Delaware Entities: Everything You Need to Know
Delaware entities are the different kinds of business structures that can be used in the state of Delaware such as Delaware C Corporation and Partnership.3 min read
2. Delaware Incorporation Process
3. Delaware Business Taxes
4. Delaware Business Names
Delaware entities are the different kinds of business structures that can be used in the state of Delaware. These business structures may include:
- Delaware C Corporation
- Delaware Sub-Chapter S Corporation
- Delaware Limited Liability Company (LLC)
- Delaware Series LLC
- Public Benefit Corporation
- Non-Profit Corporation
Each of these business types is unique and thus requires a different approach to be handled correctly, but before forming any one of them, certain tax, legal, and financial consideration should be made. For this, meeting with an attorney or certified public accountant (CPA) well-versed in such issues is advised.
Advantages of Delaware Incorporation
There are more than 850,000 companies incorporated in Delaware, including 63% of the Fortune 500. All told, no state has more companies incorporated in it than Delaware, and there are good reasons for this. Those reasons include:
- Delaware General Corporation Law. This is the set of laws that govern business operations in Delaware. It is one of the most flexible and advanced sets of business laws in the United States.
- The Delaware Court of Chancery. This is a court that specifically caters to making judgments on corporate law. It has over 200 years of legal history backing its decisions.
- The Delaware State Legislature. This body is very focused on keeping business laws current, thereby to maintain the state’s status as a leading attractor to business entities.
- The Delaware Secretary of State. This office operates with greater efficiency than many similar offices in other states. It features quicker turnaround time and extended hours.
Aside from this, other advantages of incorporating in Delaware include:
- Greater liability protection
- Greater corporate tax deductions
- Greater privacy for those incorporating
Delaware Incorporation Process
If you wish to form a business in Delaware, the following steps will be required of you:
- Filing a Certificate of Formation (also known as a Certificate of Incorporation) with the Secretary of State, along with the required filing fee.
- Applying for a Delaware Business License from the Division of Revenue. This also registers you for Income Tax Withholding and the Gross Receipts Tax. The application can be done online or by mail.
- Filing a Delaware Annual Franchise Tax report along with the appropriate taxes. Corporations will have a minimum of $175 in taxes while LLCs will have a minimum of $300.
Delaware Business Taxes
In Delaware, the corporate tax rate is 8.7 percent for federal taxable income from business activities that take place in the state. The individual income tax rate is arrived at by a calculation of base + (rate (income – start of range)). Thus:
- Income: $0 – $2000. Base: $0. Rate: .0 percent
- Income: $2,000 – $5,000. Base: $0. Rate: .022 percent
- Income: $5,000 – $10,000. Base: $66. Rate: .039 percent
- Income: $10,000 – $20,000. Base: $261. Rate: .048 percent
- Income: $20,000 – $25,000. Base: $741. Rate: .052 percent
- Income: $25,000 – $60,000. Base: $1,001. Rate: .0555 percent
- Income: $600,000 or more. Base: $2,943.50. Rate: .066 percent
Delaware Business Names
If you do choose to incorporate in Delaware, you will have to choose a name for your business. To do this correctly, you will have to make sure your name meets the following requirements:
- That it contains one of the following terms or words: “company,” “corporation,” “club,” “association,” “foundation,” “limited,” “fund,” “institute,” “incorporated,” “society,” “syndicate,” “union,” or “public benefit corporation.” Abbreviations, such as “Corp.,” “Co.,” “Ltd.,” and “Inc.,” are also allowed.
- That it does not contain any of the following words without permission from the Delaware Secretary of Education or the Delaware Banking Commissioner: “College,” “University,” “Trust,” or “Bank.”
- That it does not contain any terms judged by the Delaware Secretary of State to be vulgar or degrading.
- That the name can be distinguished from the names of all other businesses registered in the state, including foreign business entities that are registered to operate in the state.
In order to find out if your potential business name qualifies as acceptable by these standards, you can conduct a business name search through Delaware’s General Information Name Search. If the name appears, then the name has already been taken, and you will have to try another.
If you need help understanding issues relating to Delaware entities, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.