How to Form an S Corp in Delaware

Choose a name for your S corporation

First, new business owners should think of a unique business name for their corporation. Another company cannot currently use this name, and it should reflect the business’s brand identity.

All S corps in Delaware must include words such as “Company,” “Corporation,” “Foundation,” or an abbreviation in their company name. For more information about valid company names, visit the Delaware Division of Corporations website.

Reserve your corporation name

Once you decide on a name, Delaware’s reservation system lets you put a hold on it for a set period. Other companies cannot use this name for their business during this time. Reserving your company’s name is optional but highly recommended to avoid losing it.

Delaware allows business owners to reserve their name for up to 120 days for a fee of $75.

Determine your registered agent

Finding a suitable registered agent is necessary for S corporations in Delaware. This registered agent must be trustworthy since they handle all essential papers for the company, including tax forms and legal notices.

Registered agents need a physical address in Delaware and be available during regular business hours. Anyone who fits these requirements can be a registered agent. You can appoint yourself or a friend, though many businesses hire professionals to handle everything properly.

File your Certificate of Incorporation

All S corps in Delaware must file a Certificate of Incorporation before being recognized as an official corporation. This legal document provides the government with basic information about your business and its operations, including its name, address, and registered agent’s information.

Filing the Certificate of Incorporation will cost $109.

Create your business’s corporate bylaws

Corporate bylaws are rules put in place to ensure business operations stay consistent. Bylaws outline specific company roles and how the owners should run them. Once business owners draft the bylaws, the board of directors must meet to approve and adopt them.

Like many states, Delaware does not require companies to make bylaws. However, these rules are strongly recommended to ensure the roles and operation standards are understood and adequately carried out.

Hold the first corporate meeting with the board of directors

The first corporate meeting for your business will be where the board of directors chooses to approve your corporate bylaws and appoint officers. The business owner should record all of these actions for future reference.

Another essential part of this meeting is distributing stock to shareholders. Shareholders hold some ownership over an S corporation through purchasing or acquiring stocks. This ownership allows them to help in significant business decisions, like voting for directors.

File Form 2553 to get your S corp status

Form 2553 gives companies their S corp status and allows them to qualify for “pass-through” taxes. All shareholders must approve and sign off on this form. Once this document is approved, your company will officially be considered an S corporation.

Business owners must file Form 2553 within 3 years and 75 days of forming their corporation.

Apply for your Employer Identification Number (EIN)

Applying for an Employer Identification Number is essential for all new business owners in Delaware. Businesses use EINs for many business functions, such as paying taxes and opening business bank accounts. EINs are given to businesses once they file Form SS-4 with the IRS.

Obtain other permits and business licenses

Many states require specific permits and licenses for businesses to operate. Acquiring the proper licensing can ensure your business avoids future legal complications.

Delaware requires all businesses, including nonprofits, to obtain a general business license. Other required licensing may depend on the business’s industry. For example, companies in the food and beverage industry must obtain their Food Establishment Permit. 

Check Delaware’s Official Business Licensing Checklist to determine what permits you need.

Register for state taxes

All businesses in Delaware are legally required to register for state taxes. State taxes are essential for business functions like completing employee payroll. Delaware simplifies this process by offering state tax registration services through its One Stop portal. This portal also allows small businesses to register for other necessary permits, such as business licenses.

File annual reports and pay franchise taxes

Finally, the last step in incorporating your S corp is filing your annual report. Annual reports update the government about the current state of your business, including information about its name, address, and registered agent.

For most companies, filing an annual report costs $50 and must be completed before March 1st every year. The cost of the franchise tax will vary depending on the size, number of shares, and yearly tax calculation method.

• Pass-through taxation benefits: S corps are not required to pay federal income taxes. All profits and losses are reported by the shareholders instead of the company, reducing the overall tax burden on the company.
• More trustworthy: Incorporating a business can make it appear more trustworthy to investors and customers. More credibility makes it easier for companies to obtain funding and customers willing to purchase from them.

• Simple transfer of ownership: An S corp has a very flexible ownership structure, allowing the easy transfer of shares. This flexibility enables the business to continue operating without problems caused by shareholder transfer.
• Limited liability protection: S corps provides business owners with limited liability protection. This protection saves their assets from being taken if the business faces legal action.