How to Incorporate a Business in Delaware

by ExpertEntrepreneur

Thinking that incorporating in Delaware is right for your business? Here are the steps you'll need to take to form an LLC or corporation.

Have you been convinced to incorporate your business to take advantage of limited liability, tax benefits and other advantages? If so, Delaware is one of the best places to do it with their Court of Chancery, pro-business laws and low incorporation costs. Here are the basic steps you'll need to take to form an LLC or corporation in Delaware.

1. Choose an Entity

The first step before incorporating is choosing the best entity for your business, whether it's a limited partnership, limited liability company (LLC), C corporation, S corporation or something else. This is a rather in-depth topic on its own so read this page for more information: US Business Entity Comparison.

2. Select Your Business Name

Once you've chosen to form an LLC or another type of entity, it's time to select a name. This definitely isn't easy as your name should convey your message and what you do while also helping customers find you. You'll also need to add an identifier to the end depending on your business: Inc if you choose a corporation and LLC if you form a limited liability company. You also need to check with the state of Delaware to make sure your name isn't already taken.

3. Appoint Members or Directors

Next, you'll need to choose members or managers if you pick an LLC or directors for a corporation. There are some requirements to keep in mind. For a corporation, Delaware requires at least one director with no age requirements or specifications about where the director lives and names do not need to be included in your Certificate of Incorporation. If you choose an LLC, you must have at least one member.

4. File Incorporation Paperwork

Next comes filing a Certificate of Incorporation if you've chosen a corporation or something known as the Certificate of Formation to form an LLC. This paperwork must be filed with Delaware's Department of State.

5. Taxes

As a corporation, you must file the Annual Franchise Tax Report that costs $50 and a franchise tax will be based on your number of authorized shares and value, as this fee may go up if your shares exceed 5,000 in number. LLCs must file the Annual Franchise Tax Statement.

6. Get Permits and Licenses

Before you begin operating, make sure you obtain any necessary licenses and permits to meet standards and operate legally on the municipal, state and federal level.

7. Other Obligations

There are other obligations you'll want to consider, including getting a Federal tax identification number, or EIN. You may also need to register in other states if you're incorporating in Delaware but operating in other states. Both LLCs and corporations are seen as domestic only in your chosen state of incorporation (Delaware) so you'll need to register as a foreign entity in all other states. This process is known as foreign qualification and it works much the same was as incorporation, requiring filing with the state and fees.

8. Get a Business Bank Account

Now that you've incorporated your business, you'll also want to make sure the finances of your business are separate from any personal accounts. This is necessary to maintain the corporate veil, which protects you from liability of business debts and obligations, and makes bookkeeping easy from the beginning.

Updated: 04/09/2013, ExpertEntrepreneur
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