How to Form a Delaware Corporation

A Delaware registered agent must have a physical street address in Delaware (not a P.O. box) and be one of the following:

• An individual who resides in Delaware
• A business entity that’s authorized to conduct business in the state

Agents have the following responsibilities:

• Accept service of process (the formal delivery of court documents, such as a lawsuit) and other official documents from the state
• Forward documents to the corporation immediately
• Maintain regular business hours at their Delaware office address (typically Monday through Friday, 9 a.m. to 5 p.m.)
• Notify the businesses they serve and the state if they change their address or resign

You can review a list of registered agents on the Delaware Division of Corporations website. LegalZoom also offers a registered agent service based in Newark, DE that comes with additional perks like cloud storage and digital access to your mail. 

Step 3: Prepare and file the certificate of incorporation

Your corporation officially exists once the Department of State accepts your certificate of incorporation. This document serves as the corporation's charter (the official document that grants it authority) and must include the following information:

• The name of the corporation
• Corporate purpose (a pre-written statement that you only need to acknowledge)
• Registered agent's name and Delaware address
• The number of shares your corporation will issue and the value of each share
• The name, address, and signature of the incorporator (person completing the form)

You can file your certificate online through the Division of Corporations or mail it to their office if you plan to pay the filing fee by check. You’ll need to attach a cover letter with your form if you file by mail. The minimum filing fee is $109, but it could increase based on how you issue your stock shares. 

Step 4: Draft corporate bylaws and appoint directors

A corporation's bylaws are its internal rules and operating procedures. You don’t need to file them with the Delaware Division of Corporations. But they are essential to help build a framework for how your corporation will run, and can offer a framework for resolving legal disputes. 

Even though Delaware doesn’t require corporations to have bylaws, the law does specify certain requirements if you do choose to have them:

• Incorporators or directors must approve initial bylaws and have the power to adapt, amend, or repeal (cancel) bylaws going forward.
• Corporate bylaws can’t include anything that’s inconsistent with the law or the certificate of incorporation.
• Bylaws can include any clause that relates to the business and affairs of the corporation or the rights and powers of the corporation and its directors, officers, shareholders, and employees.

Here are a few common elements to include in your bylaws:

• Board of directors composition and meeting procedures
• Officer roles and responsibilities
• Shareholder meeting requirements and voting procedures
• Stock transfer restrictions and procedures
• Indemnification provisions
• Amendment procedures

You can draft your own bylaws, but it's wise to have a business attorney review them to ensure they are effective and consistent with Delaware law. LegalZoom has an attorney-assisted bylaw service that includes drafting, reviewing, and delivering your bylaws to you. 

Step 5: Obtain an employer identification number (EIN) and register for taxes

For your company to be fully compliant with federal regulations, you'll need to apply for an employer identification number (EIN). This number acts as your federal tax ID number and allows the IRS to identify your company for tax purposes.

You can apply for an EIN directly through the IRS website or LegalZoom can help you apply. 

Step 6: Open a business bank account

This step is helpful to maintain your limited liability status and protect your personal assets. A separate business bank account will also help ensure your business keeps proper financial records.

Here’s what you’ll generally need:

• Certificate of incorporation
• EIN
• Corporate bylaws
• Board resolution authorizing account opening
• Identification for authorized signers

Tax obligations for Delaware corporations

Delaware taxes

If your corporation will conduct business in Delaware, you must register with the Delaware Division of Revenue for the following taxes:

• Corporate income tax rate is 8.7% due on April 15 or the 15th day of the fourth month of your fiscal (financial) year. 
• Gross receipts tax rates range from around .1% to .7% based on your business activity. Payments are due either monthly (on the 20th of each month) or quarterly (by the end of the month following the close of each quarter) depending on your total receipts. 
• Withholding tax. The Department of Revenue has a helpful guide to withholding taxes with tax tables based on your payroll schedule. Make sure to also report new hires to the Division of Child Support Services (or Delaware One Stop) within a 20-day time frame. 
• Unemployment insurance ranges from 0.6% to 5.6%. You or your registered agent will receive a tax return (forms UC-8 and UC-8A) at the end of each quarter. File it by the end of the month following the end of each quarter.

Remember, businesses that don’t operate in Delaware aren’t responsible for state corporate income tax.

Federal tax obligations

In addition to Delaware taxes, there are a number of federal tax obligations for corporations that your business will need to stay on top of. Your main obligations will be federal corporate income tax and employment taxes. A CPA can help you understand your tax liability.

Delaware annual reports and franchise tax

Delaware corporations must file annual reports and pay franchise taxes by March 1 every year to maintain good standing with the state. 

How to calculate Delaware franchise tax 

The franchise tax is essentially a tax for the privilege of doing business in Delaware. The state offers two methods for calculating franchise tax, and corporations can choose the method that results in the lower tax.

The authorized shares method is based on the number of authorized shares in the certificate of incorporation.

• Minimum tax is $175 for corporations with 5,000 shares or less
• Corporations with 5,001 to 10,000 shares pay $250
• For each additional share after 10,000, add $85
• Maximum tax is $200,000

The assumed par value capital method is based on the assumed value of your shares.

• Divide your total gross assets by your total issued shares. The sum is your assumed par value.
• Multiply the assumed par value by your total authorized shares (the maximum number of shares it can legally issue). The resulting number is your assumed par value capital.
• Your franchise tax is $400 for every $1,000,000 of assumed par value capital. 
• Minimum tax is $400
• Maximum tax is $200,000

Annual report: Deadlines and fees

Annual reports serve to update the Department of State on your business’ basic information. You must file one every year on March 1 to stay compliant with the state. The filling fees are as follows.

• Domestic corporations: $50
• Domestic exempt corporations: $25
• Foreign corporations: $125

Penalty fees for missed deadlines range from $125 for foreign corporations to $200.00 plus 1.5% interest per month for domestic entities. 

Pay online payment through the Delaware Division of Corporations website or mail with check or money order. You can also have LegalZoom file for you to ensure you never miss a payment.

Start your Delaware corporation with LegalZoom

There's a reason more than 4 million businesses have chosen LegalZoom to help them get off the ground. Our incorporation services offer a fast, easy, and affordable way to form your Delaware corporation.

Here are some of the perks:

• Streamlined process. LegalZoom combines technology and expertise to take the guesswork (and paperwork) out of business formation. Our online process can help you start your corporation in minutes.
• Expert support. All of our corporation formation packages include consultations with a small business specialist and an accountant from 1-800Accountant.
• A full suite of services. Beyond just incorporation services, LegalZoom supports all your business filing needs. We provide year-round compliance management, bookkeeping tools, dedicated business attorneys, registered agent services, and trademark registration.

Delaware corporation FAQs

What is a Delaware corporation?

A Delaware corporation is an incorporated business entity that one registers with the Delaware Division of Corporations under the Delaware General Corporation Law. It provides limited liability protection for shareholders and heightened opportunities for growth due to its ability to issue shares of stock. 

While all corporations have limited liability and can issue stock (if a stock corporation), Delaware entities also benefit from heightened credibility as a result of the state’s extensive corporate legal framework.

Why do companies incorporate in Delaware?

Companies choose Delaware incorporation for several reasons:

• Specialized Court of Chancery with corporate law expertise
• Extensive body of predictable case law
• Flexible Delaware General Corporation Law
• Investor and lender familiarity
• Potential tax advantages for out-of-state operations
• Strong privacy protections

How much does it cost to form and maintain a Delaware corporation?

Delaware corporation costs depend on a number of factors, including the number of shares of stock you authorize and more.

Formation Costs

• State filing fee: $109 (minimum)
• Registered agent: Varies (LegalZoom charges $249/year)
• Name reservation (optional): $75

Annual Maintenance Costs

• Franchise tax: $175–$200,000 depending on calculation method and number of shares
• Annual report fee: $50
• Federal and state taxes: Varies by the nature of your business and its profitability

What is the Delaware franchise tax?

The Delaware franchise tax is an annual tax that Delaware entities pay for the privilege of doing business in the state. Corporations can choose between two calculation methods:

• Authorized shares method (from $175 to $200,000)
• Assumed par value capital method (from $400 to $200,000)

The tax is due March 1 every year along with the annual report.

Do I need a registered agent?

Yes, Delaware law requires every corporation to maintain a registered agent with a physical street address in Delaware. The registered agent receives legal documents and official correspondence on behalf of the corporation.

How do I search for a Delaware corporation?

Use the Delaware Division of Corporations' online entity search database. This real-time system allows you to search for existing corporations and verify whether or not another legal entity in the First State is using your desired business name.

Delaware corporation vs. LLC: Which is better?

The choice depends on your specific needs:

• Choose a corporation for venture capital funding, heightened credibility, or to eventually go public.
• Choose an LLC for operational flexibility, pass-through taxation, and simpler compliance requirements.

Sarah Jones and Jane Haskins, Esq., contributed to this article.