Delaware Business

How to Start a Business in Delaware

With no sales tax, a business-friendly climate, and overall favorable taxes, it’s no wonder the First State can be a great place to start a business. Delaware is one of many states seeing a boom in new business applications, too. They went from 6,092 in the third quarter of 2019 to 10,925 in the third quarter of 2020.

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Want to join their ranks? Use this guide to learn how you can start your own business in Delaware.

Benefits of Opening a Business in Delaware

Over a million companies are formed in Delaware, including two-thirds of the Fortune 500. The state is known for its tax advantages, including a number-six ranking for unemployment insurance tax and property taxes.

Delaware’s nearly 80,000 small businesses comprise nearly half the state’s workforce, too, so as an entrepreneur you’ll be in good company with fellow business owners. The First State is also home to many growing industries, including:

  • Retail trade
  • Food services
  • Accommodation
  • Social assistance
  • Health care

Private investment is also welcome, thanks in part to a 2018 law creating refundable tax credits for private investments over $10,000.

Start an Entity in Delaware

ZenBusiness offers the following formation services to our customers:

How to Start a Business in Delaware

Delaware has established over 300 programs to support entrepreneurs and small business owners. And while the state may help where possible, starting your Delaware business will take some time, planning, and investment.

The checklist below can help you think through the steps it’ll take to refine your business idea, prepare your company, and get to that wonderful day when you open your physical or virtual doors to customers.

Delaware Business Startup Checklist

  1. Create a business plan
  2. Choose a business structure
  3. Determine your business costs
  4. Pick a business name
  5. Register your business, get insurance, and open financial accounts
  6. Market your Delaware business

1: Create a business plan

Your company begins with a business plan. Planning can sometimes seem intimidating for entrepreneurs, but it doesn’t have to be. Writing a business plan is a vital step to set out on paper or on screen your overall sense of:

  • What business you want to run
  • The customer problem that your business solves
  • How your business can stand out in the market
  • Who your customers are and how you’ll attract them
  • How you’ll fund the firm until it reaches profitability
  • What goals and metrics you’ll track
  • What print and online marketing assets (such as brochures, your company website, or print ads) you’ll invest in
  • Your short-term and long-term vision for the company’s scale and growth

Without a firm business plan, many creditors and potential business partners won’t look twice at your idea.

The state government also uses incentives and tax credits to attract new and growing businesses, such as up to $50,000 in Encouraging Development, Growth & Expansion (EDGE) Grants or up to $100,000 for Science, Technology, Engineering, and Mathematics (STEM) companies. If traditional bank loans aren’t an option, you may be able to turn to the State Small Business Credit Initiative Participation Loan or the Delaware Capital Access Program. Other potential programs include:

2: Choose a business structure

Popular entities include the sole proprietorship, the general partnership (GP), the limited liability company (LLC), and, especially for Delaware-based businesses, the corporation.

Sole proprietorships and GPs are the easiest to set up. On the flipside, without legal separation between you and your business, if the business runs into legal or financial trouble, your personal assets could wind up at risk.

Incorporation is more complex and costly to set up. However, many corporations base themselves in Delaware due to favorable tax laws, and it’s worth considering if an S or C corporation is the right structure for you. Among other differences, C corporations pay business income tax at the corporate level, and those profits are taxed a second time when they’re distributed to the owners (called “shareholders” in a corporation). This “double taxation” can be avoided with an S corporation, which instead only reports revenue on the owners’ personal tax return. However, S corporations are harder to qualify for and have more restrictions.

LLCs combine attributes of corporations and sole proprietorships. LLCs provide legal separation between the business and your personal property, so problems in the business, such as lawsuits against the LLC, don’t put your personal assets at risk. Also, unlike C corporations, LLCs aren’t subject to double taxation

A Delaware LLC can have one “member” or multiple members (they don’t use the term “owner”).

3: Determine your business costs

The more costs you can factor into your business plan, the better prepared you are for financing, budgeting, and spending. Here are a few types of expenses your business may need to plan for:

  • Entity formation costs
  • Purchase or leasing fees for property, such as office or storefront space
  • Ordering office supplies or store inventory
  • Payroll, contractor fees, and payroll taxes
  • Company website design, development, hosting, and updating 
  • Technical equipment such as smartphones, tables, and/or computers
  • Business insurance

Entities such as corporations pay annual taxes, including your Corporate Annual Report ( or , depending on if your company is exempt or non-exempt). Franchise tax payments for corporations range $175 to $200,000. If these taxes are over $5,000, you can pay quarterly instead of annually:

  • 40% of the total amount due by June 1
  • 20% due by Sept. 1
  • 20% due by Dec. 1
  • Remainder due March 1

If your corporation doesn’t file its annual report by March 1, it’ll be assessed a penalty of $200.

On the flip side, Delaware-based LLCs don’t have to file an annual report. Instead, they pay a $300 annual tax, due each year by June 1.

4: Pick a business name

Miller Metal Fabrication. Decal Girl. Bramble & Brine. Middleford Deli. These are all Delaware companies, and each business name tells a different story.

As you name your company, examine what sort of story you want your business name to convey, such as:

  • Location
  • Services
  • Brand values or message

Do you already have a name in mind? Great! But before you register a domain name or print business cards, there’s some work to do.

For starters, businesses can’t have the same name. If multiple businesses have the same name, that can be confusing to everyone from customers to tax authorities. It could also get you into legal trouble.

Before you settle on a company name, search the Delaware Division of Corporations to see if an active business is using the name already.

Another option? If you have, say, one name for your business, but you want to conduct different business under different names, you can also apply for a “doing business as” (DBA) name. Sole proprietorships and general partnerships may find DBA names especially useful, since without a DBA name, they must do business under the owner’s legal first and last name.

Once you decide on a name that’s also available, check what related domain names and social media handles are available. From there, you’re ready to start putting your business name to work.

5: Register your business, get insurance, and open financial accounts

Entities such as LLCs and corporations will need to register with Delaware’s Division of Corporations. Sole proprietorships and general partnerships don’t have to take this step, but they may need to register their business name with the county Prothonotary Office where they plan to do business.

Delaware law also requires that “every business entity have and maintain a Registered Agent in the state of Delaware.” This can be a business or individual allowed to do business in Delaware, with a physical street address in the state. If your business is physically located in Delaware, then it can be its own registered agent.

You’ll also need to see which business licenses and registrations to apply for, and figure out which taxes your business entity will need to pay. Your city and county may have additional licensing, zoning, tax, and permitting requirements, too.

A sole proprietor can use their social security number as their taxpayer ID number, but an employer identification number (EIN) is also an option. Most other entities won’t have a choice and will need to get an EIN, available from the IRS.

Consider discussing your business insurance needs with a local agent, too. You can also open business bank accounts, such as checking and credit cards, so you can start receiving income and paying expenses.

6: Market your Delaware business

By marketing your business, you make customers aware of your services and products. It’s your way to make the case for why someone should choose you over the competition.

A company website is essential, with pages that showcase your offerings, tell customers your business’s story, and have a way for them to get in touch.

Online directories, such as Yelp or Google My Business, are another way you can stake out posts online. Optimize those listings and your website, too, so potential customers are more likely to find your business in online searches.

Don’t forget about advertising, either. Print media and regional radio and TV broadcasters can be powerful ways to spread the word about your company.

Ideas for Businesses to Start in Delaware

With so many companies calling Delaware home, the First State is fertile ground for many traditional, new, and trending businesses. Here are a few ideas:

  • Financial services
  • Design-build architecture and construction
  • Digital marketing
  • Residential or commercial cleaning/janitorial
  • CBD dispensary
  • Food truck

The First State Could Be Your First Choice for Business

From small mom-and-pops to the Fortune 500, Delaware prides itself on being business-friendly. With potentially favorable taxation, a range of entities to choose from, and the right business plan, you could be on your way to building a successful, profitable business of your own in Delaware.

Delaware Business FAQs

  1. How much does it cost to start a business in Delaware?

    Many businesses can be started for under $5,000, and others for less than $25,000. This Small Business Administration (SBA) guide can help you estimate your startup costs.

  2. What is a good city to start a business in Delaware?

    Based on factors such as tax burden, high-speed internet access, per capita income, and average commute time, Wilmington has been ranked a top 20 best small city to start a small business.

  3. Is Delaware a business-friendly state?

    Delaware’s taxes, regulatory environment, and other factors make it consistently rank high as friendly for business.

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