The state of Delaware attracts many businesses and entrepreneurs: more than 2.1 million entities are incorporated there, including Fortune 500 enterprises. About 81% of all US-based initial public offerings in 2024 were registered in Delaware. Its reputation as a corporate haven comes from its business-friendly laws, court system, and tax advantages.

While there are some legal considerations to forming a C corporation (C corp) in Delaware, the process is manageable if you break it down into smaller steps. The process includes important tasks such as choosing a unique company name, appointing a registered agent, issuing stocks, and complying with regulatory requirements. You’ll have to complete each one with due diligence. Below is a step-by-step guide to setting up your C corp in Delaware.

What’s in this article?

• What is a Delaware C corp?
  
• Benefits of forming a C corp in Delaware
  
• How to set up a C corp in Delaware
  
• How Stripe Atlas can help
  

What is a Delaware C corp?

A C corp is a legal structure for a corporation where the owners, or shareholders, are taxed separately from the entity. C corps can have an unlimited number of shareholders and are taxed on their earnings. The shareholders are also taxed on the earnings they receive, such as dividends, which results in “double taxation.”

A Delaware C corp is a C corp that’s incorporated in the state of Delaware. In 2024, over 20% of all business entities formed in Delaware were corporations. They must abide by Delaware’s laws regarding corporations and are also subject to the tax benefits and obligations that come with being a Delaware corporation. That’s true whether or not the company has a physical presence in Delaware or conducts business operations there.

Benefits of forming a C corp in Delaware

Incorporating a business in Delaware has become increasingly popular. Many large US companies choose to incorporate in Delaware, even if they don’t do business there. Here are some of the key benefits of forming a C corp in Delaware:

• Favorable business laws: Delaware’s business laws are among the most flexible in the US. The state’s General Corporation Law is very supportive of businesses, making it easier to manage and operate a corporation.

• Experienced business court system: The Delaware Court of Chancery specializes in business law and uses judges, not juries. This means that business disputes are decided by experienced business law experts.

• Privacy: Delaware doesn’t require director or officer names to be disclosed in the formation documents. This provides a level of anonymity not found in all US states.

• No out-of-state tax: Delaware doesn’t tax out-of-state income. This can be beneficial for companies that are incorporated in Delaware but do their business elsewhere.

• Investor attractiveness: Many investors and venture capitalists prefer Delaware corporations due to the predictability of Delaware’s business laws and court system. This can make it easier for corporations to attract investments.

• Ease of setup and management: Incorporating in Delaware is a straightforward process. Delaware also allows one person to be the sole director, shareholder, and officer of a corporation.

While these benefits can be attractive, consider the specifics of your situation and consult a legal or business expert before you decide where to incorporate your business.

How to set up a C corp in Delaware

Establishing a C corp in Delaware provides businesses with benefits, including supportive business laws, a respected court system, and certain tax advantages. But to access these benefits, you need to understand and carefully follow the procedures required by the Delaware Division of Corporations.

Here’s an overview of the process:

1. Choose a company name: The name of your corporation should reflect your business and be easy for your customers to remember. Delaware law requires that the name of a corporation be distinguishable from any name on record with the Delaware secretary of state. You can conduct a name search on the website of the Delaware Division of Corporations to ensure your desired name isn’t already taken.

2. Appoint a registered agent: In Delaware, you’re required to appoint a registered agent who has a physical street address in the state. The agent can be an individual resident or a company that’s authorized to do business in Delaware. The registered agent is responsible for receiving important legal and tax documents on behalf of the corporation, including service of process (e.g., lawsuits, legal notices) and state correspondence (e.g., annual report notices).

3. Prepare and file the certificate of incorporation: You must file a certificate of incorporation with the Delaware secretary of state. This document includes important information about your corporation such as its name, the name and address of its registered agent in Delaware, the number and type of authorized shares, and the incorporator’s information. This certificate establishes the existence of your corporation.

4. Create corporate bylaws: Corporate bylaws are the “rules” for your corporation. They set the corporate structure and detail the duties and responsibilities of the directors, officers, and shareholders. Although corporations don’t submit their bylaws to the state, they’re still legally binding documents. It’s often beneficial to hire a legal professional to draft the bylaws and ensure all legal bases are covered.

5. Appoint directors and officers: Typically, the incorporator will appoint the initial board of directors. After the initial appointment, shareholders will usually elect the directors. Directors make major policy and financial decisions for the corporation. The board of directors also elects the corporation’s officers—such as the CEO, CFO, and secretary—who manage the corporation’s daily operations.

6. Hold an initial board meeting: The initial board meeting is typically where the directors adopt the corporation’s bylaws, elect officers, approve the issuance of shares of stock, decide on corporate banking, and set the corporation’s fiscal year. Keep detailed minutes of this meeting and all future board meetings.

7. Issue stock: Corporations issue stock to their shareholders. Stock represents ownership in the corporation, and shareholders have the right to vote on important corporate matters. The amount and type of stock that can be issued by the corporation is stated in the certificate of incorporation.

8. Get an EIN: The Employer Identification Number (EIN) is a unique number the Internal Revenue Service (IRS) assigns to your corporation for tax purposes. You can apply for an EIN on the IRS website. You’ll need this number for tax filings, to open a bank account in the corporation’s name, and for many other business needs.

9. Comply with other tax and regulatory requirements: Depending on the nature of your business, you might need to comply with other tax and regulatory requirements. These might include obtaining local business licenses, registering with the state’s sales tax department if you’re selling goods and collecting sales tax, or registering with the state’s employer tax department if you have employees.

10. File an annual report: Each year, Delaware corporations are required to file an annual report with the Delaware secretary of state and pay a franchise tax. The annual report provides updated information about the business, including its address, officers’ names, and details of stock issuance.

How to save money when incorporating a business

While some incorporation fees are unavoidable, it’s possible to lower your business’s costs by handling as much as possible in-house and seeking professional help when necessary. Here are a few key strategies for saving money:

• DIY incorporation: If your business structure is straightforward and you’re comfortable with paperwork, filing the incorporation documents yourself can save you hundreds or even thousands of dollars in legal fees. Online resources and guides are available to help you through the process.

• Compare registered agent services: Registered agent fees vary between providers. Compare prices and services from different companies to find the best deal for your needs.

• Consider forming an LLC: Limited liability companies (LLCs) are often simpler and less expensive to form than corporations, making them a cost-effective option for small businesses.

• Choose the right location: Some locations have lower filing fees and franchise taxes than others. Research different places to see which ones have the most favorable business environment for your industry and budget. Delaware is a popular choice in the US for its business-friendly laws and low fees, for example.

• Take advantage of online legal services: Online legal services offer affordable packages that can guide you through the incorporation process and provide templates for necessary documents. Some might even have discounts and promotions for new customers. This can be less expensive than hiring an attorney.

• Negotiate professional fees: If you need to hire an attorney or accountant, don’t hesitate to negotiate their fees. Some professionals might offer discounts for startups or small businesses.

• Plan for ongoing costs: While saving on initial incorporation costs is important, make sure to factor in ongoing expenses such as annual report fees, franchise taxes, and registered agent fees.