How to Start a Business in Delaware

Delaware is known for its business-friendly laws and favorable tax policies, making it an ideal place for entrepreneurs to launch their ventures. With flexible corporate structures, tax incentives, and a wealth of opportunities, it’s the perfect place to turn your business dreams into reality.

Ready to take the leap? Our comprehensive guide will walk you through every essential step to successfully start your business in Delaware!

Choosing a business structure

Selecting the right business structure is an important decision for your startup. It impacts your personal liability, tax responsibilities, and how your business will operate and grow. So, take the time to evaluate your options and pick the structure that best aligns with your goals and vision for success.

Types of business structures available

Delaware offers several common business structures, including:

• Sole proprietorship. You're the sole owner and responsible for all debts.
• Partnership. Ownership is shared between two or more people.
• Limited Liability Company (LLC). Offers simplicity and liability protection.
• Corporation. A separate legal entity with strong liability protection, subject to double taxation unless it qualifies as an S corporation.

Aligning the structure with your business goals

Consider your goals:

• Liability protection. LLCs or corporations can protect personal assets.
• Taxation. Sole proprietorships, partnerships, and LLCs offer pass-through taxation and may be considered disregarded entities.
• Management and control. Sole proprietorships or partnerships provide simplicity.
• Future needs. Corporations are beneficial if you plan to raise capital or sell the business.

Think about your objectives and consult a legal or tax professional to choose the structure that best fits your needs.

Create a business plan

Begin by creating a detailed business plan. This document outlines your goals, strategies, market analysis, financial projections, and operational plans. A solid plan guides your decisions and shows investors and lenders you're ready to succeed.

Choose a unique business name and check availability

Delaware reportedly has 84,675 small businesses. So, selecting a unique and memorable name can help you stand out in this competitive industry.

Make sure that it’s available by searching through the Delaware Division of Corporations. You can reserve the name for up to 120 days for $75.

Appoint a registered agent

Every Delaware business needs a registered agent with a physical address in the state. This agent receives important legal and tax documents on your behalf, ensuring your compliance. If you're based in Delaware, you can serve as your own agent. Otherwise, consider hiring a professional service. Find a list of registered agents on the Delaware Division of Corporations website.

Register your business with the state

Once you've chosen your business structure, make it official by registering it with the state of Delaware. Here’s what you can expect from the process:

Registration process for different business types

Limited Liability Company (LLC):

• Prepare the Certificate of Formation. Download and complete the form from the Delaware Division of Corporations website.
• Appoint a registered agent. The agent must have a physical Delaware address.
• Submit the certificate for filing. File online or by mail with the required fee.

Corporation:

• Prepare the Certificate of Incorporation. Obtain the form from the Division's website.
• Appoint a registered agent. The same requirement applies.
• Submit the certificate for filing. File with the appropriate fee.

Other Entities (LPs, GPs, Statutory Trusts):

• Follow similar steps: prepare formation documents, appoint a registered agent, and file with the state.

Note: Sole proprietorships do not need to file with the Division of Corporations.

Necessary documents and fees

Documents:

• Formation documents. Certificate of Formation (LLC), Certificate of Incorporation (Corporation), etc.
• Available on the Delaware Division of Corporations website with instructions.

Fees:

• LLC filing fee. $90
• Corporation filing fee. Starting at $89, varies based on shares
• Registered agent service. Fees vary if using a service
• Name reservation (optional). $75 for 120 days
• Certified copies (optional).
• Short Form Certificate of Status: $50
• Long Form Certificate of Status: $175

Include all required fees when submitting your documents to avoid delays.

Obtain an employer identification number (EIN)

Get an Employer Identification Number (EIN) to handle taxes and open a business bank account. It’s easy—just complete a quick online application on the IRS website. You may also receive a CP-575 form from the IRS, which serves as confirmation of your EIN.

Open a business bank account and separate finances

Open a business bank account to keep your personal and business finances separate. This step streamlines your accounting, simplifies tax reporting, and protects your personal assets. Be prepared to provide certified copies of your formation documents or a Certificate of Good Standing from the Delaware Division of Corporations.

Additionally, consider how you'll be paying yourself as a business owner to manage personal finances appropriately.

Obtain necessary licenses and permits

Securing the right licenses and permits is crucial to running your business legally and avoiding costly fines or shutdowns. Proper licensing ensures that your business complies with federal, state, and local regulations, which can vary widely depending on your industry and location. It also boosts customer and partner trust by showcasing your commitment to professional standards and public safety.

Identify required licenses and permits

Every Delaware business needs a general business license from the Delaware Division of Revenue. Be sure to check if your industry requires any federal or state licenses.

Additionally, don’t forget to review local city or county regulations and secure any professional licenses if your business is in a regulated field. Staying on top of maintaining business compliance is essential for uninterrupted operations.

Apply and obtain necessary licenses

Use the Delaware One Stop portal to register your business and apply for licenses. Create an account and follow the prompts to complete forms and pay fees. For federal licenses, reach out to the appropriate agencies and stay on top of renewal dates to keep your licenses active and in good standing.

Complying with ongoing requirements and taxes

Staying on top of ongoing requirements and taxes is crucial to keep your business in good standing with both state and federal authorities. Failing to comply can lead to penalties, fines, or even the dissolution of your business. Regular compliance helps you operate smoothly, maintain legal protections, and avoid unexpected costs that could derail your business.

Annual reporting and renewal obligations

Delaware businesses must fulfill these annual obligations:

• LLCs. Pay an annual tax of $300 by June 1 to avoid penalties.
• Corporations. File an Annual Report and pay a franchise tax by March 1, based on shares.

Also, be sure to:

• Renew your business licenses. Renew through the Delaware One Stop portal.
• Maintain your registered agent information. Update any changes promptly.

Ensure that you meet these annual obligations to avoid penalties and maintain your business's good standing. Utilize resources like a year-end payroll checklist to stay organized, and be mindful of Delaware labor laws to ensure compliance with employment regulations, including when hiring minors legally.

Tax responsibilities for Delaware businesses

Understand your tax obligations:

• State taxes. Register with the Delaware Division of Revenue for income, gross receipts, or other taxes.
• LLC annual tax. Pay the $300 annual tax by June 1.
• Corporate franchise tax. Pay annually by March 1.
• Federal taxes. Obtain an EIN from the IRS for federal tax obligations.
• Local taxes. Check with local authorities for additional taxes.

An effective accounting system can help you manage these obligations. Consider consulting a tax professional to ensure you're meeting all requirements and review small business tax tips to optimize your tax strategy. Additionally, mastering tax compliance is critical to avoid penalties and interest charges.

Utilizing Delaware's business resources

Taking advantage of Delaware's business resources can significantly enhance your chances of success. With expert guidance, funding opportunities, and powerful networking, you'll be equipped to navigate the challenges of starting and growing your business. Stay ahead of regulatory changes, connect with fellow entrepreneurs, and attract potential investors—all while positioning your business for long-term growth and success.

Delaware Small Business Development Center (SBDC)

The Delaware SBDC provides free advisory services and training for small businesses. They can assist with business planning, market research, and accessing capital.

Delaware Prosperity Partnership

The Delaware Prosperity Partnership offers support for businesses looking to grow in Delaware, including information on state incentives and workforce development programs.

Financial incentives and grants

Explore financial incentives, tax credits, and grants available through the Delaware Division of Small Business. Programs like EDGE Grants provide funding to promising early-stage companies.

Additionally, consider tools like workforce planning tools to optimize your staffing needs, streamline operations with restaurant payroll management, or get support from Homebase HR Pro for human resources compliance.

Taking the next step in your Delaware business journey

Starting a business in Delaware can be a rewarding experience. By utilizing the state's business-friendly environment and following the steps outlined in this guide, you're well on your way to achieving your entrepreneurial dreams. Remember to develop a thorough business plan, choose the appropriate structure, secure necessary licenses, and stay compliant with ongoing obligations.

As you set up your business operations, consider how you will manage your team effectively. Homebase offers user-friendly tools for scheduling, time tracking, and team communication that can help streamline your daily operations. With Homebase, you can focus on growing your business while we take care of the administrative tasks.

Ready to simplify your management processes? Get started with Homebase today and set your new venture up for success. For more guidance on how to start a small business, explore additional resources available.