Delaware Incorporation for Startups
The State of Delaware is a prominent domicile for U.S. and other international business entities. Delaware has gained popularity as a welcoming home to corporations. Whether it is a limited liability company, a C Corp, an S Corp, a statutory trust or limited partnerships, all legal businesses formed in Delaware enjoy a host of regulatory and logistical benefits.
Also, Delaware is the best and cheapest state for Incorporation. It is suitable for startups who are willing to expand by foreign qualification to their states, mainly to California, where Silicon Valley is located. If your Corporation or LLC is formed outside of California (i.e., Delaware, Wyoming, New York, etc.) but you are willing to do business in California, you will need to get Foreign Qualification in California.
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Delaware is the best place for Tech Startups, which want doing business in Silicon Valley. Check in detail why you should incorporate in Delaware.
Why Incorporate in Delaware?
- The Flexibility For Structuring Delaware Corporation – The Delaware corporate statutes offer a tremendous flexibility for the rights and duties of shareholders as well as board members. Delaware permits one person to be the sole shareholder, director, and officer of a Delaware Corporation, whereas many other states need at least three people to fill the officer and director positions.
- Highly Respected & Well-Established Delaware Court System – The Delaware’s Court of Chancery focuses completely on the business law and uses judges instead of juries. Hence, if your business is involved in litigation, you can consult an experienced judge with expertise in complex corporate law. Since many corporate attorneys are already familiar with the Delaware business law, the company attorney – you choose will automatically be familiar with these laws.
- Investors Prefer Investing In Delaware Corporations – Venture Capitalists (VC) and Angel Investors usually prefer Delaware corporations over other state entities. So, if you are considering investments from such investors, you may need to invest in Delaware.
- Delaware Offers Some Tax Benefits – Delaware offers some business-friendly tax laws. Businesses that are built in Delaware, but are not conducting business over there, need not pay state corporate income tax. But yes, there is a franchise tax. Additionally, stock shares owned by people outside Delaware aren’t subject to Delaware taxes. There is no personal income tax for non-residents.
- Delaware Offers Great Privacy – Delaware does not demand disclosure of officer’s or director’s name on the formation documents. This provides additional privacy to the company and it’s directors.
How to Incorporate in Delaware?
1. Select an entity type
Once you are sure that you are going to incorporate in Delaware, the next step is choosing your “entity type.” You can choose from LLCs, Corporations stock corporations, limited partnerships, and sole proprietorship. There are different rules and laws for different entity structures. You can decide on the basis of liability protection, the taxation method, and complexity of administration. To determine which entity is suitable for you, you should always consult a professional attorney.
2. Choosing Company Name
Before starting the paperwork, make sure to check your company’s name availability. Your company’s name needs to be unique. To check whether your name is already taken or not, you can visit Inc.Paradise and enter the ideas for names you have. You will be immediately informed whether the name is taken or reserved.
3. Choosing a Registered Agent
If you do not live in Delaware, you will need a representative who is physically located in the state of Delaware and can receive your official business paperwork of your business.
To maintain your Delaware Incorporation, you can hire Inc.Paradise as your registered agent. Our fees for:
- 1 year is $89
- Pre-Paid Second Year is $129
- Pre-Paid Third Year is $169
4. Get Started
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What is Foreign Qualification?
Foreign Qualification, also known as a Certificate of Registration or Certificate of Authority is the process of registering your Delaware Corporation or LLC, which is supposed to be domestic in the state of Delaware and foreign to any other state, as a foreign entity in your company’s home state.
What does the Foreign Qualification service provided by IncParadise include?
- Preliminary name availability check in the state of qualification.
- Preparation and filing of the certificate of authority in the state of qualification.
- Obtaining a certificate of good standing or certified copy for your business from the state of formation, which must accompany your certificate of authority.
- Payment of initial state filing fees.
These fees include state filing fees and our fee for preparing documents and filing with the state.
If time is of the essence, we also offer an expedited foreign qualification service. The expedite fee of $200 covers additional state fees for expedite filings and overnight service. We print and fax Foreign Qualification order form.
If your Corporation or LLC is formed outside of California (i.e., Delaware, Wyoming, New York, etc.) but you are willing to do business in California, you will need to get Foreign Qualification in California. DE is best place for Tech Startups, according to Silicon Valley which is located there.
California Foreign Qualification
Federal Tax ID Number or EIN
After forming a Delaware LLC or corporation, the next step is to get a Federal Tax ID Number or an Employer Identification Number (EIN).
At IncParadise, we offer a reasonable service to assist you with receiving an EIN for your company from the IRS. Our fast and secure service enables you to avoid dealing with the long and confusing IRS procedures and forms. Our service also includes professional customer support. All the filings will be processed online. The time taken by orders submitted online to the IRS is 3 – 4 business days.
Employment Identification Number (EIN)
California Tax Exempt
The purpose of tax exemption certificate is to allow you to buy goods through your business without paying the local sales tax. But keep this in mind, while doing this, you must collect the tax from the customer when you sell the item.
Opening a Bank Account
To open a bank account in Delaware, you need the following documents:
- Passport of the person authorized to open the account
- Articles of Incorporation or Articles of Formation
- Employer Identification Number (EIN): Allow 4-6 weeks before traveling to the United States
- Banking Resolution
- Certificate of Good Standing
- Proof of US physical address
- All banks in the United States require an “in person” visit by at least one signer. So Travel is required.
Before applying for a business merchant account, you need to have an operating business bank account. While applying for a merchant business bank account, you will require to provide the copy of all incorporation documents which include the Employer ID number Confirmation issued by the Internal Revenue Service (IRS).
Also due to strict U.S Laws such as International Anti-Laundering laws, most of the banks are required to “know their customer” before opening a business bank account. To do so, they need to get an account opening application filled along with several enclosed documents such as a copy of your local bank reference letter, valid state issued I.D., passport, and utility bills to show proof of residency.