How to Incorporate a Business in Delaware

Delaware has long been the preferred state for those looking to incorporate. Not only are Delaware’s policies conducive to business growth, but the state also houses a court (the Delaware Court of Chancery) that exclusively handles business and corporate disputes. 

Incorporating in Delaware affects how your company is taxed, governed, and perceived by potential partners. In this guide, we’ll highlight the advantages of going this route for your business, outline each stage of incorporation, and explain the tax and legal implications of incorporation in this state.

Why Incorporate a Business In Delaware?

More companies are incorporated in Delaware than in any other U.S. state because its laws define corporate authority and shareholder rights in greater detail, and those rules have been tested in court for more than a century. For example:

• The Delaware General Corporation Law, enacted in 1899, is amended almost every year to reflect new business practices such as electronic record-keeping and remote shareholder meetings.
• Judges in Delaware have ruled on thousands of cases interpreting that law, so attorneys can review earlier decisions and see exactly how issues like director liability or proxy voting have been handled before.

Below is an in-depth overview of the benefits of establishing your business in this state.

Benefit	What It Means for Your Business
Established Legal Framework	The Delaware General Corporation Law specifies how directors can approve stock issues, mergers, and dividends. It also defines the limits of personal liability for officers. For example, a director acting in good faith under Delaware’s “business judgment rule” is generally protected from shareholder lawsuits, whereas other states interpret this rule inconsistently.
Dedicated Business Court	Created in 1792, the Delaware Court of Chancery hears only corporate and equity cases. It does not use juries; instead, judges known as chancellors decide the outcome. In most other states, similar cases go before general civil courts, leading to less predictable results.
Simplified Filing and Administration	Delaware’s Division of Corporations accepts digital filings and can approve an incorporation certificate in less than 24 hours with an expedited fee. Regular filings are typically processed within three business days. In comparison, California and New York can take one to three weeks for standard filings. Delaware also allows online access to filed documents and franchise-tax records, which means attorneys and accountants can manage compliance without mailing forms or visiting state offices.
Tax Treatment	Delaware does not tax income earned outside its borders. This means that a Florida-based company incorporated in Delaware but conducting all its business in Florida would owe no Delaware corporate income tax. Although there is an annual franchise tax, the state collects no sales tax, which simplifies accounting for businesses that sell services or digital products nationwide.
Privacy and Ownership Flexibility	Delaware’s filing rules need only the name of a registered agent and company address; they do not require disclosure of shareholders or LLC members.  When it comes to ownership, a single individual can form and own a corporation or LLC without listing additional officers. This allows startups to incorporate before finalizing investor agreements or board appointments. The same structure appeals to foreign founders who need a U.S. entity to open a bank account or sign contracts before entering the market.

Did You Know: More than two-thirds of Fortune 500 companies, including Amazon, Alphabet (parent company of Google), and CVS Health, are registered there, along with countless small and mid-sized firms.

Is Incorporating the Right Choice?

Most businesses choose either a corporation or a limited liability company (LLC). You’ll create either type by filing a Certificate of Incorporation or a Certificate of Formation with the Delaware Division of Corporations. Once filed, your business legally exists and appears in the state’s public records.  

Feature	LLC	Corporation	Series LLC
Best For	Small or closely held businesses that value flexibility and simplicity	Businesses planning to raise capital, issue stock, or attract investors	Entrepreneurs who want to isolate risk or manage multiple ventures under one umbrella
Ownership Structure	Owned by members	Owned by shareholders	Owned by members, with separate “series” that act as sub-entities
Management	Managed by members or appointed managers (flexible structure)	Managed by a board of directors and corporate officers	Similar to LLC; each series can have its own managers and operations
Liability Protection	Members are generally not personally liable for business debts	Shareholders are not personally liable for corporate debts	Liability protection applies within each series if records are properly maintained
Taxation	Pass-through by default (profits reported on owners’ personal returns); may elect corporate taxation	Double taxation (corporation pays taxes; shareholders pay on dividends) unless electing S-Corp status	Same as LLC—pass-through by default, corporate option available
Formation Requirements	File Certificate of Formation with the Delaware Division of Corporations	File Certificate of Incorporation under DGCL § 102	File Certificate of Formation with language authorizing series; establish each series internally
Annual Requirements	Pay $300 annual franchise tax (no annual meeting required)	Hold annual shareholder meeting (DGCL § 211); file annual report and pay franchise tax (minimum $175 + $50 filing fee)	Pay $300 franchise tax for the parent LLC; maintain separate records for each series
Flexibility in Profit Distribution	Highly flexible; defined in operating agreement	Must distribute profits according to share ownership	Flexible per series; outlined in operating agreement
Recordkeeping	Maintain general records; no state-mandated format	Must keep minutes of board and shareholder meetings	Each series must maintain separate records, assets, and income statements
Operating in Other States	Generally recognized in other states	Universally recognized	Not all states recognize liability protection between series—verify before expanding
Raising Capital	Limited options; cannot issue stock	Easier to raise money by issuing shares or attracting investors	Similar to LLC—capital raised per series, limited investor interest
Administrative Complexity	Low	Moderate to high	Moderate; more complex recordkeeping for each series

Your choice of entity affects how you’ll be taxed, how ownership changes are handled, and how investors view your company. A tech startup seeking venture capital will usually incorporate, while a consulting business or real estate venture may prefer an LLC for easier reporting. Deciding before you file saves time and avoids later amendments, new filings, or restructured tax elections. 

How to Incorporate in Delaware: A Step-by-Step Guide

If you’ve decided that incorporating your business is the best option, the outline below provides an overview of the steps you’ll need to take. 

Step 1: Choose a Business Name

Your company name must be distinguishable from every other entity registered in Delaware. You can check availability using the Delaware Division of Corporations Name Availability Search. If the name is open, you may reserve it for 120 days by submitting a Name Reservation Application and paying a $75 fee. 

Pro Tip: Corporations must include “Corporation,” “Incorporated,” or an abbreviation such as “Inc.” LLCs must include “Limited Liability Company” or “LLC.” Using the required term ensures that the filing meets statutory naming standards.

Step 2: Appoint a Registered Agent

Every Delaware entity must maintain a registered agent with a physical address in the state. This agent receives official documents such as lawsuits, tax correspondence, and notices from the Secretary of State. 

You can serve as your own agent only if you have a Delaware street address. Otherwise, you must hire a commercial registered agent, and fees range from $100 to $300 per year. Failing to maintain an active agent can result in loss of good standing or even administrative dissolution.

Step 3: File Formation Documents

You must file one of two formation documents with the Delaware Division of Corporations.

• A Certificate of Incorporation for corporations, or
• A Certificate of Formation for LLCs.

The filing lists your company’s name, registered agent, and the incorporator’s contact information. Here’s what else you need to know:

• Corporations must specify the number of authorized shares and par value. 
• Filing fees are $89.
• You can file online or by mail. 

Standard processing takes about three business days; expedited service is available for an additional fee. When the state approves your filing, it returns a stamped copy confirming that your entity now legally exists.

Step 4: Obtain an Employer Identification Number (EIN)

The IRS issues an Employer Identification Number (EIN) to every business for federal tax identification. You’ll need this EIN to open a bank account, hire employees, or file tax returns, so apply online or submit Form SS-4 by fax or mail. (Non-U.S. residents without a Social Security Number can still obtain an EIN by completing the form manually.) The EIN becomes the company’s permanent federal identifier, similar to an individual Social Security Number.

Step 5: Prepare Internal Governing Documents

After state approval, you must define how your company operates. Corporations adopt bylaws that specify the powers of directors and officers, meeting procedures, and voting rules. Once created, these documents must be kept in your company records, as they create the foundation for ownership and management decisions. 

Pro Tip: Missing or inconsistent governance documents can create disputes when ownership changes or when banks and investors request proof of authority, so be sure to maintain them properly.

Step 6: Register for State and Federal Taxes

Delaware corporations must file an annual report and pay a franchise tax by March 1 each year. If you operate or maintain offices outside Delaware, you must register as a foreign entity in those states and meet local tax requirements. Employers must also register with the Delaware Division of Revenue and the Delaware Department of Labor for withholding and unemployment tax accounts. 

Step 7: Open a Business Bank Account

Banks require approved state documents, EIN confirmation, and identification for all owners with 25 percent or more ownership. Here’s what you need to know:

• U.S. banks apply federal Know-Your-Customer (KYC) standards before opening business accounts. 
• If you’re outside the United States, some financial institutions accept certified copies of your formation papers and EIN. 
• Keeping a dedicated account for the company is mandatory for preserving limited liability protection. Mixing personal and business funds can allow creditors to challenge that separation in court.

Step 8: Maintain Compliance

The Division of Corporations lists delinquent entities publicly if reports or payments are late. Penalties include a $200 fine and 1.5 percent monthly interest for corporations. You must also update filings if ownership, address, or agent information changes. Consistent compliance protects your right to conduct business and confirms that your entity remains valid.

Delaware Tax and Legal Considerations

Once you incorporate in Delaware, it creates new tax and reporting duties that differ by entity type. These obligations are defined in the Delaware Code and enforced by the Division of Corporations and the Division of Revenue. 

Franchise Tax for Corporations

Delaware charges corporations an annual franchise tax. You may calculate this tax using either the Authorized Shares Method or the Assumed Par Value Capital Method, depending on your capitalization.

• Under the Authorized Shares Method, a corporation with up to 5,000 authorized shares pays a $175 tax plus a $50 annual-report fee. The tax rises as more shares are authorized, capped at $200,000, or $250,000 for large corporate filers.
• Under the Assumed Par Value Capital Method, tax is based on issued shares and total assets from Schedule L of your federal return, with a minimum of $400.

The annual report and payment are due March 1 each year. Missing this deadline triggers a $200 penalty and 1.5 percent monthly interest on the unpaid balance. The report lists directors’ names and addresses but excludes shareholder information, maintaining a limited level of privacy.

Corporate Income Tax

Delaware imposes an 8.7 percent corporate income tax on income earned within the state. A company that operates only outside Delaware owes no corporate income tax but must still pay the franchise tax. When a company maintains offices or employees inside Delaware, it must apportion its income based on in-state activity. 

Gross Receipts Tax

Delaware has no sales tax, but it does collect a Gross Receipts Tax on revenue generated from business activity in the state. Rates range from 0.0945 percent to 0.7468 percent, depending on the industry. For instance, wholesalers pay 0.384 percent, while retailers pay 0.7468 percent. In addition:

• There are no deductions for expenses, so the tax applies to total receipts rather than net income. 
• Businesses with Delaware sales must hold a Delaware Business License and file gross-receipts returns monthly or quarterly through the Division of Revenue’s online system.

Employer and Withholding Taxes

If your company employs workers in Delaware, you must register with the Division of Revenue for state income-tax withholding and with the Department of Labor for unemployment insurance. Employers must deduct state income tax from employee wages based on published withholding tables and submit those payments on the same schedule as federal deposits. Failure to register or remit taxes can lead to penalties and suspension of state business licenses.

Foreign Qualification

When your Delaware corporation does business in another state, that state may require foreign qualification. This filing extends your entity’s authority to operate there. You must submit your Delaware formation documents to the other state’s secretary of state and pay its local fees. 

Note: Incorporation in Delaware does not exempt you from taxation or registration where you actually conduct business. In addition, a nonresident corporation must file Form 1120-F with the IRS if it earns income “effectively connected” to a U.S. trade or business.

Recordkeeping and Audits

Although Delaware does not require companies to file financial statements annually, it mandates accurate record retention. Corporations, for instance, must keep shareholder and director minutes for at least three years. The Division of Revenue can inspect these records during an audit, and failure to produce them allows the state to assess estimated taxes and impose administrative penalties.

How USA Tax Gurus Can Help You Incorporate in Delaware

If you’re thinking about incorporating in Delaware, USA Tax Gurus can manage each step for both U.S. residents and nonresidents. Our incorporation services start at $599 and cover all state and federal requirements needed to form and maintain a compliant Delaware corporation.

• Entity Formation and Structure Analysis: We begin by reviewing your business model to determine whether a C-Corporation or S-Corporation fits your objectives. This review considers ownership, taxation, dividend treatment, and investor requirements. Selecting the right structure from the start avoids later amendments and ensures your corporation’s tax classification matches your intended operations.
• Name Availability Search and State Filings: We conduct a Delaware name availability search to confirm your preferred corporate name meets state guidelines. Once cleared, we prepare and file your Articles of Incorporation (Certificate of Incorporation) with the Delaware Secretary of State. We also handle all related state fees and ensure that each submission complies with 8 Del. C. §102, which governs corporate formation.
• Federal EIN and SS-4 Application: Every Delaware corporation must have a Federal Employer Identification Number (EIN) to open a U.S. bank account and report income. We complete and file the SS-4 application with the IRS on your behalf. For non-U.S. residents, we handle the additional verification steps needed to obtain an EIN without a Social Security Number. 
• Core Corporate Documents: Once your incorporation is approved, we prepare your internal governance documents. These include Bylaws that establish director elections, shareholder meetings, and officer roles, as well as Stock Issuance Certificates to record ownership. We make sure that your corporate records meet Delaware’s statutory standards and provide the documentation required by banks, investors, and auditors.
• Ongoing Corporate Maintenance: We support your corporation after formation by monitoring renewal deadlines and franchise-tax filings. We track due dates, prepare the required filings, and confirm that all payments are submitted to the Secretary of State before penalties apply. We also manage updates for director or officer changes to keep your records accurate and current.
• Registered Agent and Virtual Business Address: We provide Registered Agent Services starting at $199. Our service includes a dedicated business address with suite numbers, so that your company receives legal notices, tax correspondence, and government mail at a verifiable location. We also provide a secure online account and dashboard that lets you view and manage incoming mail, filing notices, and annual renewal reminders in one place. 

Questions About How to Incorporate a Business in Delaware?

A Delaware corporation offers clear legal advantages, but those advantages hold their value only when compliance remains consistent. By combining accurate filings with continuous monitoring, USA Tax Gurus helps you maintain a corporation that meets every state and federal obligation,  giving your business a solid, enduring legal foundation in the United States. To get started, please fill out a contact form or call 213-474-3428 today.