A Complete Guide to Starting a Business in Delaware (2023)

This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax, or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisers, as needed. Businesses outside of Delaware will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies.

Delaware is home to more than a million companies—and two-thirds of the Fortune 500—thanks to its favorable business tax structure, privacy laws, and expedient startup process. It is also the most popular state for US and international corporations. The First State is an excellent place to start a business. Follow these eight steps to starting a business in Delaware.

1. Choose a business idea

Any budding Delaware small business owner must first settle on a business idea. Will you sell a product or service? Perhaps a range of both? Here are two key questions you should ask yourself when brainstorming concepts:

Who is your customer? You need to know who you’re selling to and what they need. Will you sell direct to consumer (B2C) or business to business (B2B)? Will you reach customers online, through a traditional brick-and-mortar storefront, or both? Survey prospective consumers, analyze the marketplace, and research industry trends to clearly understand your potential customers.
What is your projected profitability? Businesses survive by making more money than they spend on business costs. There are several variables to consider when building your profit strategy, including pricing, distribution, and overheads. How much do you need to sell to break even? You must know how much you need to sell to cover your costs and generate a profit.

2. Name your business

Once you’ve got an idea for your Delaware business, you need a business name. Choose one that’s simple, memorable, and immediately conveys your core function and principles. You also need to follow specific state-level rules. Here are a few guidelines to follow when choosing a business name in Delaware:

Be original. The name of your Delaware business must be different from any other business entity registered in the state. Check if your preferred name is available on the Delaware Division of Corporations website.
Include certain words. Depending on your legal business entity structure, you may have to include certain words in your Delaware business name. LLCs, for example, must contain the term “Limited Liability Company,” “LLC,” or “L.L.C.” Your Delaware corporation must include “Association,” “Company,” “Corporation,” “Incorporated,” or “Limited,” or an abbreviation thereof.
Exclude certain words. The name of your Delaware business cannot contain words like “Trust,” “University,” or “College,” which would confuse it with another legitimate entity. LLCs can use the word “Bank” in their name, but only with approval from the Delaware Banking Commissioner.
Reserve your name. You can reserve your business name by applying online or by mail for a $75 filing fee. If approved, the name reservation remains in effect for 120 days.
Adopt a DBA. If you’d like your Delaware business to operate under a name different from the one you registered with the state, you must file for a DBA, or “doing business as.” This is sometimes known as a trade name or assumed name. Your DBA must comply with the same naming rules as your official Delaware business names. You can file for a DBA online or by mail for a $25 filing fee.
Secure a domain name and social media handles. Businesses in Delaware need to maintain an online presence to compete in today’s market. Purchase a domain name (URL) and choose social media handles that align with your business name or DBA. Taking these steps makes it easy for potential customers to find you online.

3. Create a business plan

Every business needs a business plan. While not required by Delaware law, a business plan articulates your business’s function. You can draft yours from scratch, customize a template or take inspiration from some real-life and hypothetical examples. A thorough business plan should include:

An executive summary
A detailed company description
Market analysis
An outline of the organizational and managerial structure
A list of products and services
A customer segmentation report
A marketing plan
A logistics and operations plan

4. Choose a business structure and get started

There are different business structures to choose from when forming your Delaware small business. Each has its own rules around personal liability, ownership, taxation, and funding, among other aspects. Here are the three main structures to consider:

Sole proprietorship. Sole proprietorships are the default designation for any individual engaging in business. No fees or registration are required to establish a sole proprietorship in Delaware. Earnings are taxed through the owner’s personal tax returns. Sole proprietors avoid double taxation (taxes on both business and personal income derived from the company). The downside is that owners are personally liable for most debts or legal damages against the business.
LLC. A limited liability company, or LLC, differs from a sole proprietorship in that it can have multiple owners, called members. Like sole proprietors, members are taxed at their personal income levels, avoiding double taxation. However, a significant difference is that members enjoy personal asset protection related to business debts and damages. LLCs in Delaware must pay a $300 yearly franchise tax but are not required to file an annual report.
Corporation. The main advantage of forming a Delaware business as a corporation is fundraising opportunities; you would be able to issue stocks to shareholders for an ownership stake in the company. Corporations also enjoy the same personal liability protection as LLCs. Delaware corporations are subject to a minimum annual tax of $175 and must file annual reports with the Division of Corporations for a fee of $125. Owners of corporations are taxed on personal income and business revenue. You can form a C corporation or an S corporation, the latter of which benefits from the same pass-through taxation status as LLCs.

Getting a federal employer identification number (EIN)

Once you’ve chosen a legal structure for your Delaware business, apply for a federal employer identification number (EIN). EINs are issued by the federal Internal Revenue Service (IRS), but state and local authorities also use them to identify businesses for tax purposes. You can apply for an EIN online through the IRS website, free of charge.

Incorporating within Delaware

Your Delaware business registration process differs depending on your business structure. For example, sole proprietorships—the default designation for individual-owned businesses in the US—don’t require special registration procedures. LLCs and corporations do:

LLCs. To register your LLC in Delaware, file a Certificate of Formation of Limited Liability Company with the Division of Corporations. You can do so online or by mail; the filing fee is $90.
Corporations. To register your corporation in Delaware, file a Certificate of Incorporation with the Division of Corporations. There’s a minimum fee of $89 for corporations with up to 1,500 shares of no-par-value stock or up to $75,000 of a par value stock (“par value” means stock can be converted to currency). Past this threshold, the fee increases based on the number of no-par-value shares or the total value of a par-value stock. For more information on calculating your Delaware franchise tax, visit the Division of Corporations website.

5. Obtain business licenses and permits

A statewide Delaware business license is required to lawfully operate. You can apply for a state business license through the Delaware One Stop registration portal for a $75 fee. Depending on the nature of your business, you may also need to obtain other licenses and permits. For example, your city or county may require local business licenses, and companies involved in certain professions—like law, accounting, or banking—may be subject to other industry-specific permits.

6. Examine business insurance options

Purchasing insurance for your Delaware business is key to managing risk—and it can free up your mind to focus on more important things, like growing your company. Common insurance plans for businesses in Delaware include:

Workers’ compensation insurance. Workers’ comp covers employees’ on-the-job injuries and illnesses. All Delaware LLCs and corporations operating with employees must purchase this type of insurance coverage.
General liability insurance. General liability insurance protects your business from lawsuits that could result from unforeseen incidents, like a customer slip-and-fall accident on your shop floor.
Professional liability insurance. Professional liability insurance protects against claims that advice or services caused a customer harm. This type of policy is taken out by professional services businesses.
Business income insurance. If your Delaware business is temporarily unable to operate due to a covered loss, business income insurance can subsidize some or all lost income during the downtime.

7. Understand financial considerations

You will open up a business bank account to handle business expenses and other cash flow items. To get your Delaware off the ground, you’ll also need to think about additional investments. These might include leasing a brick-and-mortar retail space, paying for a professionally designed website, or buying inventory. On top of paying employees, you may want to hire contractors and other professionals, like lawyers and accountants.

If these startup costs seem overwhelming, resources are available to help you cover the expenses.

8. Market your business

With your business officially registered, you can devise a marketing strategy to get the word out about your products and services. Marketers hone in on what makes a brand unique. Craft logos, slogans, color schemes, and fonts that align with your business. This brand work can then form the foundations of a detailed marketing plan. A comprehensive plan covers promotional strategies, such as:

Paid advertising. Paid advertising is a traditional and trusted marketing method. Ads can be print or digital, as large as billboards or as small as branded office supplies. You can buy these yourself or hire an agency to do it for you.
Social media accounts. Use social channels like Instagram, Facebook, YouTube, and TikTok to promote your products and services online and make it easy for customers to find information about your brand.
Public relations. Identify and reach out to local and national media outlets to broaden your reach. Cultivate organic relationships with journalists and publications that can help you raise your profile.
New business and customer retention. Build relationships with your customers to keep them coming back and spreading the word.

Starting a business in Delaware FAQ

How much is it to register a business in Delaware?

It costs $90 to register an LLC in Delaware and a minimum of $175 to register a corporation. There’s no need to register a sole proprietorship, though you still need to obtain a business license.

What are the benefits of opening a business in Delaware?

Delaware offers a favorable tax structure and efficient methods for resolving business disputes through the unique Court of Chancery system—and if your business does all of its business outside the state, you don’t have to pay income tax or sales tax at the state level.

Is Delaware good for running an LLC?

Delaware is a great place to launch and operate your LLC. Delaware LLCs are not required to comply with the state’s annual reporting rules, nor are they required to publicly disclose ownership identity—which can be beneficial if you value privacy.

A Complete Guide to Starting a Business in Delaware