Corporation (Inc.)

DELAWARE

Corporate Naming Requirements:
In Delaware, the corporation’s legal name must contain one of the following words: "Incorporated," "Corporation," "Company," "Limited," "Association," "Club," "Foundation," "Fund," "Institute," "Society," "Union," "Syndicate," or the abbreviations "Inc.," "Corp.," "Co.," "Ltd."

Special Note: If you are forming a professional corporation, you may be required comply to with special naming requirements. As a general rule, if your profession requires a license, you should always check with the licensing board for special naming requirements before incorporating.

Corporate Record Requirements:
Delaware corporations are required to keep their corporate records at their principal place of business.

State Corporate Taxes:
In Delaware, corporations are subject to a corporate income tax (only for C-corporations) and a corporate franchise tax (the franchise tax is a special tax for being a corporation in the state). Below is an overview of Delaware’s franchise tax and corporate income tax:

• Franchise Taxes – Applies to C-corporations and S-corporations: In Delaware, all domestic corporations must pay a franchise tax (certain foreign or non-profit corporations may be exempt). The franchise tax is calculated based on the number of authorized shares (the "Authorized Share Method") OR based on the corporation’s gross assets (the "Assumed Par Value Capital Method"), whichever method generates the lowest tax. Currently, the lowest franchise tax available in Delaware is $75.00. In order to pay the lowest franchise tax available, you should select 5,000 or less authorized shares. Click here to view some computation examples.
• C-corporation Income Tax: All C-corporations must pay an annual corporate income tax of 8.7% on income generated in Delaware. Income generated outside of Delaware is exempt from Delaware’s corporate income tax.
• S-corporation Income Tax: Since a S-corporation is a pass through entity, there are no corporate level income taxes. However, the owners must report and pay individual income taxes on the profits received.

Delaware’s Annual Report Requirements:
All corporations are required to file an "Annual Report" with the Secretary of State and pay the franchise tax described above. The filing fee for the annual report is $50.00 and the franchise tax will vary (lowest franchise tax available is $75.00). New corporations are not required to file an initial report for the first year. However, you must file an annual report each year thereafter by March 1st.

Special State Level S-Corporation Election:
Delaware recognizes the federal S-corporation election and no extra state level election is required. However, it is a good idea to file your first year tax returns along with any "IRS S-corporation approval letters" as proof of your S-corporation tax structure.

Professional Services:
Delaware allows professional services (i.e. doctors, lawyers, accountants, architects, etc) to form a Professional Corporation. Professional service C-corporations must pay federal income tax based on the federal personal service corporation (PSC) tax rate which is a flat 35% on all income instead of the regular progressive tax rates. The PSC flat tax can be avoided by electing to be a Professional S-corporation instead.

State Director Requirements:
Below is a brief overview of Delaware’s director requirements:

• Minimum Number: In Delaware, you must have at least 1 director.
• State Residence Requirements: The directors are not required to be Delaware residents.