Delaware Business Entity Conversion

Once you start a new business, it will witness growth and expansion over a period of time and that is when you may want to restructure your business. Re-structuring the entity is considered as a business entity conversion in Delaware where-in you shift from one type of entity to another type to enjoy tax, privacy, and other benefits. It is like changing from a proprietorship to a C corporation or converting an LLC to a corporation in Delaware. This type of change is made possible through a specific process of conversion in the state and may be different for different forms of companies.

What does business entity conversion in Delaware mean?

You can form different types of businesses in the state of Delaware right from Corporations to Limited Partnerships (LP), Public Benefit Corporations, Statutory Trusts, Limited Liability Companies (LLC), General Partnerships (GP) and much more. Now, if you want to change the type or form of the company currently operational, what do you do? This is where you need to opt for Delaware entity conversion as it will help you to change business structure without the need to dissolve the existing business.

There are a lot of reasons why you would want to opt for a Delaware business conversion. It is important to understand that you have to take into account several factors that will help you to make this decision. Some of the factors to consider are:

• The business owner wants to avoid any kind of personal liability
• An entrepreneur wants to create a pass-through taxation entity
• The ways through which financing has to be obtained
• Owner requires flexibility regarding splitting of their management and economic rights
• If the owner feels their personal assets are at risk especially from a legal suit by a creditor
• Risk of civil litigation

For example: Edward and Edith formed a business in Delaware to promote home-baked confectionary. Edith’s role in the business was operations and Edward was the financier. They registered an LLC in the state as they felt it would best meet their requirements. The business experienced growth and success over a period of time and it was time for expansion. A venture capitalist “ABC” showed interest in investing in their expansion but the investor could only finance if their business was a corporation. In order to expand and have it financed through a venture capitalist they opted to convert llc to corporation in Delaware.

Normally, there are three ways to change the form of a business entity and they are:

• Dissolution of the existing business and forming of a new entity
• Inter-entity mergers where the old business entity type gets merged into the new entity being formed
• Statutory conversion or Delaware entity conversion where none of the above is applicable as you simply change the form of the entity to another type

Changing Business Entity in Delaware

If you have considered all the factors and want to go ahead with business entity conversion in Delaware, what is the process? The conversion process is governed by the Delaware Code for the type of business entity being converted and the entity it will convert to. Let us look at the most preferred Delaware business conversion and the process.

Converting LLC to Corporation in Delaware

If you have formed a limited-liability company but now you want to change the business entity type to that of a corporation, how do you bring about this structural change? You will have to opt for business entity conversion in Delaware, which is governed by 2 DE Code § 265 (2014 through 146th Gen Ass). The following steps will help you understand how the process to convert llc to corporation in Delaware works.

• Step#1: You have to first get approval from the existing members of your LLC for Delaware entity conversion
• Step#2: Once the approval is there, you will be required to file for a certificate of conversion to corporation executed in accordance with 2 DE Code § 18-214 and filed in accordance with 2 DE Code § 103
• Step#3: You can download and submit the “Certificate of Conversion from a Delaware or Non-Delaware Limited Liability Company to a Delaware Corporation form” along with one Cover Memo
• Step#4: You will have to submit the “certificate of incorporation” pursuant to 2 DE Code § 103 (2014 through 146th Gen Ass). This has to be filed along with the “certificate of conversion”
• Step#5: The paperwork or application has to be filed with the office of the Department of State, Delaware Division of Corporations along with the filing fee. The total filing fee will be $253, which includes $164 for certificate of conversion and $109 for certificate of incorporation

It is important to ensure the form and cover memo contain all accurate and relevant information to ensure proper business entity conversion in Delaware. Information requirements include:

• The cover letter or memo should contain your name, address and telephone/fax number, so that the concerned department can contact you
• Information regarding the jurisdiction of formation of the Limited Liability Company
• The date of formation of the LLC
• The name of the LLC prior to filing the form to convert llc to corporation in Delaware
• The name of the new entity as set forth in the Certificate of Incorporation
• The conversion document has to be signed by a witness
• You will also have to provide details pertaining to the amount of total stock that the corporation is authorized to issue

Are you wondering how to convert an LLC to a corporation in Delaware?

Converting Corporation to LLC in Delaware

If you have formed a business corporation and want to change the business entity type to that of a limited-liability company (LLC), how do you proceed? You will have to opt for business entity conversion in Delaware, which is also known as statutory conversion. Once you convert a corporation to llc in Delaware, all your assets as well as liabilities will get transferred to the newly converted entity or the limited-liability company. The corporation to LLC conversion is governed by 2 DE Code § 18-214 (2014 through 146th Gen Ass) and the following steps will help you in understanding the process.

• Step#1: You have to first get the approval of the stockholders of the corporation for the Delaware entity conversion to take place
• Step#2: Once the approval is there, you will be required to file for a certificate of conversion to corporation executed in accordance with 2 DE Code § 18-214 and filed in accordance with 2 DE Code § 18-204 (2014 through 146th Gen Ass)
• Step#3: You can download and submit the “Certificate of Conversion from a Delaware or Non-Delaware Corporation to a Delaware Limited Liability Company form” along with one Cover Memo
• Step#4: You will have to submit the “certificate of formation” pursuant to 2 DE Code § 18-201 (2014 through 146th Gen Ass). This has to be filed along with the “certificate of conversion”
• Step#5: The paperwork or application has to be filed with the office of the Department of State, Delaware Division of Corporations along with the filing fee. The total filing fee will be $290, which includes $200 for certificate of conversion and $110 for certificate of formation

It is important to ensure the form and cover memo contain all accurate and relevant information to ensure proper business entity conversion in Delaware. Information requirements include:

• The cover letter or memo should contain your name, address and telephone/fax number, so that the concerned department can contact you
• Information regarding the jurisdiction of incorporation or formation of the corporation
• The date of incorporation
• The name of the corporation prior to filing the form to convert corporation to llc in Delaware
• The name of the new entity as set forth in the Certificate of Formation
• The conversion document has to be signed by a witness/authorized person
• Name and address of the registered agent hired by your company like IncParadise

Do you want to convert your corporation to a Delaware LLC?

Converting Foreign Entity to Delaware Entity

If you have formed a business in any other state or if it is not based in Delaware and you want it to be converted to a Delaware entity; is it different from that of domestic conversions? Business entity conversion in Delaware makes it possible to convert a Non-Delaware entity like a corporation to a Delaware entity or corporation. The following steps will help you in understanding the process.

• Step#1: You have to first get the approval of the stockholders of the non-Delaware corporation for the Delaware entity conversion to take place
• Step#2: Once the approval is there, you will be required to file for a certificate of conversion to a Delaware entity executed in accordance with 2 DE Code § 265 (2014 through 146th Gen Ass)
• Step#3: You can download and submit the “Certificate of Conversion from a Non-Delaware Corporation to a Delaware Corporation form” along with one Cover Memo
• Step#4: You will have to submit a “certificate of incorporation”, which is to be filed simultaneously with the “certificate of conversion”
• Step#5: The paperwork or application has to be filed with the office of the Department of State, Delaware Division of Corporations along with the filing fee.

It is important to ensure that you provide required information for Non-Delaware to Delaware entity conversion in the application and cover memo. Information requirements include:

• The cover letter or memo which should contain your name, address and telephone/fax number, so that the concerned department can contact you
• Information regarding the jurisdiction of incorporation or formation of the non-Delaware company
• The date of incorporation/formation of the non-Delaware company
• The name of the non-Delaware company prior to filing the form for Delaware business conversion
• The name of the new entity as set forth in the Certificate of Formation/Incorporation
• The conversion document has to be signed by a witness/authorized person

Are you thinking of converting your foreign company into a Delaware business?

How does IncParadise help you?

You may have your own reasons to opt for a business entity conversion in Delaware and it can be from any form of business to any other. What IncParadise can do is play an important role by providing meaningful assistance in the process of changing your business entity in Delaware. IncParadise is one of the most reputed registered agents with a strong physical presence in the state and we specialize in catering to varied requirements of new and existing businesses.

We also provide an array of additional services for your Delaware business including new business formation, S Corporation status, foreign qualification, EIN or Tax ID, and amendment of articles among others.

Delaware Startups

There are several decisions and considerations that an entrepreneur has to make towards Delaware startup incorporation. Yes, choosing the right destination is quite an important consideration as it can have a long-term impact especially when startups are seeking outside funding or capital. It is no secret that startup accelerators, angel investors, and venture capital firms prefer and sometimes even require Delaware startup registration or incorporation prior to making an investment. There are a wide variety of reasons for this preference but the truth is that, not registering in Delaware can be quite the potential roadblock for entrepreneurs or startups. More than that, the state of Delaware has an entrepreneurial ecosystem that supports innovation making it one of the top 10 best startup states in the nation.

Startup ecosystem in Delaware

The startup ecosystem in Delaware is known for its high level of innovation and creative spaces, which is supported by a diverse workforce, a pro-business legal and regulatory environment, top universities, and a strong line of support programs for starting a business in Delaware. The state supports innovative startups and enterprises with a host of incentive programs right from Financing to business development and R&D. Some of the programs that form a part of the startup ecosystem include:

• Loan and Capital: There are two programs that you can benefit from post Delaware company incorporation and they are the State Small Business Credit Initiative Participation Loan and Delaware Capital Access Program. These programs are geared towards providing financing to entrepreneurs and businesses that are considered to be highly risky where the traditional banking model is concerned.
• Innovation programs: After starting a business in Delaware, you can become a part of the Delaware Technical Innovation Program, which offers transition grants to companies that have applied for the Small Business Innovation Research (SBIR) or Small Business Technology Transfer (SBTT) programs.
• Grants: A Startup ecosystem can never be complete without grants and hence the Encouraging Development, Growth, and Expansion grants (EDGE) and Workforce Training Grants are considered to be a strong support system for businesses. Your startup can get funds up to a maximum of $100,000 through either of the grants.
• Credit Programs: There are several credit programs that you can enroll into after Delaware startup registration. The two most important programs are Angel investor credit and the R&D Tax Credits. These programs specialize in lowering payment on taxable expenses or providing refundable tax credit to qualified investors.

Another important aspect of the startup ecosystem in Delaware is “Entrepreneurial Meet-ups”. These meet-ups can be a driver for starting a business in Delaware. The meet-ups consist of various Delaware networking groups that create a space and environment for entrepreneurs and small business owners to meet, discuss, build fruitful relationships, and expand networks. Delaware offers a platform for entrepreneurial events to take place that allow entrepreneurs and business owners to showcase their startups or present innovative products and services. A Delaware startup registration will open the doors to using “Co-working Spaces” and incubator programs.

Major companies and start-ups in Delaware

Today, Delaware is home to some of the biggest names in business like DuPont, Incyte, and Gore. The business ecosystem is considered perfect for Delaware startup incorporation as the state is ranked #6 in the U.S State Innovation Index and #1 for Patents Issued Per Capita. The “First State” is ideal for Delaware company incorporation and today some of the most promising young IT and tech companies are mushrooming in the state. The reality is that when you are asked to think about a startup environment then the first place that comes to the mind is the Silicon Valley and today the state of Delaware has a few of its own. In fact, Delaware has a diverse startup environment right from agriculture based agtech startups, fintech, and medtech and science startups. There is a host of new Delaware startup registration going on in the state right at this moment!

Delaware situated in the Northeastern United States is a popular destination for Delaware startup incorporation including 66% of the Fortune 500 companies. Some of the largest firms include Chemours, Navient Corporation, 21st Century Insurance, DuPont Company, Dogfish Head Brewery, W. L. Gore and Associates, Integrity Staffing Solutions, Wilmington Trust, WSFS Bank, Delaware Intercorp, Citizenre, Grant & Eisenhofer, Nassau Valley Vineyards, and Tritek among others. Some of the top and recent Delaware startup registration includes Scalarr, Rarible, Oyster, Latitude, StrategyConnect, and Tradologics and they have received a total funding amount of $397 million.

Start your new business in Delaware Today!

Top Reasons Startups Prefer Delaware

Delaware’s business laws as well as economic and tax climate makes it possible for starting a business in Delaware. The year 2019 witnessed 226,000 new business formations and according to the U.S. Small Business Administration report, 84,675 small businesses were formed in 2020. In 2019, the Delaware economy grew at an annual rate of 2.3% vis-à-vis of the overall US growth rate of 2.1%. The most popular form of business among startups is limited liability company (LLC) and business corporations (INC). There are several reasons why entrepreneurs prefer Delaware startup registration, so let us take a look at some of them

Venture capitalist/Angel investors prefer Delaware companies

Venture capital firms and angel investors normally prefer Delaware companies due to several reasons. One of the important reasons is the Delaware laws and procedures that govern entities help in protecting investors. This is also one of the reasons why it is considered to be a business-friendly state. In fact, Delaware startup incorporation is more preferred by VC’s as compared to an LLC or an S-Corp. This is because S corporations and limited liability companies are both pass-through entities and this means the profit and losses will go into the owner’s tax returns. Since, a venture capitalist funds are from big institutional investors it will create tax related issues for the investors and their funds hence an S-Corp or LLC Delaware startup registration is not preferred.

Secondly, by law S Corporation requires all its shareholders to be U.S. residents, citizens, and “natural persons”. Unfortunately, a venture capitalist firm does not qualify as a “natural person,” hence investment is not possible if your Delaware startup incorporation is an S corporation. There is another disadvantage for investors or VC’s, which is that an S corporation will be able to offer only one type or class of stock. Delaware company incorporation can offer preferred stock. Professional investors like it more than common stock as the former allows the shareholders the rights to be negotiated according to the deal. As a result, a venture capitalist firm opts for preferred stock to minimize any adverse exposure in a business.

Tax friendly state

Delaware is one of the few states that are more famous as a “Corporate Tax Haven”. The tax friendly climate attracts different types of businesses including financial companies and is considered as the single-most impactful reason for Delaware startup incorporation. In fact, the low tax and no sales tax environment has made the Corporation Trust Center at 1209 North Orange Street famous in a unique way. This is a single-story building located in Wilmington, Delaware and is home to 285,000 separate business entities including big names like Apple, Bank of America, American Airlines, Wal-Mart, Coca-Cola, Cargill, General Electric, JPMorgan Chase, Google, Ford, and Berkshire Hathaway. Some of the other tax benefits that you can enjoy post Delaware startup registration are:

• One of the advantages of starting a business in Delaware is that there is no Delaware corporate tax on goods or services provided by a Delaware business operating from outside the state.
• There is no Delaware corporate tax on any interest or any form of investment income at a holding company that one may earn while being based in this state.
• There are no stock transfer taxes or capital shares taxes in the state
• The state does not have any inventory tax, use tax, or unitary tax
• Once Delaware startup registration is complete and business is operational, you will not be required to pay any business taxes on intangible income
• You will not be required to file any personal property tax
• You will not be required to file any ad-valorem or value-added taxes (VATs)

Flexibility of Delaware corporate statutes

The foundation for most business advantages in Delaware lies in the Delaware General Corporation Law (DGCL). The DGCL is known to provide both predictability and stability and thus becoming a fundamental reason behind the higher numbers of Delaware startup incorporation. The corporate law has not only been shaped by the experts from the corporate law segment but is also protected from any influence by any special-interest groups. The positive is that the Delaware legislature reviews the Delaware General Corporation Law each year in an effort to ensure that it is able to address most of the current business related issues.

The DGCL is considered to be an enabling statute and includes certain mandatory requirements that not only provide flexibility to business entities but also help in protecting investors. The DGCL will come into effect post Delaware startup registration and this specialized contract law governs the various duties, roles, and relationships that exist between investors and the corporation or business itself.

Greater privacy protections

One of the top benefits of starting a business in Delaware is that you will enjoy greater privacy protection. This protection comes from the fact that a business entity or a corporation is not required to disclose the name of the director or officers on their formation documents. As a result, the names of LLC members or directors of a corporation will not be available publicly thus offering greater privacy.

Easy and fast startup incorporation process

One of the benefits of starting a business in Delaware is the ease of the formation or incorporation process and running your business. You can use our services for Delaware company incorporation as we have the experience and a dedicated team of professionals who understand the new business formation process in the state. We at IncParadise have helped more than 20,000 companies to bring their ideas to life by helping them register their business successfully.

If you are planning to form a startup in the state all by yourself then all you need to form a company are the following:

• Choose a name for the Delaware startup
• Check name availability and reserve the name
• Hire a Delaware Registered Agent
• File Delaware company incorporation paperwork with the Division of Corporations
• Obtain business licenses or permits as required by your business
• Apply for and obtain an Employer identification number (EIN)

Register a new Business in Delaware at the click of a button!

Business friendly laws

One of the important reasons that have driven the formation of almost half-million business entities in Delaware is the business friendly laws. The state has a flexible corporate law and the highly respected Delaware Court of Chancery. One of the many business-friendly laws is that you don’t need to be a resident of the U.S before filing for a Delaware startup incorporation and the cost of incorporation is also one of the lowest in the nation. One of the salient highlights is the Court of Chancery, which uses judges instead of juries. The judges possess the necessary exposure and expertise in various issues pertaining to business law thus making corporate dispute resolution highly efficient.

Ready to Incorporate in Delaware?

A startup or a new business needs a good business climate, strong but business friendly laws, state incentives and funding opportunities, economic opportunities, robust infrastructure, and tax savings and you can benefit from all this through a Delaware startup incorporation. IncParadise is a Delaware incorporation specialist and we can help you with the process of Delaware startup registration. You can also take advantage of our online filing system, which is easy to use and highly efficient.

We also offer a host of additional services like foreign qualification, EIN assistance, S Corporation status election, and Delaware Certificate of Good Standing among others. These services will help you to start your business with low cost.

Tech Startups in Delaware

The attractive incorporation laws in Delaware are responsible for drawing in some of the biggest venture capitalists to the state and this is where the seed for startups started to germinate. The startup industries in Delaware look promising with a growing IT sector as the state government shifts its focus towards fostering an environment that enables technology growth. In fact, some of the Delaware tech startups have become national success stories thus inspiring others. The state of Delaware has worked towards creating the perfect environment for IT or fintech startups like creating a Delaware Innovation Space, which is a $6 million growth space based in Wilmington DE. The Economic Development Administration (EDA) has provided a funding of $3 million for creating collaboration spaces and new private lab pods thus providing capabilities and tools to early-stage biotech and healthcare startups.

Key startup industries in Delaware

There has been a steady rise in the use of technology and innovation to provide a wide variety of products and services that is changing the existing business and consumer landscape. The startup environment is rich with many opportunities including funding competitions, entrepreneurship venture support and commercialization programs, startup one-on-one consultations, Hen Hatch startup funding competitions, gap funding and training programs etc. Whether it is deep learning, and big data or innovations in environmental biotechnology products and health care services, you can incorporate in Delaware in any of the following key startup industries in Delaware.

Fintech Industry

Delaware is home to some of the largest financial sector companies like Capital One, Citibank Delaware, JPMorgan Chase, Fair Square Financial, WSFS Bank, PayPal, M&T Bank, and SoFi. The state is gradually moving towards becoming a nationwide leader in fintech and one of the reasons driving the fintech industry in Delaware is the Financial Management Act of 1981. There has been a steady rise in the fintech industry wherein there is a higher use of technology and innovation for providing financial products and services. Innovations and new ideas are being introduced within the financial services industry and they are actually changing the way a company deploys their financial services and products and how users interact with it. This has transformed the financial services landscape and created a long-term growth opportunity for startups keen to incorporate in Delaware. Some of the major highlights of the Delaware fintech industry are:

• Delaware has been one of the top locations for traditional banking but now even international fintech companies have started looking at this state as a favorable destination
• The fintech industry in Delaware ranks quite high on different measures of innovation in this industry. In the year between 2009 and 2018, almost 199 fintech patents were assigned to several Delaware based companies, entrepreneurs and individuals.
• Delaware is known to have the highest relative concentration of fintech industry services jobs as compared to any U.S. state and this is because of the high number of companies opting to incorporate in Delaware in this sector.
• Nearly one-fifth of Delaware’s GDP is driven by finance making it the largest contribution by any single sector.
• The investment by the U.S in 2018 was $52.5 billion in the fintech industry with the fintech industry in Delaware accounting for approximately $50 million in investments.

Delaware’s rapidly changing regulatory landscape offers Delaware tech startups a unique advantage for developing innovative financial solutions.

Biotech Industry

The Biotechnology (biotech) industry is considered as one of the top startup industries in Delaware and it comprises companies that derive their products through extraction of living organisms. The fact is that we have been employing biotechnology since the ancient times mainly in improving crops and breeding animals. Biotech as it is known comprises research, development, and production of different types of commercial products and a majority focuses on agricultural or medical applications. According to expert projections, the medical biotechnology industry is slated to reach revenue potential of $500 billion and one of the reasons for this is the proximity Delaware shares with New York, Philadelphia, and Washington D.C. This is one industry you can incorporate in Delaware as some of the biotech companies that have shown excellent growth include Incyte, Adesis, W. L. Gore & Associates, Prelude Therapeutics, and Agilent.

Biotech is now being seriously considered as the future of the state of Delaware and is one of the top catalysts in the existing vibrant science economy. Let us look at some of the salient highlights with respect to the Delaware biotech industry.

• The Delaware Biotechnology Institute is targeting an expansion of 70,000 square feet of space that will house offices, labs, Delaware tech startups, shared research instrumentation facilities, and collaborative space. This $160 million Biopharmaceutical Innovation Building will be the home to National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL).
• The University of Delaware’s Science, Technology and Advanced Research (STAR) Campus is working towards creating a biotech ecosystem that will support and feed the future startup industries in Delaware especially in the biotech industry. The STAR campus is replete with incubators and labs, health innovation design lab, CHS demonstration kitchen, and health care simulation lab.
• Bioscience-Related Patent Distributions are among the highest in the state of Delaware at 249 per 1 million populations. There were 193 bioscience-related patents assigned to Delaware based companies, entrepreneurs, and individuals between 2016 and 2019

Edtech Industry

The Edtech Industry is one of the fairly new startup industries in Delaware. Edtech stands for “education technology”, and entails the use of IT tools as well as educational practices to enhance and facilitate learning. The concept of Edtech had started as an experimental method of education initially but now it is being transformed completely by modern day entrepreneurs so much so that it is not anymore about reformatting training manuals and books but about using digital technology effectively for delivering a brand new form of educational or learning architecture. In the current scenario, Edtech is in its nascent stages and is being used for teaching and learning, as assistive technology. A State Educational Technology Plan has been created by the task force on Delaware state educational technology, Delaware Department of Education. There are five important components of this plan and they are learning, teaching, leadership, assessment, and infrastructure. The Edtech industry is slowly coming into prominence as more Delaware tech startups are registering in this industry but it still does have a long way to go.

Healthcare Industry

The U.S. News & World Report revealed that Delaware is ranked 6th for quality of Healthcare and is ranked 15 in the list of the best states for Healthcare. The ranking is driven by the healthcare policy and the rise of a new age of digital healthcare research. It is one of the first states to launch the first standardized, operational, interoperable, real-time statewide health information exchange in the country in 2007 opening the door for startup industries in Delaware healthcare. The primary objective of this health exchange is to connect hospitals, physicians, and reference laboratories across the state. You can incorporate in Delaware in the healthcare industry as it is considered a keystone growth industry.

Delaware healthcare services along with educational services contributed $5.53 billion to the Gross Domestic Product (GDP) of Delaware in 2019. Some of the top healthcare companies in the state include Beebe Healthcare, Psychotherapeutic Services, Prelude Therapeutics, Intervet, Inc., and Nanticoke Health Services among others. The Delaware Department of Health and Social Services (DHSS) is trying to implement a State Health Care Innovation plan relying on state specific Innovation Models to bring about a change in the current healthcare system and to create a platform that will enable startup industries in Delaware to grow within this system while adding value to the system.

Start a tech startup in the Delaware pro-business environment!

Why Tech Startups Incorporate in Delaware?

Today, Delaware is home to some of the largest tech startups and is also favored by investors or venture capitalists. There are several advantages and reasons why entrepreneurs opt to incorporate in Delaware. The availability of several opportunities and a robust innovation platform makes the state perfect for startups or new businesses. The fintech industry in Delaware along with biotech is considered to be growing at a rapid pace. The advantages that make the state so attractive to entrepreneurs are:

Delaware business laws

One of the top advantages to Delaware tech startups is the pro-business laws. The primary aim of the business laws in Delaware is to provide investors as well as businesses (managers, members etc.) with laws that are optimal for engaging in a highly ethical and profitable business. Unlike other states, business cases in Delaware are not tried by juries but by judges highly experienced in corporate law. The Delaware judges are considered to be extremely impartial and highly efficient thus providing that extra-legal edge to Delaware tech startups.

Investors prefer Delaware startups

There are many reasons for investors and venture capitalists preferring startup industries in Delaware and one of the important reasons is the business law. The Delaware General Corporation Law (DGCL) due to its predictability and stability is considered pro-business by investors. The DGCL not only helps in governing new business entities but also helps in protecting venture capitalists and investors.

Favorable taxation for startups

Delaware has one of the most favorable taxation for startups because of the low or no tax environment. Some of the tax benefits for Delaware tech startups include:

• There is no Delaware corporate tax on interest or any investment income
• Delaware business taxes are not applicable on intangible income
• New businesses in the fintech industry in Delaware or any other industry are not required to file use tax, unitary, or inventory tax
• There is no corporate tax on goods or services provided by a Delaware corporation operating outside the state
• If you incorporate in Delaware then you will not be required to file any personal property tax
• The state does not have any ad-valorem or value-added taxes (VATs)

Flexibility in corporate structuring

If you incorporate in Delaware then you will be able to leverage the advantages related to arrangement of management structures as well as economic rights of businesses. The corporate statutes of Delaware provide a high degree of flexibility in terms of structuring your corporation and board members for example, directors, officers, and shareholders of a corporation are not required to be residents of Delaware. The state allows startup industries in Delaware to have a single person be the only officer, director, or shareholder of a business corporation as compared to other states where a minimum of 3 people are required to hold such positions.

Easy company formation process

You can opt from different types of businesses in the state of Delaware based on your requirements and preferences. Delaware tech startups can form a limited liability company, corporation, limited liability partnership, general partnership, and sole proprietorship among others. Whatever the type of business, the company formation process is easy and efficient in the state. If you are planning to form a new business then you will have to apply to the Delaware Division of Corporations or you can save your time and form a new business with the help of IncParadise, which can assist you with the entire process of starting a new company in Delaware. We also offer you service of process and several other services like notifying you for filing of annual report, assisting with submission of annual report, helping you apply for a tax ID (EIN), and help you to avoid penalty by ensuring you are able to meet the due dates for all your business requirements related to the fintech industry in Delaware or any other industry.

Ready to Form Your Tech Startup in Delaware?

Whether you plan to start a business in the fintech industry in Delaware or any other industry; forming a new business in the state of Delaware has its own set of advantages including tax benefits and pro-business laws. As an entrepreneur planning to incorporate in Delaware, you can hire IncParadise as we are one of the top registered agents in Delaware and an expert incorporation provider. We can help you with the process of starting your tech startup and also handle all your Delaware state annual compliances.

IncParadise also offers additional services for Delaware tech startups so that they can fulfill their legal or state based requirements. Our additional services include Delaware domestication, foreign qualification, EIN or Tax ID, and Certificate of Good Standing among others.

Introduction to Delaware Foreign Qualification

The state of Delaware is home to more than 1.5 million business entities with 84,675 small business formations in 2019 including foreign corporation registration in Delaware. It is one of the most preferred states by both businesses and investors due to benefits like the flexibility of structuring the ownership, administration, and operation of an entity to fit the needs of owners and investors. Delaware also presents tax advantages, small business incentives, funding and grants, privacy, and a reliable judicial system. The advantages and pro-business environment have been and will continue to attract entrepreneurs for doing business in Delaware for domestic and foreign entities.

What is foreign qualification?

Foreign qualification refers to registration of a business with the office of the secretary of state of a state different from that of its formation or home state. There are several scenarios in which a company may want to opt for Delaware foreign qualification although the most common reason is business expansion. The process of foreign corporation or foreign LLC registration in Delaware will enable a company to pursue growth opportunities in another state or across state borders legally without the need for incorporating or forming a new entity. Let’s look at an example to understand this:

If you have formed a domestic LLC in Nevada then Nevada is considered to be your home state. Now, if you plan to expand your operations to the state of Delaware then you will be required to acquire Delaware foreign qualification in order to register your LLC in the new state.

The foreign LLC or foreign corporation registration in Delaware will ensure you are able to make your business operational. You will be required to apply for and obtain business licenses or permits, hire a registered agent in Delaware, and also maintain annual compliances as required by the state of Delaware as well as Nevada.

When does a company have to foreign qualify?

If you already have a business corporation or LLC in any state in the nation except Delaware and want to expand your existing business or are interested in doing business in Delaware then you will need to register your business in the said state through a process known as foreign qualification. At the same time, it is important to understand the scenarios that will require you to apply for foreign qualification. Let us look at separate examples to understand when you need to and when you will not be required to pursue foreign LLC registration in Delaware.

• Example#1: You have a retail store in Texas and because of its tremendous success; you want to expand to other states like Delaware. In order to open a new store in Delaware, you will have to go through the process of Delaware foreign qualification as this will help you to register in this state. When you are foreign qualified, you will be able to operate your store in both locations.
• Example#2: You are a consultant based out of California and you work with multiple clients online across several states including Delaware. Since most of your work is online, you will not be required to file for foreign LLC or foreign corporation registration in Delaware. Business law specifies that earning revenue from multiple states doesn’t translate into the fact that you are actually transacting your business in those states.

Foreign qualification is not mandatory or necessary for all types of businesses or activities in Delaware. To determine if your company requires Delaware foreign qualification; you need to ask a few questions first. They are:

• Do you have a physical presence like a retail store, restaurant, or any other commercial office space in Delaware?
• Are you required to apply for a business license or permit in this state?
• Do you conduct face-to-face or in-person meetings with clients quite frequently in the said state?
• Does your business generate a substantial percentage of your company’s revenue from Delaware?
• Does your business have employees working in this state?
• Are you paying any state payroll taxes in Delaware?

If your answer is “yes” to any or all of the above questions then you will need to file for Delaware foreign qualification.

Expand your business through Delaware foreign Qualification!

Doing business in Delaware

The type of business you are planning to form will be governed by Title 6 and Title 8 of the Delaware Code e.g., foreign corporation registration in Delaware is governed by Title 8, Subchapter XVI of the Delaware Code. You are probably wondering what doing business in Delaware really means. In brief, it refers to the practice of carrying on with the business activities of a company in the state of Delaware when the said company was actually registered in another state. In such a scenario, foreign corporation registration in Delaware is necessary.

When you are doing business in Delaware then it also means that there is a physical presence in the state. The presence could be in the form of:

• A warehouse in Delaware
• Commercial space or office in the state
• A retail store in the state
• Sales representatives in Delaware

Similarly, there are certain activities that are not considered as doing business in Delaware like having a bank account in Delaware, an isolated transaction in the state, conducting business as a part of interstate commerce, and collecting debts among others.

Foreign Qualify Process

The process of Delaware foreign qualification will depend purely on the form of business you plan to conduct in the state like the foreign LLC registration in Delaware may be different from that of a foreign corporation. However, it is also important to remember that failing to foreign qualify can lead to penalties for noncompliance pursuant to 2 DE Code § 378 (2014 through 146th Gen Ass) for business corporations and 2 DE Code § 18-908 (2014 through 146th Gen Ass) for a limited liability company. The Court of Chancery can even prohibit such a company from doing any business in the Delaware state.

Delaware foreign corporation registration

If your corporation is based out of Delaware and you plan on doing business in Delaware then you will have to foreign qualify. The following steps will help you to identify the requirements for foreign corporation registration in Delaware.

• Name: The first step towards foreign corporation registration in Delaware is to determine if your chosen name is available. You will need to conduct a name availability search in the Delaware state database. If your chosen name is available then you will need to reserve the name with the Department of State, Division of Corporations. The fee for this is $75.
• Registered Agent: An important aspect of doing business in Delaware is hiring a registered agent as it is mandatory for service of process pursuant to 2 DE Code § 376 (2014 through 146th Gen Ass). You can hire IncParadise as we possess knowledge of and expertise in Delaware foreign qualification and can help you qualify for the same.
• Certificate of Existence: It is also known as the certificate of good standing and is required for foreign corporation registration in Delaware. The Certificate of Existence should be dated within 6 months prior to the date of applying for the Qualification of Foreign Corporation. The certificate has to be issued by the original jurisdiction of incorporation of the foreign business entity.
• Qualification of Foreign Corporation: If you want to apply for Delaware foreign qualification by yourself then you need to download the form from the Delaware Division of Corporations portal. The form is known as the Qualification of Foreign Corporation and has to be submitted along with a Certificate of Existence and a filing fee of $245. The processing of the qualification certificate will take around a week although you have the option of expedited processing.

Do you want to form a Delaware Foreign Corporation?

Delaware foreign LLC registration

If you are planning to start a limited liability company in Delaware and are already doing business in another state then you will need to apply for foreign LLC registration in Delaware. The following steps will help you to identify the requirements for the Delaware foreign qualification for an LLC.

• Name: The first step towards foreign LLC registration in Delaware is to choose a name and determine if the name is available. You will need to conduct a name availability search through the Delaware state database. If your LLC name is available then you will need to reserve it by submitting the “Application for Reservation of Limited Liability Company Name” along with a fee of $75 to the Department of State, Division of Corporations.
• Registered Agent: An important aspect of doing business in Delaware is hiring a registered agent as it is mandatory for service of process on registered foreign limited liability companies pursuant to 2 DE Code § 18-910 (2014 through 146th Gen Ass). You can hire IncParadise, one of the most reputable agents in Delaware to assist you with the process of foreign LLC registration in Delaware.
• Certificate of Existence: A Certificate of Existence also known as the certificate of good standing is required for foreign LLC registration in Delaware. The Certificate of Existence states that the limited liability company exists. This certificate should be dated within 6 months prior to the date of applying for the Certificate of Registration of Foreign Limited Liability Company. The Certificate of Existence will be issued by the original jurisdiction of LLC formation or your home state.
• Qualification of Foreign LLC: If you want to apply for Delaware foreign qualification by yourself then you need to download the form from the Delaware Division of Corporations portal. The form is known as the Certificate of Registration of Foreign Limited Liability Company and has to be submitted along with a Certificate of Existence and a filing fee of $200. The processing of the qualification certificate will take around a week although you have the option of expedited processing.

Do you want to form a Delaware Foreign LLC?

Need Any Assistance in Applying for Delaware Foreign Qualification?

If you are thinking of doing business in Delaware even if you are operating your LLC or corporation in another state then foreign qualification will help you with registration in this state. As one of the leading registered agents in Delaware and the nation, IncParadise can assist you with the process of foreign LLC or foreign corporation registration in Delaware. We can also help you in acquiring a Certificate of Existence/Certificate of Good Standing from your home state and provide you additional services that will ensure you are in compliance with all requirements pertaining to foreign qualification in Delaware. We provide foreign qualification services in all 50 states, which means that if you plan to expand into any other state apart from Delaware then we can also assist with foreign qualification in those states as well.

Starting a Company in Delaware

The state of Delaware with a GDP of $72.461 Billion has a strong economy and robust transportation infrastructure that businesses can leverage. The efficient business climate that the state boasts of is driven by the strategic location, which has been the center of business in the Northeastern United States. It is home to 84,675 small businesses and had an annual growth rate of 2.3% in 2019. The economic and business climate is conducive for Delaware company registration for non-residents and you can choose to form any type of business entity like corporations, limited partnerships, limited liability companies, and other corporate entities. You can even open a Delaware company online but right now, you are probably wondering what makes Delaware so popular for a new business.

Why choose Delaware to start a business?

An attractive economic and business environment is what makes Delaware so popular amongst new businesses and entrepreneurs. When setting up a Delaware company as non US residents, you will be able to benefit from the low cost of doing business and pro-business legal and tax system. There are several other advantages that make this state not only one of the best places for incorporation but also ensure strategic positioning of your company. Some of the top advantages are:

• The process of starting a new business is not complicated although it may require you to file several documents. You can even open a Delaware company online.
• The Delaware Court of Chancery with expert judges instead of a jury to play a key role in protecting businesses by quickly and efficiently resolving corporate issues.
• If you are planning on setting up a Delaware company as a non-US resident, then tax advantages are one of the salient benefits. The state does not have corporate income tax, personal property tax, value-added taxes (VATs), unitary or inventory tax, and stock transfer taxes among others
• Another important tax benefit is that once you open a Delaware company online and your company has shareholders not residing in Delaware then they don’t have to pay taxes on shares in this state
• The Delaware Corporate Statutes imparts a lot of structural flexibility when it comes to organizing a corporation
• The Delaware company registration for non-residents is quite similar to that of domestic business entities
• There is greater privacy that businesses can enjoy. For example, Delaware corporations are not required to disclose the name of directors or officers in their formation documents.

These are some of the reasons why more than half a million businesses have formed in the state and are successfully operating in Delaware. You can enjoy these benefits post Delaware company registration for non-residents.

Setting up a Company as a Non-US Resident in Delaware

If you are residing outside of the U.S and want to start a business in Delaware, is it possible? Are there any restrictions? Generally speaking, the corporate law structure of Delaware does not impose any kind of restrictions on management or ownership of a Delaware company by a U.S non-resident. This simply means that Delaware company registration for non-residents is possible and the process to form or incorporate a business is quite similar to that of a domestic company.

How to form a Delaware LLC or Delaware Corporation as a Non – US resident?

If you are a non – US resident and want to start a company in the US or in Delaware then there is a process governed by the Delaware business laws that you would have to follow. You can actually start a new business in Delaware irrespective of which country you reside in. Although Delaware company registration for non-residents is possible, physical presence of the owner is not mandatory, however you will be required to enlist or hire the services of a reputed Delaware Registered Agent by law.

In order to form a Delaware LLC or Delaware corporation as a non – US resident you will need to be compliant with the business laws and fulfill certain criteria like obtaining an Employer Identification Number (EIN), file franchise taxes, Delaware company formation with a bank account, and pay US taxes as a nonresident. You will be required to file all your incorporation or formation documents with the Department of State: Division of Corporations.

Do I need a US Business Address to form a company in Delaware?

One of the important requirements for setting up Delaware Company as a non US resident is that of a physical address. You may start a business in the US while residing anywhere in the world but your business in the U.S needs to have an address, which has to be shared with the office of the Secretary of State and Delaware Division of Corporations. The address is used primarily by the state departments or agencies to send certificates, important business mail, reminders or notifications etc. The physical address will also be required to facilitate Delaware company formation with a bank account or open a new bank account. The address is a mandatory requirement of the state for business formation and hence needs to be fulfilled.

Since, you are residing outside the U.S, how do you fulfill this requirement? This is where a registered agent like IncParadise can provide you with a physical address through the virtual mailbox service to fulfill state requirements as well as business needs like receiving important mail and helping you to maintain regular business hours in Delaware.

Start a new business in Delaware’s pro-business climate!

Steps to start a Delaware company

The process for Delaware company registration for non-residents is quite similar to that of a domestic company formation although there may be some extra requirements.

1. Choose a name for a Delaware company

One of the important steps towards setting up a Delaware Company as a non US resident is to identify a name and reserve it. Firstly, you will need to identify a name that is unique and available. You have to check for availability by performing a name search on the website of the Department of State: Division of Corporations. If your chosen name is unique and available then you have to reserve it online or by submitting a paper form. The fee is $75 and the form is submitted with the Delaware Secretary of State. A name can be reserved for a period of 120 days and is important if you plan to open a Delaware company online.

2. Hire a Registered Agent

A Delaware company registration for non-residents is possible only if you are in compliance with all requirements of the state and this includes hiring a registered agent. A new business as well as existing business in the state has to hire and maintain a registered agent pursuant to 8 DE Code § 132 (2012 through 146th Gen Ass) for corporations and 6 DE Code § 18-104 (2016) for LLC. The primary objective of a Delaware registered agent like IncParadise is to receive all official mails from the office of the Secretary of State and also handle service of process on your behalf. We can be your registered agent in Delaware for handling of service of process and fulfill other business related requirements.

3. File Certificate of Incorporation or Certificate of Organization

The most important step towards setting up a Delaware company as non US residents is filing for the formation documents. The documents will differ according to the type of business entity you form. If you are planning to form a stock corporation then you will have to apply for the Certificate of Incorporation pursuant to 2 DE Code § 102 (2014 through 146th Gen Ass). You have to submit a cover memo and a minimum fee of $89 along with the incorporation certificate form to the Delaware Division of Corporations.

If the Delaware company registration for non-residents is a limited liability company then you will be required to file the Certificate of Formation pursuant to 2 DE Code § 18-201 (2014 through 146th Gen Ass). You have to submit a cover memo and a fee of $90 along with the form to the Delaware Division of Corporations. You can submit the form by mail or open a Delaware company online.

4. Obtain Employee Identification Number or EIN

An Employer Identification Number (EIN) is a 9-digit unique identification number that is assigned to a business entity by the Internal Revenue Service (IRS). This is also known as the Federal Tax Identification Number (FEIN) and it is mandatory for a company to obtain an EIN prior to setting up a Delaware Company as a non US resident. This number is used for filing tax returns and is also required during Delaware company formation with a bank account, applying for loans, and other business related activities. It is important to note that as a US non-resident, you will not be required to show or possess a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) to obtain an EIN.

5. Open a business bank account

Delaware company formation with a bank account is possible and you are not required to be a U.S. resident alien or American citizen to open a business bank account in Delaware. Although, each bank in the U.S has its own set of requirements, if you have your Certificate of Incorporation or Certificate of Organization and Employee Identification Number (EIN) then you will be able to apply for a Delaware business bank account. You may also be required to furnish other information such as location or address of your company and address of your registered agent. You can apply for a business bank account prior to or after setting up a Delaware company as a non US resident. Some of the common documents required by Non-US residents for a business bank account include:

• Certificate of Incorporation or Formation
• Federal Tax ID Number (EIN)
• Proof of address
• Photo ID (such as a valid passport)
• LLC Operating Agreement if you have formed an LLC
• Corporate bylaws

6. Maintain annual corporate compliance and requirements

Once you open a Delaware company online, it is important to ensure that you maintain annual corporate compliance and requirements of the state as this will help your business to enjoy active status. The annual requirements vary from one state to another and are also different for different forms of businesses. If you are setting up a Delaware Company as a non-US resident, then the requirements will be the same as a domestic or foreign company operating in the state. There are primarily three requirements and they are:

• Annual Reports
• Franchise Tax
• Maintaining a Registered Agent

If a company fails to maintain annual corporate compliance and requirements then the state may charge penalties and even administratively dissolve the said business entity.

7. Use virtual office/mail forwarding service

One of the primary requirements for a Delaware company registration for non-residents is a physical address. You can form any business in Delaware but you will need to provide the business address in the formation documents and also for obtaining business related documents like a business license or even a tax ID like EIN. It is not always possible to own a brick and mortar office or rent out a commercial space, especially if you reside outside the U.S. In such a scenario, you can still obtain a business address to open a Delaware company online and this is possible through opting for a virtual office or a mail forwarding service.

IncParadise can provide you with a virtual office and mail forwarding services in Nevada and Wyoming. In fact, you can start a new business in Delaware and opt for Nevada mail forwarding or virtual office services. One of the salient benefits of opting for a mail forwarding service is that you will never have to compromise on communication with your customers and vendors even if you were to change office address or move to another location

Need Any Help in Forming a Delaware Company?

Whether you plan on setting up a Delaware company as a non US resident, requires a registered agent, or want to obtain an Employer Identification Number (EIN). We at IncParadise can provide the necessary assistance. We are an expert incorporation and registered agent service provider in Delaware and we can help you to start your business in Delaware and also maintain annual compliances with the Secretary of State or Division of Corporations.

We believe that every business in Delaware has its own set of requirements and hence we offer a wide variety of business related additional services. These services include S Corporation status election, U.S. street address, Certificate of Good Standing, amendment to the Articles, and foreign qualification among others. You can

Delaware Business Tax

An entrepreneur wanting to form a new business in the state of Delaware needs to check their federal, state, and local or county business tax requirements. Although, the state is considered to be a tax shelter; you may be required to file Delaware business taxes. How do you determine what type of taxes your businesses are required to file? The type of Delaware business tax return to be filed is dependent on the type of entity you form as corporations have different tax filing requirements as compared to a limited-liability company.

The Internal Revenue Service (IRS) categorizes federal business taxes under the following:

• Self-Employment Tax
• Income Tax
• Employment Tax
• Excise Tax
• Estimated Tax

It is important to note that the type of state and local taxes will vary according to the state where you form or register your business.

What are Delaware business taxes?

Delaware, like most of the other states, taxes some form of business income that is derived within the state. The income derived from specific businesses is taxed mostly depending on the legal structure of the said business. Although, in some states, there are no corporate income taxes, Delaware has a corporate income tax. In this state, there is Delaware franchise tax and business entities like LLC, general partnerships, and limited partnerships also have to file Delaware business taxes. Depending on the legal form of your business, you may have to file one or more of the taxes like the LLC which you are not required to file with franchise tax as it is applicable to only traditional corporations.

Delaware business taxes comprises primarily of the following:

• Franchise tax
• Delaware corporate tax
• Annual tax
• Gross Receipts Taxes
• Withholding Tax

What are the tax advantages in Delaware?

Delaware is considered a business friendly state with a strong tax shelter. This makes the state extremely attractive to entrepreneurs and investors. Whether you are incorporating or forming a limited liability company, there are certain Delaware business tax benefits that you will enjoy including tax credit programs. Some of the tax advantages are:

• Business Friendly Tax Environment: One of the top Delaware business tax benefits is that the state does not levy the following taxes on new or existing entities:
  • There is no Delaware corporate tax on interest or any other investment income, which a holding company based in the state may earn. If a holding company owns equity investments or fixed-income investments then it will not be taxed on the gains on a state level.
  • There is no Delaware corporate tax on goods or services that is being provided by a Delaware corporation operating outside the state.
  • The State of Delaware does not have any personal property tax and hence you will not be required to file any Delaware business tax return on the same, although local county real estate property taxes may be applicable but they are quite low.
  • There are no Delaware business taxes on intangible income like that of trademark royalties
  • Whether your company is situated in Delaware or it is out-of-state, any in-state purchases will not be subjected to sales tax.
  • Delaware does not have any ad-valorem or value-added taxes (VATs)
  • The state does not have any use tax, unitary, or inventory tax
  • There are no stock transfer or capital shares taxes in Delaware
• Tax Credits: The average cost of doing business in the state of Delaware is almost 25 percent below the national average and the tax incentives play a key role in keeping the average low. The state offers a wide variety of tax credit programs as a part of the Delaware business tax benefits package and this refundable credit helps save money, which is important for startups and small businesses. Some of the most popular tax credit programs include:
  • New Economy Jobs Tax Credit
  • Additional credits for job creation in targeted growth zones
  • New Business Facility Tax Credits
  • Public Utility Tax Credit
  • Brownfields Credit
  • Gross Receipts Tax Credit
  • Angel Investor Job Creation and Innovation Tax Credit
  • Brownfields Credit
  • Business Finder’s Fee Tax Credit
  • Clean Energy Technology Device Manufacturers’ Credit
  • Research and Development Tax Credits
  • Individuals with Disabilities Tax Credit
  • Neighborhood Assistance Tax Credit
  • Land and Historic Resource Conservation Tax Credit

IncParadise can help you start a Delaware new business today!

How Delaware Businesses are taxed?

If you are planning to form a new business in Delaware then you may be required to file a Delaware business tax return and this will be applicable to the type of business entity and the activity like sale of goods or services. The tax rate will be determined by the type of Delaware business taxes applicable to your business and hence it is important to identify the taxes according to the business type. This will also ensure you are better prepared for the filing of tax returns and thus cut down on any unexpected fee or fines. The different Delaware businesses and the way they will be taxed are as follows:

Delaware Corporate Taxation

If you form a domestic or a foreign corporation in Delaware then you will have to file a Delaware business tax return unless exempt under Section § 1902 (b): Imposition of tax on corporations; exemptions; Title 30, Delaware Code. The applicable Delaware corporate tax is:

• Corporate income tax: The corporate income tax return has to be filed using Form 1100 or Form 1100EZ using their Employer Identification Number (EIN). The applicable Delaware corporate tax is 8.7% of the federal taxable income allocated as well as apportioned to the state of Delaware. The percentage tax applicable is based purely on an equally weighted 3-factor method of apportionment. The factors taken into consideration are wages, property, and sales in the state as a ratio of wages, property, and sales everywhere else.

A corporation formed in the state may be required to file a Delaware business tax return for gross receipts tax and withholding tax.

Delaware Franchise Tax

If you form a domestic or foreign company in Delaware then you will have to pay franchise tax. The Delaware franchise tax is a fee that has been imposed by the state for the privilege or the right to own a company or business in the state. This is one of the few Delaware business taxes that are not based on the income of the company or its activity. There are two methods for determining the amount of tax to be paid. If the Authorized Shares method is used then the minimum tax is $175.00 and if the Assumed Par Value Capital Method is used then the minimum tax is $400.00 for corporations. The maximum franchise tax using either method should not exceed $200,000. On the other hand, the franchise tax for a Delaware LLC is a maximum of $300.

The due date for the Delaware franchise tax is different for different types of businesses. The tax for corporations is due on March 1st of each year while the due date for an LLC is June 1 each year. If this Delaware corporate tax is not paid within the due date then the state may impose a penalty and a monthly interest fee of 1.5 percent.

Delaware personal income tax

If you form a company in Delaware, which is a pass-through tax entity, then you will be required to file Delaware business taxes in the form of personal income tax. A pass-through tax entity is a type of business where the earnings and losses of the company are passed onto the owners. The most common form of this type of business entity that files a Delaware business tax return is:

• Sole proprietorships
• Limited liability companies
• Partnerships
• S corporations

The personal income tax rate in Delaware has changed and the tax rate varies from 2.2% to 5.55% for income below $60,000, and if the income is $60,000 or more then the tax rate is 6.60%. The form for filing a Delaware business tax return will be different based on the type of entity for example, a single-member LLC classified as partnership has to file “form 300” while a single-member LLC classified as a sole proprietorship has to file “form 200”. You will also have to report all your profits and losses on Schedule C for efficient filing of Delaware business taxes.

Delaware withholding tax

If a company is conducting business in Delaware or maintaining an office in the state and is also paying wages or providing other forms of remuneration to resident or non-resident Delaware individuals then they will be required to pay Withholding Tax. This type of Delaware business taxes requires a business to withhold an estimated amount from the employees as tax.

The due date for filing Delaware business tax return for withholding taxes varies according to the payroll end date for example; if your payroll end date is 01-01-21 then the due date for return will be 01-06-21 for eight monthly filers. Similarly, for quarterly filers, if the quarter end is 03-31-21 then the filing due date would be 04-30-2021. The withholding tax forms are normally sent after a withholding application is filed with the Delaware Division of Revenue but you will have to open a withholding account using the One Stop Business Licensing and Registration system. Failure to file Delaware business taxes like the withholding tax may lead to a penalty of 5% per month along with an interest of 0.5% per month.

Gross receipts tax

If you form a business in Delaware then you may be required to file gross receipts tax. You will have to file a Delaware business tax return if you are a seller of goods (tangible or otherwise) or if your business provides any type of service in the state. It is one of the important Delaware business taxes where-in the term “gross receipts” refer to the total receipts received by a business from sale of goods or services rendered within the state. It is important to note that deductions for this type of Delaware business taxes are not applicable on labor costs, cost of goods, interest expense, property sold, discount paid, state or federal taxes, delivery costs, or any other expense allowed. The tax rate can vary from 0.0945% to 1.9914% depending on the type of business activity for example, the current tax rate for an advertising agency and General Services is 0.003983% while that of Automobile Manufacturers is 0.000945% and Retailer – General is 0.007468%. You can get more information on gross receipts tax from the Department of Revenue website.

Ready to Incorporate your Delaware company?

Each type of business has its own set of requirements, which is dependent on the business activity and the first step towards making it operational is by registering with the state. IncParadise, an expert incorporation service provider in Delaware can help you to register your LLC or corporation in the state.

At IncParadise we value our customers and recognize the need for businesses to remain compliant with annual requirements as specified by the state. Hence, we offer Delaware additional services for all types of businesses, so that they can choose what they need and thus fulfill their legal or state based requirements. Our additional services include Delaware domestication, foreign qualification, EIN or Tax ID, and Certificate of Good Standing among others.