or obtain more resources for your company. Such actions could include:
- Getting an Employer Identification Number (EIN)
- Filling out a change of registered agent form
- Obtaining a certificate of authority
- Filing a certificate of amendment
- Creating a Delaware Series LLC
When we’re your registered agent, we can help you with all of these filings, and more.
Franchise Tax
Both corporations and LLCs are required to pay the Delaware annual franchise tax. For corporations, this amount is determined either by number of authorized shares or assumed par value. Either way, it’s a minimum of $175 plus the annual report fee. LLCs, on the other hand, pay a flat fee of $300 (also known as an Alternative Entity Tax).
Annual Report
Only corporations are required to file an annual report in Delaware. This must be filed online through the Delaware Division of Corporations: Annual Report and Tax Instructions. Most corporations pay a filing fee of $50, while nonprofit corporations pay $25.
Marketing
One of the best ways of helping your business expand is getting word out about your products and services. Marketing efforts could include anything from creating a robust social media presence for your business, to participating in local trade shows or farmers markets. As your business picks up speed, you may consider outsourcing your marketing efforts to a small PR company so you can free up more time to focus on the area of your company you’re most passionate about.
Scaling
While growth is the objective of any new business, a smart business owner knows that with growth comes changes. It’s a good idea to check back in on your business plan from time to time to make sure your company structure can adequately support the amount of work your business demands. Some questions to consider:
- People. Does your company have enough people to respond to increasing demands?
- Leadership. Is your leadership team robust and experienced enough to usher in your company’s growth?
- Structure. Do you have the right internal structure to address upcoming changes?
- Technology. Would investing in new technology help your company operate more efficiently?
- Funding. Will your company need more funding to facilitate growth?
Whatever the case for your company, anticipating your future needs will help you smoothly transition into a more profitable business when the time comes.