Starting an S Corp in Delaware 2024: Your Ultimate Guide

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How to Start an S Corp in Delaware

Welcome to the exhilarating world of Delaware entrepreneurship! Ready to start your Delaware S Corporation and enjoy its unique benefits? You’ve come to the right place. Delaware offers ample resources to ensure your business thrives, with added perks like tax savings and liability protection.

Embark on this thrilling journey with LLCBase as your trusty guide. We’ll provide all the info and resources needed for your Delaware S Corp success. Let’s dive into the vibrant journey of The First State entrepreneurship and make your dream a reality!

Start an S Corp

What is an S Corp

An S Corp is a type of corporation that offers certain tax advantages and liability protection for its shareholders. Like a traditional corporation, an S Corp is a separate legal entity from its owners, providing them limited liability. However, unlike a traditional corporation, an S Corp is not subject to double taxation. Instead, profits and losses are passed to the shareholders, who report this information on their tax returns.

Why Start an S Corp in Delaware

Delaware’s reputation for being business-friendly is highly attractive to entrepreneurs. The state government has adopted measures and regulations that create a favorable business environment to operate and thrive. Policies are implemented to facilitate ease of doing business, such as simple registration processes, fair tax codes, and access to resources and support systems for businesses.

Added to these is the liability protection accorded to an S Corp. In case of any legal actions or debts, the personal assets of the owners or shareholders are not in danger, thanks to this corporate structure. This means your personal properties are not at risk even in business failure. Moreover, S Corps in Delaware also enjoy various tax benefits. Unlike traditional corporations that face double taxation on income and dividends, S Corps allow for pass-through taxation, ensuring only shareholders are taxed on company profits, not the corporation itself.

Lastly, establishing an S Corp in Delaware offers a sense of professionalism and credibility. An S Corp designation can give customers and potential investors more confidence in your business because it usually indicates a more formal commitment and a higher level of organization and structure. Additionally, the reputation of Delaware as a business-friendly location, combined with the prestige of operating as an S Corp, can significantly enhance your company’s professional image. Consequently, starting an S Corp in Delaware has numerous advantages that can help propel your business to new heights.

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How to Start an S Corp in Delaware: Step-by-Step

If you plan to establish an S Corporation in Delaware, it is essential to adhere to this comprehensive, step-by-step guide:

Step 1: Choose a Name

Selecting a unique and distinguishable name for your S Corp in Delaware is crucial for branding and legal purposes. To ensure that your desired business name is not already in use by another entity in Delaware, you can use the Delaware Division of Corporations Entity Search database to search for name availability. When choosing a name, consider incorporating words or phrases relevant to your industry that will resonate with your target audience.

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Step 2: Reserve Your Business Name (optional)

If the name you want is available, it’s a good idea to reserve it to ensure that no one else can claim it while you are forming your S Corp. In Delaware, the name reservation is valid for 120 days, with a name reservation fee of Not available through online and $75 through mail. Reservation periods vary by state, so check with your local government agency for specific timeframes and fees.

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Step 3: Appoint a Reliable Registered Agent

Registered Agent is responsible for receiving official correspondence and legal documents on behalf of your S Corp. This includes government notices, tax filings, and legal paperwork. The Registered Agent must have a physical address within Delaware and be available during regular business hours. You can act as your Registered Agent or hire the best registered agent service in Delaware to fulfill this role.

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Step 4: File Certificate of Incorporation

Certificate of Incorporation are the legal documents that officially establish your S Corp. They must be filed with the appropriate state agency, usually the Secretary of State’s office. The information required in the Certificate of Incorporation typically includes your business name, Registered Agent, the purpose of the business, and the number of authorized shares.

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Step 5: Obtain an EIN

An EIN is a unique identification number the Internal Revenue Service (IRS) assigns to your S Corp. It is used for tax filing and reporting, opening a bank account, and conducting other business transactions. You can apply for an EIN in Delaware online through the IRS website, by fax, or by mail.

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Step 6: Submit Form 2553

To elect S Corp status for your business, you must file Form 2553 with the IRS. This form provides information about your company’s shareholders, including their names and addresses, and confirms that your business meets the eligibility requirements for S Corp status. The form must be completed and submitted within a specific timeframe, typically within 75 days of your company’s formation.

Step 7: Register for Taxes

Depending on the nature of your business and its location within Delaware, you may be required to register for various taxes, such as sales tax, employer tax, and other state-specific taxes. Registering with the Delaware Division of Revenue ensures you comply with all tax regulations and requirements.

Step 8: Obtain Licenses and Permits

To operate your S Corp legally, you may need to obtain specific licenses and permits based on your industry and location. This can include professional licenses, zoning permits, health department permits, and more. Conduct thorough research to identify all necessary Delaware licenses and permits and file the appropriate applications with the relevant agencies.

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Step 9: Set Up a Business Bank Account

To maintain clear financial records and separate your personal finances from your business finances, it’s important to establish a dedicated bank account for your S Corp. This account should be used for all business transactions, including receiving payments, paying expenses, and managing payroll. Proper financial management is essential for maintaining your S Corp’s compliance and ensuring accurate tax reporting. Check the list of the best banks in Delaware and make all your business transactions convenient and efficient.

Fees for Starting an S Corp in Delaware

The fees associated with starting an S Corp in Delaware can vary depending on the specific requirements of your business. Here is a list of common fees you may encounter:

  • Name reservation fee (optional): If you choose to reserve your business name, a name reservation fee of Not available (online) and $75 (mail) may be associated with this service.
  • Certificate of Incorporation filing fee: To officially form your S Corp, you must file the Certificate of Incorporation with the appropriate state agency. This typically involves a $89 for filing online, fax and by mail.
  • Registered Agent fee: If you hire a professional Registered Agent service, you may need to pay an annual $50 – $300 for their services. Note that this fee can vary depending on the provider.
  • Employer Identification Number (EIN) application fee: Generally, no fee is associated with obtaining an EIN through the IRS. However, if you use a third-party service to obtain your EIN, they may charge an EIN application fee.
  • State tax registration fee: Registering with the Delaware Division of Revenue may involve a state tax registration fee. This fee can vary depending on the types of taxes you must register for.
  • Licenses and permits fees: The costs for obtaining necessary licenses and permits for your S Corp will depend on your industry and location. Depending on the licenses and permits needed, these fees can range from $50 – $300 or more.
  • Business bank account fees: When setting up a business account, you may encounter various fees, such as a bank account opening fee, monthly maintenance, or transaction fees. These fees can vary depending on the bank and your account type.

Please note that these fees are subject to change and may vary depending on your situation. Researching and confirming the fees associated with starting an S Corp in Delaware is essential to ensure you are prepared for all potential costs.

Advantages of Delaware S Corp

Forming an S Corp in Delaware can provide numerous benefits for business owners, which are explained in detail below:

  • Limited liability protection for shareholders: One of the primary advantages of forming an S Corp in Delaware is the limited liability protection it offers its shareholders. This means that the shareholders’ personal assets, such as their homes, cars, and personal savings, are protected from the debts and liabilities of the business. In the event of a lawsuit or financial loss, shareholders are only liable for the amount they have invested in the company, ensuring their personal assets remain safe.
  • Pass-through taxation, avoiding double taxation: S Corps are unique in avoiding the double taxation issue traditional corporations face. Double taxation occurs when a corporation is taxed on its profits, and then the shareholders are taxed again when they receive dividends. With an S Corp in Delaware, profits and losses are passed to the shareholders, who report this information on their tax returns. This pass-through taxation structure helps to reduce the overall tax burden on the business and its owners.
  • Increased credibility and professionalism: Forming an S Corp in Delaware can increase your business’s credibility and professionalism. Customers, suppliers, and investors often view corporations as more established and legitimate than other business structures, such as sole proprietorships or partnerships. This can attract new business, establish trust in the marketplace, and provide a solid foundation for future growth.
  • Potential state-specific tax benefits or incentives: Depending on the state where you form your S Corp, additional tax benefits or incentives may be available to business owners. These can include reduced tax rates, tax credits, or other financial incentives designed to promote business growth and development within the state. It’s essential to research the specific tax benefits and incentives available in Delaware to determine if forming an S Corp is the best option for your business.

FAQs

Why would I want to start an S Corp in Delaware?
Delaware is known for its business-friendly laws and regulations, making it a popular state to register corporations of all sizes.
Can I form an S Corp in Delaware if I don’t live there?
Yes, you don’t have to live in Delaware to form an S Corp there.
What are the requirements for starting an S Corp in Delaware?
You must file a Certificate of Incorporation with the Delaware Secretary of State’s office and appoint a registered agent with a physical street address in Delaware.
How long does it take to start an S Corp in Delaware?
The processing time for S Corp registrations in Delaware is typically within 24 to 48 business hours.
Are there any unique tax advantages for forming an S Corp in Delaware?
Delaware does not have state-level corporate income tax, which can provide substantial tax savings for an S Corp.
How many shareholders can an S Corp have in Delaware?
Delaware limits the number of shareholders in an S Corp to 100.
Do I need to have a physical office address in Delaware to register my S Corp?
No, but you do need to appoint a registered agent with a physical street address in Delaware.
Does Delaware require that S Corps have directors?
Yes, there must be at least one director in a Delaware S Corp.
Will my S Corp need to file annual reports with the state of Delaware?
Yes, Delaware S Corps are required to file both an annual franchise tax report and a corporate income tax return.
How much does it cost to register an S Corp in Delaware?
Filing a Certificate of Incorporation in Delaware costs $89.
Can I change my S Corp’s registered agent in Delaware?
Yes, you may change your registered agent at any time by filing a change of agent form with the Delaware Secretary of State.
Who can act as a registered agent for my S Corp in Delaware?
Anyone who is a resident of Delaware or a registered agent service can act as your S Corp’s registered agent in the state.
Do I need an attorney to form an S Corp in Delaware?
It’s not required, but it may be beneficial to consult with an attorney regarding the legal requirements for your S Corp.
Will my S Corp need to file for foreign qualification in other states where I do business?
Yes, you will need to apply for foreign qualification in any state where your S Corp does business.
Can a non-US citizen start an S Corp in Delaware?
Yes, there are no requirements that restrict non-US citizens from starting an S Corp in Delaware.
What is the process for filing corporate documents online in Delaware?
The Delaware Division of Corporations provides an online service for submitting and filing corporate documents and paying fees.
How often do filings need to be made for an S corp in Delaware?
Delaware requires annual reports to be filed each year by each S Corp.
Does Delaware recognize single member S Corps?
Delaware recognizes single member S Corps, but the IRS does not.
Are there annual conferences or events that S Corps in Delaware can attend?
There are various small business conferences and events held throughout Delaware throughout the year that S Corps can attend.
Can I use a PO Box for my registered agent’s address?
No, a PO Box cannot be used as a physical street address for an S Corp’s registered agent in Delaware.
How can I confirm that my S Corp has been properly registered in Delaware?
The Delaware Secretary of State’s website has a business entity search, allowing you to view your S Corp registration details.
Are there any residency requirements to become a member of an S Corp in Delaware?
No, residency is not a requirement to become a member of an S Corp in Delaware.
Can an S Corp in Delaware be taxed as a partnership?
Yes, by filing IRS Form 8832, S Corps can elect to be taxed as a partnership.
Can I name my S Corp whatever I want in Delaware?
Yes, you can choose any name not already taken as long as it meets the requirements of the Delaware Secretary of State’s office.
Can I dissolve my S Corp in Delaware without incurring fees?
Provided you have filed up-to-date “Annual Reports”, you should be able to dissolve in Delaware without having to pay dissolution fees.
How often is the franchise tax owed?
Delaware S Corps must pay Franchise Tax Fees annually, payable April 15th.
Can the President and Secretary be the same person in Delaware?
Yes, you don’t need different people to be President and Secretary of your Delaware S Corp.
Will I need to pay both state and federal taxes for my S Corp in Delaware?
Yes, like any other corporation operating in the United States, an S Corp operating in Delaware will have to pay both state and federal taxes.
Can I file as C Corp in Delaware instead of an S Corp?
Yes, you can. File a C Corp Certificate of Incorporation with the Delaware Secretary of State’s office to register as a C Corp.
What is an S corporation?
An S corporation is a type of corporation that meets certain IRS requirements for taxation. It allows the company’s income, deductions, and credits to be passed through to shareholders, who report this information on their own tax returns.
Why would I want to start an S corporation in Delaware?
Delaware has business-friendly laws and regulations, making it a popular place for entrepreneurs to start a business. In addition, there are certain tax advantages to incorporating in Delaware.
What requirements must my business meet to qualify as an S corporation in Delaware?
To qualify as an S corporation, your business must have no more than 100 shareholders and only issue one class of stock; have only individuals, estates, and certain trusts as shareholders; and be a domestic corporation organized under Delaware law.
What steps do I need to take to start an S corporation in Delaware?
First, you’ll need to appoint a registered agent in Delaware to receive official notices and service of process. Then, you’ll need to file your certificate of incorporation with the Delaware Secretary of State and obtain necessary licenses and permits.
How do I choose a name for my S corporation in Delaware?
Your corporation’s name must be distinguishable from other business names in Delaware, and it must include a corporate suffix such as “Corp.” or “Inc.”
How much does it cost to start an S corporation in Delaware?
The filing fee for a certificate of incorporation in Delaware is currently $89, and you may need to pay additional fees for other permits and licenses.
How long does it take to start an S corporation in Delaware?
The time it takes to start an S corporation in Delaware varies depending on many factors. Most businesses can expect the process to take between 1-4 weeks.
Do I need to hire a lawyer to incorporate my S corporation in Delaware?
While it’s not a legal requirement to hire a lawyer, many business owners find it helpful to have legal guidance during the incorporation process.
What is a registered agent, and do I need one in Delaware?
A registered agent is a person or business that is designated to receive legal notices and service of process on behalf of a corporation. You will need to appoint a registered agent in Delaware to incorporate your S corporation there.
Can I be my own registered agent for my S corporation in Delaware?
Yes, you can serve as your own registered agent for your S corporation in Delaware, as long as you have a physical address in the state.
What types of businesses are best suited for S corporation formation in Delaware?
Small to medium-sized businesses that have favorable tax structures are well-suited for S corporation formation in Delaware.
What are the tax benefits of forming an S corporation in Delaware?
S corporations are not taxed at a corporate level, which saves money on federal and state taxes. Instead, their profits and losses are passed through to shareholders who report them on their individual returns.
Can I form a single-member S corporation in Delaware?
Yes, Delaware allows businesses to form S corporations with a single member.
Do I need to file regular reports with the Delaware Secretary of State once my S corporation is formed?
Yes, Delaware requires all corporations to file an annual report and pay an associated fee every year.
What is the minimum number of directors required to form an S corporation in Delaware?
Delaware requires a minimum of one director for an S corporation.
What documents do I need to provide to incorporate my S corporation in Delaware?
The documents you will need to provide include a certificate of incorporation, corporate bylaws, and any other required permit or license applications.
Can anyone file a certificate of incorporation for an S corporation in Delaware?
Anyone can file a certificate of incorporation for an S corporation in Delaware, whether a resident of the state or not.
How do I keep my S corporation in good standing in Delaware?
To keep your S corporation in good standing, you must file all required reports and pay any associated fees in a timely manner.
Do S corporations have double taxation in Delaware?
No, S corporations do not have double taxation, as their profits are passed through to shareholders who report them on their individual tax returns.
Do I need to have an operating agreement for my Delaware S corporation?
While it’s not legally required, it’s helpful to have an operating agreement for your S corporation to establish operating procedures and resolve disputes among shareholders.
Can I transfer my S corporation to Delaware from another state?
Yes, it is possible to move your S corporation to Delaware from another state. You will need to follow certain guidelines and file paperwork to make the transition.
What is the advantage of choosing Delaware as the state of incorporation for my S corporation?
Some of the advantages of choosing this state of incorporation include a recognized legal system, favorable corporate laws, non-existent corporate income tax, and business-friendly environment.
Does Delaware require S corporations to obtain a business license?
Specific requirements for business licenses and permits vary by locality in Delaware. It’s best to check local laws regarding licensing for your S corporation.
Can I form a Delaware S corporation as a nonprofit organization?
No, Delaware does not allow nonprofit organizations to form as S corporations.
How do I wrap up an inactive S corporation in Delaware?
You will need to file official dissolution paperwork with the Delaware Secretary of State to terminate an S corporation’s existence in the state.
Can a foreign corporation form an S corporation in Delaware?
Foreign corporations cannot form S corporations in Delaware, but they can file to do business in the state and file annual reports.
Does Delaware allow professional corporations to form as S corporations?
Yes, professional corporations such as those for lawyers, engineers, and doctors may form as S corporations in Delaware.
Do the shareholders of an S corporation in Delaware pay state income tax?
Delaware does have a state income tax, but shareholders of S corporations in the state do not pay it on S corporation profits.
Can I form a manager-managed S corporation in Delaware?
Yes, Delaware allows for manager-managed S corporations, but their management structure must be spelled out in official documents.

Also Read

Why You Should Start Delaware S Corp

One of the main reasons to consider starting a Delaware S Corp is the state’s favorable corporate laws. Delaware has a long history of offering robust legal protections for corporations, including well-established case law that provides clarity and predictability for businesses. This can be especially important for startups, who need to navigate complex legal issues as they grow.

In addition to its legal protections, Delaware also offers tax benefits for corporations. The state has a relatively low corporate income tax rate and does not tax businesses that operate outside of the state. This can result in significant savings for companies that do business across state lines, making Delaware an even more attractive choice for entrepreneurs.

Another reason to choose Delaware for your S Corp is the state’s business-friendly climate. Delaware has a strong infrastructure to support businesses, including a well-developed network of banks, legal professionals, and other services that can help your company succeed. Additionally, Delaware’s Secretary of State’s office is known for its efficient processing of corporate filings, reducing the time and administrative burden for entrepreneurs.

By choosing to start a Delaware S Corp, you can also benefit from the state’s reputation as a leader in corporate governance. Delaware has a long-standing tradition of prioritizing the rights of shareholders and providing clear guidelines for corporate governance. This can help instill confidence in investors and partners, making it easier to secure funding and grow your business.

Finally, starting a Delaware S Corp can give your company credibility in the eyes of potential stakeholders. Many investors and partners are familiar with Delaware’s corporate laws and prefer to work with companies that are incorporated in the state. By choosing Delaware for your S Corp, you can signal to others that you are serious about your business and committed to its long-term success.

Overall, there are many reasons to consider starting a Delaware S Corp for your business. From its favorable legal protections and tax benefits to its business-friendly climate and reputation for corporate governance, Delaware offers a range of advantages for entrepreneurs. If you’re looking to establish a strong foundation for your startup and position it for long-term success, Delaware is definitely worth considering as the right choice for incorporating your S Corp.

Conclusion

Starting an S Corporation in Delaware, also known as The First State, is an excellent choice for entrepreneurs who want to take advantage of the many benefits that this business structure has to offer. By following the steps outlined in this guide and making sure to comply with all the regulations and requirements specific to Delaware, you will be well on your way to establishing a successful and thriving S Corp. Remember, this journey may have its challenges, but with determination, hard work, and the right support, there’s no limit to what you can achieve in the business world of Delaware.

As you embark on this new chapter as a business owner in Delaware, always remember that you are part of a vibrant and thriving entrepreneurial community. The spirit of The First State is one of innovation, creativity, and resilience. By choosing to establish an S Corporation in Delaware, you are taking control of your financial future and contributing to the growth and prosperity of the local economy. Visit LLCBase for more valuable insights and resources to help you navigate the process of starting an S Corp in Delaware. Wish you the best of luck in your entrepreneurial endeavors!

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