You’re about to embark on a long and exciting journey, one full of hard work and rewards: starting a new business.
With wide eyes and big dreams, you’re about to enter the world of business ownership.
But beyond the initial thrill of the startup decision, there’s a lot to consider. In fact, if you’ve never done it before, starting a business can seem like an intimidating mountain of work. Out of all your responsibilities and tasks, you might not even know where to start.
But have no fear. The good news is that once you have everything planned out and understand the process, the formation process is smooth sailing. And this is your go-to guide.
Everything you’ve been wondering about, everything you need to do, every question you have – it’s all right here. By the time you’re through these 16 steps, you’ll be a bonafide business owner who’s prepared for sustained success.
Delaware Entrepreneur Hack
When you form a business through business formation services (Example: ZenBusiness and LegalZoom), they’ll register your business with the state and help you check off most of the startup-steps in this list. They assist you with everything from building a website to opening a business bank account.
If you’d like to cut through the clutter and compare the best LLC services, see our comparison of the top 7 deals.
1) Write a Business Plan
Jumping into this endeavor without goals, directives, or a sense of direction can lead to a scattered, unproductive business.
A business plan lays the groundwork for your future success. It helps you analyze key elements of your business and forge pathways to achieve your goals. Here are a few things you should consider including in your business plan:
- Executive Summary (a separate document that gives a complete overview of your business’ purpose, plans, goals, competition, opportunities, etc.)
- Company description
- Market Analysis (opportunities, competition, etc.)
- Managerial or organizational structure
- Products and/or services
- Marketing strategies
- Funding goals
- Financial projections
Business plans aren’t just great for internal operations, but they give your business legitimacy in front of potential investors, customers, partners, and more. Need help? Check out this guide from the U.S. Small Business Administration.
2) Decide on a Business Name
You might’ve come up with the perfect name right away. If so, consider yourself lucky. Sometimes, deciding on a business can be difficult, requiring brainstorming meetings and late-night rap sessions. That’s because your name is your business’ identity and reputation. It should be something that’s unique and memorable but also defines your business purpose.
The state has certain name restrictions based on your business type. Going with an LLC? Then it must include the words “Limited Liability Company,” “L.L.C.,” or “LLC.” A corporation? Make sure it uses one of the following: “association,” “company,” “corporation,” “club,” “foundation,” “fund,” “incorporated,” “institute,” “society,” “union,” “syndicate,” or “limited.”
And you can’t use a name that’s already taken. Perform a name search through the Delaware Department of State’s website to determine if anyone is already using your desired name.
If it’s free, you can claim it by submitting a reservation or using it on your formation documents.
3) Decide on a Legal Structure
There are only a few types of business structures, but each one dictates some important parts of how your business will run.
The most popular types are the sole proprietorship, general partnership, limited liability company (LLC), S corporation, and C corporation. Most small businesses go with the LLC because of its unique blend of flexibility and personal asset protection.
However, you shouldn’t make this decision without reading up on all of your options. We’ve done plenty of research on each business type and developed side-by-side comparisons. Check out our LLC vs. Corporation and LLC vs. Sole Proprietorship comparison guides for a closer look.
4) Choose a Registered Agent
The Department of State needs a point of contact for your business, someone who will be available at your registered office address during typical business hours – 9am to 5pm.
This person is called a registered agent, and they serve as an intermediary with the state, receiving all of your company’s important legal communications and relaying them on to you. The Delaware registered agent ensures that no important state documents, deadlines, or payments fall through the cracks, so you’ll want to choose a person or company you trust.
You can choose either an individual or a business entity as your registered agent in Delaware, but they must:
- Be an individual Delaware resident or a corporation authorized to do business in the state.
- Have a physical address in Delaware (not a P.O. box).
- Have a mailing address in Delaware.
- Be present and available to receive service of process and other communications during normal business hours.
Unlike many other states, in Delaware, a business can be its own registered agent. If you’d rather use an individual, attornies, consultants, or business partners can be wise choices, people who know business maintenance inside and out. But there are plenty more options. Even family members and friends are viable options.
Or, you can choose a registered agent service instead. These companies take care of all your registered agent responsibilities, and some will even handle your business formation and annual reporting as well.
Important: You must continuously maintain a registered agent on file with the Department of State. If your agent resigns or you appoint a new one, you’ll need to notify them by filing the appropriate documents.
5) Register Your Business
This is the big one, the step that officially creates your business. No matter which business type you choose, you’ll need to register it with the Department of State.
LLCs: The form that officially puts your Delaware LLC on the map is called a Certificate of Formation. You must submit this form by mail or in person, as there is no online filing option.
This Delaware LLC filing costs $90 and will typically be processed in 10-15 business days. During heavy filing periods (March, June, and December), however, it can take up to 3-4 weeks. Need it sooner? You can pay an extra $50 for 24-hour processing or $100 for same-day processing.
Corporations: Instead of a Certificate of Formation, you’ll file a Certificate of Incorporation, which costs $89 (can vary based on stock). The same processing times and expedite options apply.
Sole Proprietorship/General Partnership: There are no official forms or fees to register as a sole proprietor or general partnership. Simply start doing business and that’s it! While this is obviously faster and easier, we recommend incorporating your business because of the personal asset protection LLCs and corporations provide.
Foreign Entities: If you’ve already formed your business in another state and want to expand to Delawre, you will need to foreign qualify it before conducting business. For LLCs, this means filing a Certificate of Registration for $200. Corporations must file a Qualification Certificate for $245. Make sure you foreign qualify before doing business in the state, or you might incur some severe fines and penalties.
6) Get an EIN
The Employer Identification Number (EIN) is your ticket to doing state and federal taxes. It’s a nine-digit number, much like a Social Security Number, that identifies your business on tax documents.
If you’re forming an LLC, it will be considered a “pass-through” entity, so the business itself won’t pay federal income taxes. Instead, you and the other members will report income and losses on your personal tax returns.
But this doesn’t mean you can go without an EIN. If your LLC pays any type of business taxes – like Sales, Use, or Unemployment Taxes – or hires employees, you’ll need to get one.
Unsure if you need one? The IRS provides a useful “Do I need an EIN?” link on this page, where you can also apply for an EIN. If you go through the online application process, you’ll receive your number immediately.
Otherwise, you can submit a Form SS-4 by fax to (855) 641-6935 or by mail to :
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
7) Open a Business Bank Account
LLC and corporation owners are required to keep their personal and business finances completely separate, or they risk losing their personal asset protection. To do so, you’ll need a business bank account.
The good news is that opening a business bank account is pretty simple. Just pay a visit to your bank’s local branch and sit down with one of the bankers there. You will need to present your formation documents, an EIN number, and some personal information. Then, you can direct all of your business income and expenses to that account instead of a personal one.
It doesn’t really matter which bank you choose, whether it’s a national giant like Chase or Bank of America or a small, local bank. However, it’s usually easiest to go with the one where you have existing accounts.
8) Handle Any Tax Obligations
Ah, taxes. They’re always part of the picture, especially when you run a business.
Familiarizing yourself with your business’ tax requirements will help you establish a solid financial plan going forward. LLCs don’t need to file a corporate tax return and pay federal income taxes, so you’ll handle these taxes as part of your personal return.
Corporations, on the other hand, will need to file a Corporate Income Tax Return, while sole proprietorships/general partnerships will need to pay self-employment taxes.
Every business operating in Delaware must pay an Annual Franchise Tax to keep their good standing with the state. For LLCs, this tax is a flat rate of $300, due by June 1. For corporations, you will need to calculate it based on your stock and assets (see how here), and it’s due by March 1.
There are a few other taxes your business may owe in Delaware, depending on your circumstances:
Gross Receipts Tax: Any Delaware business that sells goods or services is required to pay this tax on its total gross revenues. Currently, the rate is between .0945% and .7468%, depending on your business activity. See this FAQ page for more information.
Withholding and Unemployment Insurance Taxes: You’ll need to pay these taxes if you hire any employees. Withholding taxes are through the Division of Revenue, and the Unemployment Insurance Tax is through the Department of Labor.
Visit Delaware’s Division of Revenue website for additional information on taxes.
9) Find an Accountant
Sometimes it’s easier to hand off your financial responsibilities to a professional. Not only will an accountant ensures that your taxes are filed and paid correctly, but they might also find a few ways to save your business money.
Bookkeeping and tax procedures are time-consuming and require some specialized knowledge. Balance sheets, financial reports, cash flow, audits, and much more – an accountant can ensure that your company operates smoothly and streamlines its expenses.
This can be expensive depending on the complexity of your finances, but the benefits an accountant offers can be well worth it.
10) Create an Operating Agreement
An operating agreement constructs a framework of procedures and standards for your business. This is where you can lay out processes for member conduct, asset allocation, compensation policies, voting procedures, dissolution, and much more.
While operating agreements aren’t technically required in Delaware, they are essential to your business’ stability and success. They provide a safety net in legal disputes and legitimacy in front of banks, courts, government agencies, and other businesses.
You can either draft one yourself using an online template, or you can hire an attorney or an incorporation service to take care of it for you.
Once you’ve drafted your agreement, it must be approved by each of your LLC’s members, then filed with the rest of your business documents. You do not need to submit it to the Department of State.
Corporations need to prepare a similar document called “corporate bylaws.” Bylaws are required but don’t need to be publicly filed.
11) Acquire the Necessary Licenses
After filing your formation documents, your business is legitimate, but it might still need specific licenses before opening its doors in Delaware. This depends entirely on your business type and purpose, but there are a few state licenses you should know:
Business Licenses: According to the state website, “Any person or entity conducting a trade or business in the State of Delaware is required to obtain a Delaware business license from the Delaware Division of Revenue.” You can apply via Delaware’s One Stop Business Licensing and Registration Service. The fee for your license will vary depending on the type of business you run. You can find each type and their associated fees here. You will be responsible for renewing your business license each year.
Professional/Occupational Licenses: Your business type or occupation may require additional licensure through certain state boards. For example, electricians must be certified by Delaware’s Board of Electrical Examiners. Check the Division of Professional Regulation website to see if you might need some additional licenses.
Local Licenses: Your specific city, county, or municipality might have its own licensure requirements. Take a look at your local government’s website to find out.
12) Consider Business Insurance
Even though it’s not pleasant to consider, there’s always a chance that unforeseen events might take a toll on your assets.
While forming an LLC or corporation offers some personal asset protection, additional business insurance can also protect your business assets in cases of lawsuits, damages, etc. You can acquire insurance for your business products, vehicles, specific occupations and much more.
If you hire employees, you’ll also need to get workers’ compensation insurance. SBA.gov has a useful guide for determining which forms of insurance your new business might need.
13) Build a Website
Your company’s digital presence is just as important as its physical one. Like it or not, most potential customers will find your business online, and if you don’t exist online, you’re missing out.
But don’t worry, you don’t need to be an HTML or web design expert to build a website. Sites like WordPress and Squarespace make it easy to construct an elegant and responsive website, no coding necessary. But if you’re not comfortable or confident doing it on your own, you can always hire a professional web designer to take care of it for you.
14) Launch Social Media Accounts
Making your mark on the digital landscape doesn’t start and end with your website. Most successful businesses also have a robust social media presence on multiple platforms. Facebook, Twitter, and Instagram are all great ways to connect organically with potential customers and develop your brand voice.
Just don’t forget to publish consistent social media content, or you’ll have trouble building a base of followers.
15) Understand Ongoing Delaware Requirements
After you’ve launched your business, things will likely be moving at 100 miles per hour as you evolve and grow. But in all of the excitement, you can’t forget your state’s ongoing compliance requirements. Every state has its own annual or biennial business requirements.
Delaware only requires Annual Reports from corporations, not LLCs, although both business types must pay the Annual Franchise Tax. Corporations must file their Annual Report and pay the Franchise Tax by March 1, and LLCs must pay their tax by June 1. All of these filings are available through Delaware’s eCorp filing portal.
16) Check Out Delaware Small Business Resources
You’re not on this journey alone. There are plenty of free resources available to make starting and growing your business a smoother, easier process.
SBA.gov has a comprehensive document that outlines all of Delaware’s small business resources. Check it out here and you’re likely to find what you need. For more information, take a look at the webpage for Delaware’s SBA district office.