How to Incorporate in Delaware

Learn how to incorporate in Delaware with ease. Get the help you need to understand Delaware's incorporation laws and make the process stress-free.
How to Incorporate in Delaware

Table of Content

Do you know that so many companies choose to incorporate in Delaware? Can you tell me why? Delaware is known worldwide as the best and most business-friendly state to incorporate. If you form your business in Delaware, you can give your business sky-high success within a short time.

But as a non-resident, you can have a little difficulty incorporating here due to some formalities. Despite this, there is a quote by Henry David Thoreau: “Success usually comes to those who are too busy to be looking for it.” So, be a brave business owner and stay with us to learn all the necessary steps to forming your company in Delaware.

Why Is Delaware a Good Place to Incorporate?

You might be surprised to know that Delaware is one of the smallest states in the country, but it is also one of the most popular locations for incorporation. Many of the largest companies in America have chosen Delaware as their state of incorporation because of the state’s business-friendly laws.

In fact, 58% of Fortune 500 companies and 68% of the 50 biggest US companies are based in Delaware. Delaware is the legal domicile of more than one million commercial entities. Although there are countless benefits to incorporating in Delaware, we are going to list the main reasons below:

  • Flexible Law: Delaware provides established corporate laws’ legal and liability protection. The nation’s most advanced and flexible business entity laws – The Delaware Court of Chancery mainly hears cases involving businesses. It uses judges, which benefits large corporations with thousands of shareholders.

  • Tax Flexibility: Delaware provides access to a low franchise tax rate, no sales tax, and a low franchise tax for small businesses. In addition, non-residents do not pay income taxes.

  • No Requirement for Residency: In Delaware, company members are not required to live there. A corporation’s members, owners, officers, managers, or directors do not have to live in Delaware.

Is Delaware Advantageous for Small Businesses?

Do you know? Opening your Delaware business is easy and beneficial, whether you are a resident or a non-resident. Also, Delaware is a business hub for both big and small businesses.

Delaware has a beneficial business environment for both of them. People from all over the world are highly interested in incorporating here. Most people outside the US are keen to start their small businesses in Delaware. We will be showing you the reasons behind their interest in choosing Delaware.

  • Asset Protection: It is the primary reason for businesses to incorporate in Delaware. Delaware provides small businesses with the very same limited liability afforded to large businesses. Delaware allows you to separate personal assets from business assets. Imagine your business is sued and your assets are at risk. In this situation, your corporation will, ideally, keep your assets safe from the lawsuit.

  • No Occupational Business License Required: According to Delaware’s General Service Licence requirement, businesses are not generally required to obtain an occupational business license or pay Delaware’s gross receipts tax. So, you don’t hate to face the hassle of collecting that license.

  • Franchise Tax Relief: The most famous reason Delaware has attracted the attention of businesses is its lenient taxes. We already know that Delaware has no sales tax, no state income tax, etc. Also, Delaware provides franchise tax relief for small businesses. If a company’s total gross assets are less than a certain amount, it may be able to pay a lower franchise tax or not have to pay it at all. This can result in huge cost savings for small businesses.

  • Access to Capital: Delaware has a very strong financial ecosystem. Small businesses can have several financial benefits, including loans, credit programs, grants, several investors, etc.

Can I Incorporate In Delaware from Abroad?

If you are a non-resident and desire to incorporate in Delaware, it will be a great decision for your company. Delaware provides countless benefits to non-resident business owners. Also, forming a business in Delaware is a trouble-free process. Do you want to know some advantages of Delaware corporations available only to non-residents? The list is below:

  • No Sales Tax: Delaware does not have a sales tax. It means your corporation in Delaware can make purchases without paying sales tax.

  • No State Income Tax: Delaware corporations that do no business in Delaware do not have to pay state corporate income taxes. This means that if you are a non-resident and own a company in Delaware but don’t live or work in another country or state, you will not need to pay state income tax.

  • No Inheritance Tax: Delaware does not demand a state inheritance tax on non-resident business owners. If you are not from the state and your business stocks are not residents of our state, they will not have to pay the inheritance tax.

  • No Ad Valorem Tax: Another exciting benefit for non-residents is the No Ad Valorem tax. Delaware does not require a personal property tax. If your resident state or country doesn’t have personal property tax, you shouldn’t have to pay also.

  • Non-Resident Directors: It benefits non-US companies wishing to own and operate a US-based business from their home country. You can have as many non-resident directors for your company.

  • Privacy Protection: Do you know that Delaware corporations are very strict about the privacy of business owners? Delaware corporations never disclose the names of their shareholders or officers in their Certificate of Incorporation. It is beneficial for non-resident owners to keep essential personnel information confidential.

  • Low Annual Fees: Delaware has comparatively low annual fees. This benefit makes Delaware an attractive option for non-residents.

Delaware Company Registration for Non-Residents

After evaluating all the advantages, we can say now that incorporating your Delaware business is a money-making idea. Besides, the process of incorporating in Delaware is a no-brainer. In fact, venture capitalists and angel investors usually prefer that people from other countries incorporate their businesses in Delaware. Isn’t that exciting for us, like non-resident business entrepreneurs?

To incorporate in Delaware, you have to complete a simple process. Stay with us. We will describe to you a step-by-step procedure to assist in forming your new business.

  • Choose Your Business Entity Type: The first requirement is to decide on a business entity type (LLC, partnership, sole proprietorship, corporation) for your company. You can consult a professional expert to decide which business type would benefit you. However, we will describe to you later the four types of business structure to help you determine your favorable structure.
  • Choose Your Business Name: Now, you must choose a unique name for your company. You may think about how you select a name that wasn’t listed before. In that situation, you can search for business names on the Delaware Secretary of State website in the business name database. After choosing your business name, you can reserve your name through that website.
  • Appoint a Registered Agent: Assigning a registered agent is crucial to every business entity. Because the registered agent is the one who will handle your legal papers on behalf of your company, the agent must have a physical address in Delaware. For non-residents, obtaining a registered agent is mandatory.
  • Prepare the Certificate of Incorporation: The certificate of incorporation is the required document for company registration. With the help of your registered agent, you can collect specific forms to file your personal information and business information. It includes:
    • Your company’s name.
    • The purpose of your business.
    • Licensed stock shares.
    • Your registered agent’s name and address.
    • The address and name of all your incorporators.
  • File Your Completed Certificate of Formation: You can file paperwork via mail or online. But it will be better if you get help from a professional as a non-resident to submit your filing paper. The completed form and the necessary filing fee should be filed with the Delaware Division of Corporations.
  • Obtain an EIN: Although an EIN has various purposes, in forming a business, it is required for tax filing, opening a bank account, applying for several licenses and permits, applying for loans, hiring employees, etc.
  • Other Permits and Licenses: To expand your business, you may need additional requirements, such as a lease agreement, ITIN, payment gateway account, etc.
  • Maintain Compliance: After registering your company, you must maintain a good relationship with Delaware state law. And obey the state requirements, including filing annual reports and paying franchise taxes.

The company formation process in Delaware could be a little tricky to understand for non-resident business holders. As a solution, you could get help from a business consultant like us, Business Globalizer. We can provide you with the necessary help, from choosing a business name to maintaining your business.

Incorporate In Delaware Online

Although you can apply for forming your business by both mail and online, non-residents prefer mostly online. Because the online process is more convenient rather than by mail.

When you go for online registration, you don’t have to visit the Delaware government office, you can just go to the official website and apply through it. Also, online registration is faster and provides a secure payment facility for non-resident people. Do you want to know how the process of online registration works? Here we go.

  • First, gather all the required information to complete the registration process.

  • Go to the Delaware Division of Corporations Website.

  • Create a username and password.

  • Complete the registration providing the required information.

  • Pay the needed filing fee using a valid credit card.

  • File additional documents like operating agreements.

  • After confirming the registration, apply for an EIN.

Suitable Business Structure for Incorporation in Delaware

We said in our previous topic that choosing a suitable business structure is very important for the growth of a business. But you must remember some facts before picking a business structure – market research, market needs, customer diversity, economic potential, state laws, funding opportunities, investors, etc.

Do you know why choosing the proper business structure benefits your business? Because it will decide the future success of your business. Now, we will explain some business structures for freelancers or non-residents who are profitable in Delaware.

Sole Proprietorship

It is the simplest and most common structure in Delaware. Mostly, freelancers and individual shop owners follow this structure. In a sole proprietorship, you have complete control over your business, and it’s easy to run.

Sole Proprietorship Advantages

  • No corporate bank account is required by law.
  • You don’t need an EIN.
  • Freelancers don’t need to file documents before earning money.
  • There are no additional regulatory fees for being a sole proprietor.
  • Taxation for sole proprietors is straightforward and simple.
  • Also, the tax rate is low.

Limited Liability Company (LLC)

Like everyone else, you might have a question: Why open an LLC in Delaware? Well. The non-resident mainly forms an LLC because of the limited liability protection. An LLC can benefit non-residents most, including asset protection, wide market size, credibility, investors, loans, favorable laws, flexible operating agreements, etc. You can also form a single-member LLC as a freelancer.

Benefits of Registering LLC in Delaware

  • You can form both single-member LLCs and multi-member LLCs.

  • You don’t need to file tax returns for your freelance earnings as a single-member LLC.

  • Taxation is simple.

  • It provides limited liability protection for members.

  • It provides liability protection and operational flexibility.

S Corporation

S corp is widely beneficial for freelancers rather than others because it has some potential tax advantages over other types of business structures. Freelancers choose it because it can save money on their self-employment taxes. But it will be easier if you form an LLC and then make it an S corp for taxation.

S Corp Delaware Advantages

  • Stockholders are usually not liable for corporate obligations.
  • S corps’ profits aren’t taxed twice.
  • It allows for certain tax deductions and benefits.
  • Easy transfer of ownership.
  • Employee-shareholders of S corporations can reduce their self-employment taxes.

Partnership

A partnership may be appropriate for you when working with others and sharing equal responsibility for the business’s liabilities and debts. It also goes for freelancers.

The Benefits of Partnership

  • Partnerships are easy to start with minimal paperwork.
  • EINs are only required if you hire others.
  • All the partners can contribute capital, skills, or labor.
  • The partnership agreement can benefit the partner.
  • Partnerships offer pass-through taxation.

Need Help in Incorporating Your Business?

From deciding the business structure to filing your taxes, there is plenty of work to do for incorporation in Delaware. If you are a non-resident business owner or freelancer, completing the formation process in Delaware could be tricky.

 S corp is widely beneficial for freelancers rather than others because it has some potential tax advantages over other types of business structures. Freelancers choose it because it can save money on their self-employment taxes. But it will be easier if you form an LLC and then make it an S corp for taxation.

In that situation, you can get professional assistance from Business Globalizer. We provide all the services regarding business formation in several states in the US. Including:

  • Business consultation for choosing the right business structure, name, and state.
  • Registered Agent.
  • Company formation process.
  • Physical address.
  • EIN.
  • ITIN.
  • Business bank account.
  • Payment gateway solution.
  • Tax consultation.
  • Premium business consultation (maintain compliance).

You see! We can cover all the necessary services for a business formation. You just need to connect with us; we will handle all your paperwork without any hassle at a very reasonable price.

Some Disadvantages or Drawbacks of Delaware

Although we know the countless benefits of Delaware, you have to keep in mind some things before incorporating your business here.

  • Double Taxation: If you maintain your business in your home country or state, in that case, you have to pay the franchise tax twice. One is for your home state, and one is for Delaware.

  • Registered Agent Fees: Registered agents must be paid to receive legal correspondence if your business isn’t based in Delaware. And the fee amount can be an extra burden for you.

  • Different Taxation: The tax rate is different for different companies. Suppose you have a bigger company with a higher stack and employees; then, you must pay a high tax rate. For small companies, the tax rate is minimum.

  • Double Registration and Annual Filing: If you incorporate in Delaware, you could register your company twice for your home and Delaware states. Also, you have to submit your annual report twice.

Remember these facts while forming your company. Also, try never to forget the deadline for filing your taxes and annual report.

FAQs on How to Incorporate in Delaware

Q1: Does Delaware require your residency to incorporate there?

Answer: No. You don’t have to worry about that. You don’t have to live in Delaware to register your business here. Also, you can operate your business from your home state or country. You will just need a registered agent to handle your legal documents.

Q2: How much does it cost to form a Delaware company?

Answer: Although incorporated in Delaware, costs could vary according to the business; the minimum fee can be $89, including the corporation, tax filing, and country fees.

Q3: Do I need to visit Delaware State to register my company?

Answer: No. You don’t have to visit Delaware to incorporate your business. You can apply online through the Delaware Division of the Corporation’s website. 

Q4: What is better for freelancers, Delaware corporations, or LLCs?

Answer: Although both are preferable for freelancers, most people choose LLCs due to their flexible taxation, fewer formalities, and lower fees.

Final Words

After understanding all the advantages and formation process, we can say now that incorporating in Delaware is beneficial for you; even the diversity of customers can drive your business to a new level. So don’t be late in thinking; pack your baggage, start your business in Delaware, and jump into the ocean of success.

Furthermore, for any kind of help regarding business formation, you can contact us at any time.

Related Post