How to Form a C Corp in Delaware

Pick a name for your C corporation

Every new C corp needs a good name that is easily recognizable. For a name to be valid, it must not be used by any other organization in Delaware. Delaware’s state guidelines also require C corps to include the words “Corporation,” “Company,” “Association,” “Institute,” or another approved word in their name. The business owner can also choose to use abbreviated versions of these words.

Reserve your corporation name

Business owners who want to incorporate in Delaware can reserve their company’s name for 120 days. This optional step prevents the name from being taken while completing the incorporation process. Obtaining this reservation costs $75.

Determine your registered agent

Appointing a trustworthy registered agent is a crucial step in the incorporation process for C corps. Registered agents are in charge of receiving legal documentation for your business. They must then promptly inform the business owner of these documents.

The main requirement of registered agents is that they have a physical address in Delaware. You can register yourself or a friend as your registered agent, though it is not recommended. Many businesses hire professionals or companies instead for extra safety in case legal issues arise.

File the Certificate of Incorporation

C corporations in Delaware must file the Certificate of Incorporation to create the business officially. Information that business owners should provide includes business name, goals, address, the number of shares issued, and registered agent’s information.

You can file the Certificate of Incorporation for a small fee of $109.

Create corporate bylaws

Corporate bylaws dictate how the company will operate and the roles the owners must fill. Before implementing these bylaws, the board of directors must approve them in a meeting.

Corporations in Delaware are not legally required to have corporate bylaws. Despite this, many businesses implement them for more consistent business operations.

Distribute stock to shareholders

Shareholders are the people who invest in corporations and hold partial ownership over them. The amount of stock the owner gives determines a shareholder’s authority over the business. During the first meeting with the board of directors, the business owner should distribute stock to the company’s shareholders.

Apply for your Employer Identification Number (EIN)

Every new business owner must acquire an Employer Identification Number from the IRS. EINs allow business owners to open bank accounts to manage their finances better. This number is also necessary for filing business taxes, hiring new employees, and completing payroll.

Obtain permits and business licenses

Delaware’s government requires that all businesses obtain a general business license before operating. In addition to this general licensing, companies in specific industries may need to apply for industry-specific licensing. Determining which licenses you need before operating your business is vital to avoid future legal complications.

Review Delaware’s Official Business Licensing Checklist for more information on permits you may need.

Register for state taxes

Delaware requires that all C corps register for state taxes. This registration ensures that your company complies with Delaware’s tax laws and allows you to pay for payroll, income tax, and other state taxes. Delaware makes the registration process simple with its online One Stop portal.

File annual reports

The last step in completing your incorporation process is filing your company’s annual report. This report costs $50 and provides the government with updated information about your business. This information includes its name, address, and registered agent details.

Filing the annual report must be done before March 1st every year. The company will also be required to pay a franchise tax, which can vary depending on the tax calculation method and overall size of the company.

• Trustworthiness: Incorporating your business shows potential shareholders, loaning agencies, and customers that it is a credible corporation. This credibility increases the likelihood that people will be willing to invest in the company.
• Asset protection: C corporations provide limited liability protection to their owners. This protection separates the company from the owner, preventing the owner’s assets from being claimed if the business encounters legal problems.

• Unlimited shareholders: Unlike an S corps, C corps do not have a limit to their number of shareholders. Having access to unlimited investors can make growing the business easier and faster. A C corp also benefits from being less risky for shareholders since having a larger group of people distributes the risks.
• Tax benefits: Delaware has no state sales tax on goods or services, reducing costs for C corporations that sell products. C corps in this state also benefit from a low-income tax rate of 8.7%.