Starting a Business in Delaware: 8 Essential Steps

Do you have a promising business idea but don’t know how to start? From drafting a business plan to opening a bank account, we got entrepreneurs looking to start a business in Delaware covered. There are eight essential steps to take your business from idea to incorporation. Keep reading for a guide to get your Delaware business off the ground and make your dreams of being your own boss a reality.

Start Operating in Delaware: Key Points

1. Writing a business plan is crucial; it’s a roadmap to take you from idea to incorporation.

2. State law requires all Delaware business entities to have a registered agent.

3. Every business entity also needs a Delaware business license, among other considerations.

Ready to Start a Delaware Business?

Setting up a business in Delaware doesn’t have to be overwhelming or daunting. It’s easy for small business owners new to the game to get started.

We’ll take you through the eight essential steps for getting your Delaware business off the ground:

1. Choose a business idea

2. Draft a Delaware business plan

3. Select a business name

4. Choose a business structure

5. File business formation documents

6. Apply for Delaware business licenses and permits

7. File and report business taxes

8. Open a business bank account

From coming up with an entrepreneurial idea to choosing a great name, applying for state-specific licenses, filing tax returns, and more, we can help take you through the process from start to finish so you can start operating in Delaware. With the right idea and plan, you can start thinking about incorporation. A third-party service can help business formation go more quickly and easily.

1. Choose a Business Idea

Every new business entity starts with a vision. An integral first step to starting a business in Delaware is coming up with a solid business idea. Some entrepreneurs might already have one, but this is a crucial first step if you don’t. It doesn’t necessarily need to be groundbreaking or innovative, just some type of service or product that solves a need and can cater to a specific customer demographic.

A common way small companies get into doing business is by turning a passion or hobby into a way of making money. For example, people who are exceptionally skilled in social media might monetize this by helping companies with their marketing, or people who care about the environment might want to start an eco-friendly business. Recent-college graduates can also turn their existing skills into a job.

Don’t be discouraged if you don’t have an idea; there are many ways to find inspiration. For example:

• Meet with people with similar interests and skills for a brainstorming session.

• Keep up with trends and anticipate future clientele’s needs.

• Make sure your mental and physical health is in a good state. This can eliminate any brain fatigue or sluggishness that could block creativity.

• Build off another idea! Not every business idea needs to be new. Think of something that already works and consider ways you could improve.

2. Draft a Delaware Business Plan

It’s essential to have a solid business plan in place before you start operating in Delaware. A plan needs to be put in place before you go through the rest of the business formation process because it outlines and details each stage of starting managing your entity. New business owners can think of it as a roadmap for their business, which can help bring on investors or potential business partners.[1]

There’s no one-size-fits-all template for a successful business plan. Entrepreneurs can pick the best format between a detailed, traditional plan or a high-level, lean startup plan.[1] The most important thing is that your plan meets your business needs.

Traditional Business Plans

These are the most common forms of business plans. They require more work up front because each section requires a lot of detail and can be lengthy. Most traditional business plans have the following sections: 

• Executive summary

• Company description

• Market analysis

• Organization and management

• Service or product

• Marketing and sales

• Funding request

• Financial projections

• Appendix

Lean Startup Plans

These plans are less common and are typically less intensive. They’re focused on summarizing vital business plan elements and typically take up no more than one page. A lean startup plan will usually include the following sections:

• Key partnerships

• Key activities

• Key resources

• Value proposition

• Customer relationships

• Customer segments

• Channels

At a minimum, your plan should include essential information on how you would want to structure, run, and grow your business. Without one, owners risk missing thinking about critical elements, which can lead to a failed enterprise or lack of investment.[1] The Delaware State website has resources for writing your plan and a state small business division.

3. Select a Business Name

What’s in a name? More than you think. You want a business-friendly name that customers will remember, that’s true to your brand, and fits your product. You must also ensure that your name follows state and federal guidelines. For example, make sure your name isn’t already in use. You can get into legal trouble if you do business under the same name as another entity.

After finding a business name that suits your entity, be sure to do a Delaware business search to make sure it’s available to use in the state. You can do this using Swyft Filings’ Free Business Name Search tool. The Delaware Division of Corporations also has a name search tool. Check the state’s Corporation & Business Entity Search page for more resources on Delaware companies.

Got a great business idea and name but are not ready to move to incorporation yet? Consider filing a name reservation. People looking to start a business in Delaware who want to keep their name can do so for up to 120 days. All you need to do is file an application, which can be done online and pay a filing fee of $75. This allows you to reserve, re-reserve, transfer, or cancel a name reservation.[2]

4. Choose a Business Structure

There are four major types of business structures that you can consider for your business formation. Each has pros and cons regarding management style, profitability, tax treatment, etc. You can also consider an S corporation, which is a type of tax classification and not a business structure.

The four main business structures are:

1. Limited Liability Company (LLC)

2. C Corporation

3. Doing Business As (DBA)

4. Nonprofit

At a glance, here are ways you can differentiate each of the four business structures and one tax status so you know what you’re getting into when you take your business to incorporation.[3] If you want to save time, money, and energy when forming your entity, consider using a third-party service. Swyft Filings can help you file paperwork correctly for all entity types.

5. File Business Formation Documents

Specific business structures require owners to file different formation documents to complete their business formation. Most new business entities in Delaware need a certification of incorporation. The state’s Division of Corporations website has an online guide with sample forms, instructions, and pricing information. The entity forms can be submitted online as PDFs or physically through the mail.[4]

Your Delaware certificate of incorporation should include the following:

1. The name of the corporation

2. Name and mailing address of the Delaware registered agent

3. Name and mailing address of the incorporator

4. Signature

Stock corporations must also include the total number of authorized shares and the value assigned to the stock.[5] For non-stock corporations, be sure to list the conditions of membership, either in the certification or bylaws of the corporation.[6] To form your Delaware LLC, you would only need items 1 and 2 at a minimum.[7]

State law requires every business entity to have a registered agent with a physical address in Delaware. Even if the entity itself is not located in the state, the registered agent must be in order to accept the Service of Process. They also provide information for billing and tax obligations.[8] Check out Swyft Filings’ registered agent service to help you find a professional Delaware agent.

Entrepreneurs should also consider creating an operating agreement. Even though state law doesn’t require this, it is a valuable legal document that helps establish who owns the company. It is the only governing document for the business. It helps define who has decision-making powers, like who should be involved in financial and functional decisions and make rules and provisions.

When drafting your operating agreement, you could include the following:

• A description of the business structure

• The names of the business owners

• A brief explanation of owners’ responsibilities and management styles

Knowing which documents you need to file for each type of business structure is essential. As mentioned, some forms are required by state law, while others are not. Failure to file the correct forms may lead the Internal Revenue Service (IRS) or Secretary of State to reject your request for business formation. Other risks include failing to document the entity’s governance, ownership, and internal operations.

It’s vital to get the paperwork right. These documents can act as the foundation for your business entity; some are legally required. To ensure your filing is done correctly and efficiently per state and federal law, consider using a third-party service like Swyft Filings. We handle the paperwork so you can focus on running the business.

6. Apply for Delaware Business Licenses and Permits

Any person or entity that does business in the state is required to have a Delaware business license issued by the Delaware Division of Revenue. This applies to all business entities, including small businesses and startups, even if they operate outside of the state. Owners must get their business licenses once they start operating in Delaware. Otherwise, they risk doing business illegally.[9]

Business owners can apply for their business online using the One Stop Business Licensing and Registration Service. They can expect to receive it about one month after applying. If you need a license sooner, a temporary license can be issued and printed from your computer. Most licenses last for about one year and typically expire on December 31 of the year they are issued.[9]

At a minimum, all businesses must register with the Delaware Division of Revenue and get a business license. Depending on the company and location, business owners might also need to register with other local, state, and federal entities. Check out our Business Licenses and Research service if you’re unsure what licenses and permits you need to operate.

For example, certain entities and business owners might need to consider the following:

• Get a city or county business license, depending on your location in Delaware.

• Businesses with employees need to register with the Delaware Division of Unemployment and Insurance and the Delaware Office of Workers Compensation.

• Entities identifying as corporations, partnerships, and LLCs must register with the Delaware Division of Corporations.

• Certain professions must register and get a license with the Delaware Division of Professional Regulations.[9]

7. File and Report Business Taxes

Next, consider the post-formation period of the business journey. All Delaware corporations must file an annual report and pay a franchise tax. LLCs, limited partnerships, and general partnerships formed in Delaware do not need to file an annual report. However, they must still pay an annual tax of $300 by June 1 each year.[4]

On the other hand, exempt domestic corporations can skip the tax but still need to file an annual report.[4] Corporations incorporated in Delaware that do not conduct business are not subject to corporate income tax. Still, they do have to pay a franchise tax.[10]

State taxes vary from state to state. On top of this, be sure to check federal tax laws. Business entities that fail to pay their taxes risk being audited by the IRS. Annual reports must be filed by March 1 each year. Entities that fail to do so face a $200 penalty. On top of that, interest at 1.5% per month is applied to any unpaid tax balance, which can add up.[4]

Another reason why it’s so important to have a Delaware Registered agent is because notification of annual reports and franchise taxes are sent to agents in December every year.[4] Annual taxes can range from $175 to $200,000 in the state. Business owners can pay in quarterly installments if they owe more than $5,000 or more each year. The percentage breakdown can be found here.                                                                                                                                           

8. Open a Business Bank Account

Almost half of all small businesses in the United States use personal credit cards for business-related purposes.[11] Having a credit card specifically for business spending is vital for multiple reasons. It helps separate personal spending from professional spending, it helps build credit, which allows companies to expand, and it can help the individual business owner develop their credit.

However, there are a few other things to note about business credit cards. While they’re easy and convenient, like all credit cards, they still come with a line of credit unique to the business and its owner, with a set limit. If the balance is not repaid in full each business cycle, expect to be hit with an interest charge, typically much higher than the rate on a small business loan.[12]

Business owners need an Employer Identification Number (EIN) to get a business bank account. We can help you get one here. This is similar to your social security number (SSN), which the IRS uses to identify you or your business when you file taxes yearly. On top of allowing owners to get a business credit card, they can also open a business account and apply for licenses.

Take Your First Steps Toward Small Business Ownership

Are you ready to get your business idea off the ground? Entrepreneurs looking to start a business in Delaware can follow the eight critical steps listed above. The business-formation process begins with a lucrative idea and a solid business plan, whether a traditional or lean startup plan. From there, owners need to register their unique name, or they can reserve one.

Then, choose a business structure: (LLC), C Corporation, DBA, and nonprofit are all excellent options for small businesses. You can also elect S corporation status, which is a tax classification. Each state and business structure has requirements, so check which formation documents, business licenses, and permits you need. Otherwise, you might risk operating illegally.

Once you start operating in Delaware, follow through with filing your business taxes and consider opening a business bank account to build credit and expand. There are several steps to get from idea to incorporation. Swyft Filings is here to help make business formation easier and get you started right. Our service can be tailored to fit your business needs.

Frequently Asked Questions

Is Delaware a good place to start a business?

Yes! State law requires all businesses to have a registered agent who helps deal with legal paperwork, like due process. This helps lift some of the administrative burdens of the business owner. Also, while all Delaware corporations must file an annual report and pay a franchise tax, there are exceptions to this, where some corporations are exempt.[4]

How much does it cost to start operating in Delaware?

This varies depending on your unique business needs. For example, every business in Delaware needs to register with the Delaware Division of Revenue and get a business license. This is one fee, but business owners might also need to register with other local, state, and federal entities depending on the business and location.

Can I start a business in Delaware without a business plan?

While a business plan isn’t required by state law, it’s highly recommended that you draft one before starting your business for multiple reasons. You can pick whatever format suits you best to include basic information on how you want to structure, run, and grow your business. Without one, owners risk not thinking all the vital elements through.[1] 

What does Delaware require to start a business?

Entrepreneurs should consider completing all the steps listed above to get their business from idea to incorporation. However, state law requires business owners to choose and register a unique name, file the necessary business formation documents, including a certificate of incorporation at the very least, and get a business license and a registered agent in the state.

What is the process for starting a business in Delaware?

The business formation process starts with ensuring you have a solid idea for a service or product that solves a need and can be marketed to a particular customer demographic. Then draft a business plan – usually traditional or lean startup – to ensure you’ve carefully thought through all the steps. From there, you can register your unique business name and choose a structure.

Why are most LLCs in Delaware?

Essentially, Delaware state law provides a complete and versatile package of incorporation services. As a result, more than 66% of Fortune 500 Companies have Delaware as their legal home and location. According to the state’s Division of Incorporations, “The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation.”[13]

Bibliography

1. U.S. Small Business Administration. “Write Your Business Plan.” Accessed June 16, 2023.

2. Delaware Division of Corporations. “Name Reservation Applications.” Accessed June 16, 2023.

3. Swyft Filings. “Choose The Right Business Type.” Accessed June 16, 2023.

4. Delaware Division of Corporations. “How to Form a New Business Entity.” Accessed June 16, 2023.

5. Delaware Division of Corporations. “Certificate of Incorporation for Stock Corporation.” Accessed June 16, 2023.

6. Delaware Division of Corporations. “Certificate of Incorporation for Non-Stock Corporation.” Accessed June 16, 2023.

7. Delaware Division of Corporations. “Certificate of Incorporation of a Limited Liability Company.” Accessed June 16, 2023.

8. Delaware Division of Corporations. “Frequently Asked Questions.” Accessed June 16, 2023.

9. Delaware Division of Revenue. “Business Licenses FAQs.” Accessed June 19, 2023.

10. Delaware Division of Revenue. “Franchise Taxes.” Accessed June 19, 2023.

11. Small Business Administration. “10 Stats That Explain Why Business Credit is Important for Small Business.” Accessed June 19, 2023.

12. Investopedia. “Using a Business Credit Card.” Accessed June 19, 2023.

13. Delaware Division of Corporations. “About the Division of Corporations.” Accessed June 19, 2023.