How to Start a Business in Delaware (Updated 2024)

Are you looking to start a business in Delaware? If so, you'll need to follow Delaware's business laws and procedures to set up your business legally. Follow the key steps below to create your Delaware business.

1. Choose a Business Idea

Your first step when starting a business is landing on a good business idea. Your business idea should be profitable and sustainable. Start by considering the areas you already have experience in. For example, if you've spent the last few years freelancing as a dog walker, you might want to consider starting a dog walking business.

As you evaluate your business idea, ask yourself questions like:

• Is there demand in my geographic region for my proposed goods or services?
• How much competition is already out there? Is the market already saturated or would my business meet an unmet need?
• What would my startup costs be?
• How long until my business becomes profitable? Do I have enough capital to sustain my business until that time?
• Which expenses are necessary vs. discretionary?
• What's the minimum investment you need to start your business?

The best way to answer these questions and to map out your vision is to create a business plan. Your plan should include a marketing strategy and revenue projections. Moreover, you're likely to attract more investors and lenders with a well-thought-out business plan. (Check out our section on business financing, loans, and capital for ideas and guidance on funding your small business.)

2. Decide on a Business Legal Structure

As you plan your business, you'll need to choose an entity structure. The most common legal structures for a small business are:

• sole proprietorships
• partnerships
• limited liability companies (LLCs), and
• corporations.

Apart from the four main business structures, Delaware recognizes limited partnerships, limited liability partnerships (LLPs), and limited liability limited partnerships (LLLPs), which are types of partnerships where some partners have limited liability.

If you provide a professional service, you can form a professional service corporation (called a "professional corporation" in other states). In general, a "professional service" is a service that requires the person providing the service to have a license or other legal authorization and that can't be provided by a regular corporation.

You should choose the entity type that applies to your business and provides you (and the other owners) with the best benefits. Consider each entity's costs, legal and tax requirements, and liability protections to make the best choice for your business.

Depending on which business structure you choose, you might be able to elect to become an S corporation, a tax entity. Different types of businesses, such as LLCs and corporations, can elect to be taxed as S corporations but legally remain corporations or LLCs. If you have specific questions, you should speak with a tax attorney or other tax professional.

3. Choose a Name for Your Delaware Business

Once you have your business idea and entity structure, it's time to put a name to your business venture. Choosing the right name for your business is a crucial step. You'll need to select a business name that's unique and marketable. Customers should be able to easily identify and remember your business name. You'll also want to choose a name that's easy to find when people search for your goods or services and reflects your company's image.

In Delaware, like in most states, your business name must be distinguishable—that is, different enough—from the names of other business entities already on file with the Division of Corporations (DOC), a part of the Delaware Department of State (DOS). You can check to see if your proposed business name is already in use by doing a name availability search on the DOC website.

Entity name designators: For most business entities, Delaware law requires you to include certain words that identify your business's entity structure (like including a word such as "LLC" for LLCs or "Company" for corporations). See our articles on how to form a corporation and LLC in Delaware for more information about naming your business.

Reserving your business name: You can reserve an available name for 120 days by filing a name reservation application to the DOC. You can apply by mail or submit the application online using the DOC's Online Name Reservation Site. You can also renew (re-reserve) your business name reservation. As of 2024, the filing fee to reserve or renew a name is $75.

Registering a trade name: If you do business under a trade name (also called a "DBA," "fictitious name" or "assumed name"), then you must register that name with the Office of the Prothonotary of every county where you'll do business. A "trade name" is any name that's different from the owners' full names (for a sole proprietorship or general partnership) or the name the business has registered with the DOC. You must fill out and notarize the Registration Certificate and pay the $25 fee (as of 2024) to register your trade name. (Del. Code tit. 6, §§ 3101 and following (2024).)

If you conduct business online, you might want to register your business name as a domain name. Moreover, to avoid trademark infringement issues, you should do a federal and state trademark search to make sure the name you want to use isn't the same as or too similar to a name already in use.

4. Register Your Business Entity With the Delaware Secretary of State

You can register your business with the DOC online through the DOC's Document Filing and Certificate Request Service or by mail. The DOC provides downloadable formation documents on its forms by entity type webpage. Some business types don't require you to file any paperwork.

Here's how to form each type of business:

• Sole proprietorship: You don't need to file any organizational documents with the state to create a sole proprietorship in Delaware.
• General partnership: To create a general partnership in Delaware, you don't need to file any organizational documents with the state. However, you should draft a partnership agreement to establish the rules for how your partnership will be managed and how the assets and liabilities will be divided among the partners.
• Limited partnership: To form a Delaware limited partnership, you must file a Certificate of Limited Partnership with the DOC. (Del. Code tit. 6, § 17-201 (2024).)
• Limited liability partnership (LLP): In Delaware, you can form an LLP or convert an existing partnership into an LLP by filing a Statement of Qualification with the DOC. Your partnership agreement must indicate that the partnership is an LLP. If converting your partnership into an LLP, you must have the proper approval from the partners. (Del. Code tit. 6, § 15-1001 (2024).)
• Limited liability limited partnership (LLLP): A limited partnership can become an LLLP in Delaware by filing a Statement of Qualification with the DOC. The partners must agree to the election and the name of the LLLP must include the phrase "Limited Liability Limited Partnership" or its abbreviation. (Del. Code tit. 6, § 17-214 (2024).)
• LLC: To create an LLC in Delaware, you must file a Certificate of Formation with the DOC. You should also prepare an operating agreement to outline the basic rules for your LLC's operations. (Del. Code tit. 6, § 18-201 (2024).)
• Corporation: To create a Delaware corporation, you must file a Certificate of Incorporation with the DOC. You should also prepare and adopt bylaws for your corporation. A corporation's bylaws, like an LLC's operating agreement, set out your corporation's internal operating rules. You don't need to file your bylaws with the state. (Del. Code tit. 8, § 101 (2024).)
• Professional service corporation: Licensed professionals of qualified services can form a professional service corporation in Delaware by filing a Certificate of Incorporation with the DOC. (Del. Code tit. 8, § 618 (2024).)

To form some of these businesses, you need to appoint a registered agent in Delaware for service of process. A registered agent agrees to accept legal papers on the company's behalf.

After you form your corporation or other applicable business with the SOS, you can file IRS Form 2553, Election by a Small Business Corporation, with the IRS to elect S corporation tax status.

5. Apply for Delaware Licenses and Permits

You'll probably need to apply for at least one license, permit, or registration for your business. You can find more detailed information in our article on Delaware business licenses.

You can use Delaware One Stop to register with and satisfy legal requirements for the following state agencies:

• Division of Revenue (DOR)
• Division of Unemployment Insurance, and
• Division of Workers' Compensation.

Annual state business license. Every Delaware business must obtain an annual state business license from the DOR and pay a set fee every year. The license fee varies but is usually $75 (as of 2024).

Tax registration. Delaware doesn't have a sales tax so you don't need to register for that purpose with the DOR. However, your business must pay a gross receipts tax to the DOR every month or quarter. If your business has or will have employees, you must register with the DOR for a withholding account. As referenced above, you can register with the DOR through One Stop.

Employer identification number (EIN). If your business has employees or is taxed separately from you, you must obtain an EIN from the IRS. Even if you're not required to get an EIN, there are often business reasons for doing so. For instance, banks often require an EIN to open an account in the business's name and other companies you do business with could require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There's no filing fee.

Regulatory licenses and permits. Depending on your specific type of business you might also need other licenses or permits issued by specific state agencies, such as the Division of Public Health within Delaware Health and Social Services. In addition, some required licenses are issued locally, so be sure to check the websites for any cities or counties where you'll be doing business.

Professional and occupational licenses. The Division of Professional Regulation (DPR) oversees many of the state's regulatory boards and commissions for licensed professions and occupations. The DPR's website homepage has links to virtually all of the regulated professions.

6. Pick a Business Location and Check Zoning Regulations

Next, you need to choose a location for your business. The best location for your business depends on several factors:

• Price and affordability. Your primary consideration when shopping for a business location should be price. If you're buying a place, you'll need to budget for a mortgage, utilities, and property taxes. If you're leasing a commercial space, you'll probably need to pay rent, a security deposit, utilities, and other potential shared or individual costs. Refer back to your business plan to land on an appropriate price range. You'll need to choose somewhere you can afford now and in the future. If you lease, negotiate terms that'll work for your business in the long term.
• Location, size, and layout. Before you start a mass search, think about your needs versus wants. How much square footage do you need to operate your business? What sort of layout do you need (think office space, storage, customer area, etc.) and can you convert an existing space into your desired layout? Which business location (for example, downtown or next to a highway) will give you the highest profit margin?
• Zoning. Verify your desired location is properly zoned for your intended business activities. You can usually find zoning regulations for your town or city by reviewing your local ordinances and contacting your town's zoning or planning department.

Do you need a physical location for your business? In general, your business needs a mailing or office address. Many times, you're legally required to have a business address. Your address can sometimes be your home address, a P.O. box, or a coworking space, among other options. See our article on whether you need a physical address for your small business to learn more.

Can you run your business out of your home? Many business owners run their small businesses out of their homes. Home-based businesses are becoming more popular, especially for online businesses. You should make the call depending on your business activities and the residential zoning laws. Look over your lease (if you rent your home) and homeowners association rules (if applicable), either of which might ban some or all home businesses.

7. Register and Report Business Taxes

You must pay taxes on your business income. You can file returns and pay most taxes through the Delaware Taxpayer Portal. You can find downloadable tax forms on the forms section of the DOR website. For more guidance, read our article on Delaware state business income tax.

Sole proprietorships. As a sole proprietor, you'll pay state taxes on business income as part of your personal state income tax return.

Partnerships. Partners pay state taxes on partnership income on personal tax returns. Delaware partnerships must also file Form PRT-RTN, Partnership Return. Limited partnerships don't need to file an annual report but must pay an annual tax ($300 as of 2024) to the DOC. LLPs and LLLPs must file annual reports.

LLCs. By default, LLCs are considered "pass-through tax entities," meaning members pay state taxes on their share of LLC income on their personal tax returns. In other words, LLCs are taxed as partnerships by default. However, an LLC can elect to be taxed as a corporation by filing Form 8832, Entity Classification Election with the IRS. Depending on how your LLC is taxed, your company must file a separate state tax form—either a partnership return or a corporation return—with the DOR. LLCs don't need to file annual reports but they must pay an annual tax ($300 as of 2024) to the DOC. For more, read our article on LLC annual report and tax filing requirements in Delaware.

Corporations. Shareholders must pay state taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on their personal state tax return. Moreover, the corporation itself is subject to Delaware corporate income taxes. And, finally, corporations must file an annual report with the DOC (which is associated with the payment of the state's franchise tax).

If you have employees, you must also deal with state employer taxes.

And, apart from Delaware taxes, there are always federal income and employer taxes. Check IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a Business.

8. Obtain Insurance for Your Delaware Business

Regardless of your industry or type of business, you should look into getting insurance coverage for your business. Business insurance can protect your business and your personal assets from unexpected events, such as personal injury lawsuits and natural catastrophes.

An insurance agent can help you explore the different coverage options for your business. You should consider getting general liability insurance to protect your business against claims related to bodily injury or property damage. Your business might also benefit from cyber liability insurance to cover litigation and settlement fees following a data security breach.

For further guidance, see our article on what types of insurance your small business needs.

9. Open a Business Bank Account

No matter the type of business you form, you should consider opening a separate business account to make it easier to track your income and expenses. For some business types, including LLCs and corporations, a separate bank account is necessary to maintain your liability protection.

Additional Help With Starting Your Delaware Business

The DOC has a helpful webpage on How to Form a New Business Entity. On this page, you can find information about:

• entity types
• registered agents
• name reservations
• formation documents
• beneficial ownership reporting
• certificates of status/good standing, and
• annual taxes.

You can also find helpful information at Delaware One Stop. Check out One Stop's Opening a Business in Delaware webpage for the four core steps to starting your Delaware business. One Stop offers other resources such as mentoring, answers to frequently asked questions, and Business First Steps.