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How to Incorporate in Delaware (May 2024 Update)

Meow Technologies, Inc.

Meow Technologies, Inc.

With over 50% of all publicly traded companies and 64% of the Fortune 500 incorporated within its borders, Delaware has earned its nickname as the “Corporate Capital of the World.” But what exactly makes the second smallest state such an appealing place for businesses to call home? Read on to find out why you should consider incorporating in Delaware, the step-by-step process to do so, important requirements to remain compliant, and whether forming a corporation in Delaware makes sense for your small business.

Why Delaware? The Benefits of Incorporating in the First State

There are several key reasons why over 1 million business entities have chosen Delaware as their legal home.

Tax Benefits

  • No corporate income tax for companies not conducting business within the state. This applies even if the corporation is incorporated in Delaware. Companies pay only a modest franchise tax instead.
  • No state sales tax, reducing operational costs for corporations who do decide operate within Delaware.
  • No personal property tax, investment income tax, or inheritance tax at the state level.

In sum, Delaware offers corporations legitimate ways to significantly reduce tax liability.

Privacy Protections

  • Only the corporation’s registered agent information is a public record. The registered agent accepts legal documents on the company’s behalf.
  • Officers, directors, and shareholders do not have to be publicly revealed or even located within the state. This provides extra privacy.

Expedient & Simple Business Formation

  • 1-hour or same day filing of incorporation paperwork and certificates is common.
  • Lean regulatory bureaucracy and staff expertise in corporate formations makes the filing process straightforward.
  • Corporations enjoy flexibility in governance structures. Just one person can serve in multiple roles like officer, director, and shareholder all at once.

Specialized Corporation Law Court

  • Corporate law-focused judges rather than juries render decisions.
  • No punitive damages awards speeds case resolution.
  • Well-established legal precedents exist, especially for alternative dispute resolution.

The 8 Step Process to Form a Delaware Corporation

While consulting with business lawyers is highly recommended, the state aims to make DIY incorporation achievable for entrepreneurs. Below are the basics of what’s entailed.

Step 1. Choose a Business Name

Your corporation’s legal name must include a business designator like "Company" or one that connotes incorporation status. It cannot match another entity’s name. Delaware lets you reserve a name online for 120 days for $75.

Step 2. Appoint a Delaware Registered Agent

All corporations must designate a registered agent based in Delaware that can accept legal service documents if your business gets sued. An individual or business entity can fill this role.

Step 3. File a Certificate of Incorporation

This legal document officially forms your corporation. It must list details like your entity’s name, registered agent, authorized shares, business purpose, and an incorporator’s signature. Filings fees start at $89.

Step 4. Adopt Corporate Bylaws

Bylaws outline internal rules and procedures for operating your company. While not mandated, adopting bylaws proves to regulators and lenders that you’re running a proper corporation.

Step 5. Hold First Board of Directors Meeting

The incorporator initially appoints director(s) to oversee high-level corporate affairs. Directors then hold an organizational meeting to appoint officers, select a bank, authorize stock, set fiscal year, and adopt a corporate seal.

Step 6. Issue Stock Certificates to Shareholders

Stocks formally document shareholder ownership interests. Directors authorize stock certificate issuance per entity bylaws and governance procedures. Delaware lets you easily issue stock without par value if desired.

Step 7. Stay Compliant After Forming

Newly incorporated entities must file an annual report and pay franchise taxes to stay in good standing. The minimum tax is $175 per year. Standard due date is March 1st.

Step 8. Obtain an Employer Identification Number (EIN)

An EIN is required for federal tax purposes and other governmental reporting. Apply online anytime on the IRS website.

Ongoing Franchise Tax & Annual Report Filings

To maintain your incorporation status, Delaware requires corporations to file an annual report and pay franchise taxes. Requirements include:

  • $50 annual report filing fee.
  • Minimum $175 franchise tax. Maximum owed is $200,000.
  • Quarterly estimated pre-pay for taxes above $5,000.
  • Annual deadline is March 1st.
  • Late fees of $200 plus interest penalties.

Is Forming a Delaware Corporation Right for Your Small Business?

With the business-friendly tax incentives and helpful regulatory landscape, forming a corporation in Delaware holds lots of appeal on the surface. But business structure decisions also need to make practical sense for your company’s situation. There are a few downsides to weigh as well before incorporating in Delaware.

Higher Compliance Requirements

For small business owners looking to minimize legal work, Delaware adds regulatory burdens that incorporating locally may avoid. You must register your corporation in your home state too while meeting both jurisdictions’ annual reporting rules. This doubles the administrative workload and state fees owed.

Minimal Tax Benefits

Unless your corporation earns significant revenues, the tax advantages may be non-existent or negligible after paying Delaware franchise taxes and home state added costs. Plus, states levy taxes on companies “doing business” in them, even if incorporated out of state. Consult a tax advisor to run the numbers.

Added Representation Expenses

If legal disputes arise, you must hire a Delaware-barred attorney and travel there to appear in-person for litigation events. Similarly, a locally based registered agent familiar with Delaware laws is a must. These advisors impose fees that incorporating in your home state avoids.

The Outcome

Many companies see bottom line benefits from Delaware’s business-friendly legal and tax structure. For most small businesses though, the extra compliance burdens and legal/tax representation costs fail to justify expected tax savings. Carefully determine if affiliating with Delaware provides advantages that significantly outweigh staying solely incorporated in your home state. Either way, forming a corporation shields your personal assets and opens up fundraising opportunities worth celebrating!

Meow Technologies is a financial technology company, not a bank or FDIC-depository insured institution. Likewise, Meow Technologies is not an investment adviser and none of the information presented herein should be relied upon as financial advice or a recommendation to make any financial decision nor should it be considered to be tax or legal advice. The information is the opinion of Meow Technologies for educational purposes and may not be suitable for all companies. Products, like the one described herein, are offered through Meow Technologies and are not advisory services which are only offered through Meow Advisory, LLC.** The FDIC’s deposit insurance coverage only protects against the failure of an FDIC-insured bank.**

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*Disclaimer: Meow Advisory LLC is a registered investment adviser. Registration as an investment adviser does not imply any level of skill or training.
For accounts opened through Atomic Brokerage LLC: Meow Advisory LLC has an engagement with Atomic Brokerage LLC (“Atomic Brokerage”), a registered broker-dealer and member of FINRA and SIPC , to bring you the opportunity to open a brokerage account. Brokerage services for customers of Meow Advisory LLC are provided by Atomic Brokerage. For more details about Atomic Brokerage, please see the Form CRS, General Disclosures, and the Privacy Policy. Check the background of Atomic Brokerage on FINRA’s BrokerCheck.
For subadvisory services for accounts opened through Atomic Invest LLC: Meow Advisory LLC has an engagement with Atomic Invest, LLC (“Atomic Invest”), an SEC-registered investment adviser, to bring you the opportunity to open an investment advisory account. Investment advisory services are provided by Atomic Invest. Companies which are engaged by Atomic Invest receive compensation of 0% to 0.85% annualized, payable monthly, based upon assets under management for each referred client who establishes an account with Atomic Invest (i.e., exact payment will differ). Atomic Invest also shares a percentage of compensation received from margin interest and free cash interest earned by customers with Meow Advisory LLC. Meow Advisory LLC is not a client of Atomic Invest, but our engagement with Atomic invest gives us an incentive to refer you to Atomic Invest instead of another investment adviser. This conflict of interest affects our ability to provide you with unbiased, objective information about the services of Atomic Invest. This could mean that the services of another investment adviser with whom we are not engaged could be more appropriate for you than Atomic invest. Advisory services through Atomic Invest are designed to assist clients in achieving a favorable outcome in their investment portfolio. They are not intended to provide tax advice or financial planning with respect to every aspect of a client’s financial situation and do not include investments that clients may hold outside of Atomic Invest. For more details about Atomic Invest, please see the Form CRS, Form ADV Part 2A, the Privacy Policy, and other disclosures. Brokerage services for Atomic Invest are provided by Pershing Advisor Solutions LLC (“PAS”), a registered broker-dealer and member of FINRA and SIPC.
Neither Atomic Invest nor Atomic Brokerage, nor any of their affiliates, is a bank. Investments in securities are Not FDIC insured, Not Bank Guaranteed, and May Lose Value. Investing involves risk, including the possible loss of principal. Before investing, consider your investment objectives and the fees and expenses charged by Atomic Brokerage and/or Atomic Invest.
See the Legal Section within the Meow website for additional agreements.

U.K. Gilt pricing quoted net of fees. ~5% U.K. Gilt yield is sourced from Investing.com December 2023 6-month United Kingdom 6-Month Bond Yield. ~5% Treasury Bill yield is sourced from treasurydirect.gov December 2023 12-week U.S. Treasury Bill auction.

**Disclaimer: Meow Technologies is a financial technology company, not a depository, bank or credit union, and your account at Meow is not, itself, an FDIC-insured product.

Meow currently partners with three banking providers. Banking services are provided by Third Coast Bank SSB; Member FDIC, Grasshopper Bank, N.A; Member FDIC, and FirstBank, a Tennessee corporation; Member FDIC.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by Grasshopper Bank, N.A, you deposit your funds into a deposit account at Grasshopper Bank, N.A. which sweeps those funds into deposit accounts across a network of Federal Deposit Insurance Corporation (“FDIC”)-insured banks, for up to the current standard maximum deposit insurance amount (“SMDIA”) of $250,000 per eligible depositor, per destination institution, for each ownership capacity or category, subject to applicable terms and conditions, including Grasshopper's ICS Deposit Placement Agreement. Grasshopper Bank, N.A. uses a third-party vendor and agent to help administer this sweep process. Visit https://www.intrafi.com/network-banks/ for a list of the banks and savings associations with which we/Grasshopper, N.A. have a business relationship for the placement of deposits at destination institutions, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by Grasshopper, N.A. or you). The current maximum deposit insurance amount for your funds is up to $125 million in FDIC insurance through the sweep network of Grasshopper Bank, N.A, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and restrictions and refer to the applicable rate sheets for additional information.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by Third Coast Bank SSB, you deposit your funds into a deposit account at Third Coast Bank SSB. If you also hold funds in a sweep program with Third Coast Bank SSB, Third Coast Bank SSB sweeps those funds into deposit accounts across a network of FDIC-insured banks, for up to the current SMDIA of $250,000 per eligible depositor, per receiving bank, for each ownership capacity or category, including any other balances you may hold at that receiving bank directly or indirectly through other intermediaries, including broker-dealers. Third Coast Bank SSB uses a third-party vendor and agent to help administer this sweep process. Visit Third Coast Bank SSB for a list of the banks and savings associations with which we/Third Coast Bank SSB have a business relationship for the placement of deposits at receiving banks, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by Third Coast Bank or you). The current maximum deposit insurance amount for your funds is up to $50 Million in FDIC insurance through the sweep network of Third Coast Bank, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and conditions and refer to the applicable rate sheet for additional information.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by FirstBank, a Tennessee corporation, you deposit your funds into a deposit account at FirstBank, which sweeps those funds into deposit accounts across a network of FDIC-insured banks, for up to the current SMDIA of $250,000 per eligible depositor, per destination institution, for each ownership capacity or category, subject to applicable terms and conditions, including FirstBank's ICS Deposit Placement Agreement. FirstBank uses a third-party vendor and agent to help administer this sweep process. Visit IntraFi for a list of the banks and savings associations with which FirstBank has a business relationship for the placement of deposits at destination institutions, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by FirstBank or you). The current maximum deposit insurance amount for your funds is up to $125 million in FDIC insurance through the sweep network of FirstBank, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and restrictions and refer to the applicable rate sheet for additional information.

***FDIC insurance coverage is only available to protect you against the failure of an FDIC-insured bank that holds your deposits (and does not protect you against the failure of Meow or other third party). Your account with Meow and all services provided to you are subject to the Meow Terms of Service (“Account Agreements”) and other applicable terms and no other representations or warranties, express or implied, are provided to you except as expressly set forth in those written Account Agreements. If you have any questions regarding your account, please contact team@meow.com.

FirstBank Funds Availability Notice

FirstBank’s general policy is to allow you to withdraw funds deposited in your account on the first business day after the day we receive your deposit. Funds from electronic deposits will be available on the day we receive the deposit. In some cases, we may delay your ability to withdraw funds beyond the first business day. Then, the funds will generally be available by the SECOND business day after the day of deposit.