Delaware boasts the country’s fourth-lowest business costs and tax burden while ranking tenth in entrepreneurship. With business-friendly tax laws and a low cost of living, the Diamond State provides a superb platform for those who want to start a new business there.
How to Start a Business in Delaware:
1. Determine your business structure.
One of the most important decisions that you make will be choosing the legal structure for your company. Your choice will have an impact on taxes, paperwork, personal liability, and your ability to raise funds.
You can choose from the following legal structures:
A sole proprietorship is the simplest structure and usually involves one individual who is solely responsible for the enterprise, while a partnership is suitable for businesses with two or more owners. A corporation is a standalone entity with shareholders, while a Limited Liability Company (LLC) is the most popular type because of minimal paperwork, flexibility, tax benefits, and simple implementation process. LLC business owners are not obligated to file a corporate tax return.
Businesses are regulated by Delaware state laws and must be registered through the Delaware One Stop Business Portal.
2. Write a business plan.
Your business plan is the foundation of your new business and will serve as an invaluable guide for how to structure, run and grow your company. The business plan must meet your needs and can fall into one of two common categories: traditional or lean startup.
The traditional plan is very detailed, takes more time to write, and is quite comprehensive while the lean startup plan is streamlined and fast to write.
A strong business plan can help you get funding and makes opening a new business easier. You can consult with the Delaware Division of Small Business, a free service that offers business planning and consulting for small business owners in Delaware.
3. Sign up for business banking.
Your business and personal finances must be kept separate to maintain accurate records. With a business bank account, you can easily obtain statements and access products that would not be available to you as an individual.
4. Seek funding.
Opening a new business often requires capital. If you are unable to fund your new business, you will need to take out a loan. There are three common ways to fund your business: commercial loans, business lines of credit and small business loans.
A popular organization that can assist you with small business loans in Delaware is the Grow Wilmington Fund.
5. Decide on a business name.
Make a list of names you like and search Google to find conflicts with other Delaware business names.
Once this is done, you will need to do a trademark search to ensure that the business name that you chose has not already been trademarked. You can perform the trademark search at the U.S. Patent and Trademark Office and the Trademark Electronic Search System. These databases have a comprehensive list of business names that are registered together with their classification.
After you have confirmed that your business name is not trademarked, you need to check the Delaware Divisions of Corporations website to ensure that your business name is not the same or similar to another corporation registered in Delaware.
If you are satisfied that your business name is available, you can then register it on the U.S. Patent and Trademark Office website. You can check out our guide on How to Name a Business to assist you with naming your business.
Once you have found a suitable name, make sure to register the matching web domain and social media handles, should you wish to market your business online.
6. Request an Employer Identification Number (EIN).
Every business needs to have an Employer Identification Number (EIN). Registering for an EIN is easy—all you need to do is go to the IRS website. You can complete the application online, and save your EIN confirmation notice once you receive a number from the IRS.
7. Acquire business licenses and permits.
The state of Delaware requires any person or business conducting a trade or business to obtain a Delaware business license from the Delaware Division of Revenue. In addition, you may need specific business licenses and permits depending on the type of business you start in Delaware. You can refer to the Delaware One Stop Business Portal to view the most common types of businesses together with information on the licenses and permits required for those types of businesses.
8. Hire employees.
To start hiring you will need to register at the Delaware Directory of New Hires. Employees need to be registered within 20 days of starting. This does not apply to independent contractors.
Delaware employers need to issue every new employee an I-9 form to verify they are eligible to work in the U.S.
With reference to the pre-employment screening process in Delaware, an employer is entitled to view a job applicant’s criminal history and obtain the relevant records from the criminal justice system.
9. Check your business employer requirements.
Business employer requirements are specific to the type of business that you are starting and include various labor, safety and tax obligations that need to be met. You should consider hiring a tax or business attorney to ensure your business is fully compliant with the laws in Delaware.
If you are starting a business in Delaware, you will need to take note of the following important items:
Delaware’s law requires all employers to provide workers’ compensation coverage to their employees. You can obtain more information at the Delaware Department of Labor website.
Health insurance isn’t a requirement for small businesses in Delaware.
The Delaware One Stop Business Portal
The Delaware One Stop Business Portal is designed to guide you through the business registration process. The Delaware One Stop Business Portal provides business planning and advice as you prepare to register your new business.
In Delaware, your small business is required to establish a Delaware unemployment insurance tax account with the Delaware Department of Labor. If your business is required to contribute towards unemployment insurance, you will be required to file quarterly reports.
Entities legally recognized as businesses in Delaware are subject to franchise tax, a "privilege tax" for doing business in the state. Only sole proprietorships and partnerships owned by individuals are exempt. Read our article on franchise tax for more information.
Delaware Formation and Registration Fees:
Domestic corporation for profit
Articles of merger
You can view a comprehensive list of costs here.
How do I get a business license in Delaware?
Is a business license required in Delaware?
Yes. If you're conducting a trade or business in the State of Delaware, you are required to obtain a Delaware business license from the Delaware Division of Revenue.
How much does it cost to start an LLC in Delaware?
It cost $90.00 to start an LLC in Delaware.
How much does a business license cost in Delaware?
Delaware business licenses can cost between $25.00 to $75.00. However, this cost could increase, depending on your business services and products sold.
How do I start an LLC in Delaware?
Do I need a business license to sell online in Delaware?
Yes. Any individual or business conducting a trade or business in the State of Delaware is required to obtain a Delaware business license from the Delaware Division of Revenue.
How do I get a contractors license in Delaware?
- Register your business.
- Obtain applicable business licenses.
- Provide necessary paperwork, such as Worker’s Compensation, employee information, and unemployment insurance.
- Complete the application process with the Delaware Division of Labor website.
How do I get a tax ID number in Delaware?
What are the best banks for small businesses in Delaware?
What important posters should be at a Delaware business premises?
- Safety and Health on the Job.
- Wage and Hour.
- Unemployment Insurance.
- Equal Opportunity.
- Fair Housing.
How much does it cost to start a business in Delaware?
Delaware articles of incorporation for LLCs cost $90.00 and for Corporations cost $89.00.
How do I start a business in Delaware with no money?
- Use services to generate cash flow and fund a product-based business.
- Get creative to discover funding sources.
- Grind it out and look for business, even if you don't get paid for it.
- Use your current resources in different ways to generate income.
- Get a credit line to help with the early stages of your business.
- Locate an accelerator if you can hit the market swiftly.
- Crowdfund and allow the public to invest a small percentage of money in return for future buy-in.
- Use a business incubator to provide funding designed specifically to financially assist a startup company.
How can I protect the name and logo of my business in Delaware?
The easiest way is to register your business name on the U.S. Patent and Trademark Office website. Prior to registration, remember to check on the Trademark Electronic Search System and the Delaware Divisions of Corporations website to ensure that your business name is not already registered by another company.
Do I need workers' compensation for my new business in Delaware?
All employers in Delaware are compelled to provide workers’ compensation coverage to their employees.
Does my business in Delaware need to contribute to health insurance?
Health insurance isn’t a requirement for small businesses in Delaware.