For a side-by-side comparison of all entities, see our Entity Matrix.

For general benefits of forming a business entity, see Why Form an Entity?

Why form an entity in Delaware:

For information on incorporating outside your home state, see Where to Form an Entity?

For many years, Delaware has been an ideal state for large public and private companies to incorporate.  Delaware courts have given corporate decision makers the greatest protection from shareholder claims (claims that the directors and/or officers have not acted in the shareholders' best interest).  

In most states, the "business judgment rule" protects corporate officers and directors from liability for business decisions made in good faith.  What makes Delaware particularly attractive to incorporators is that the standard for "good faith" is fairly low relative to other states.  Delaware courts are reluctant to find directors and/or officers who make uninformed or imprudent decisions to be in breach of their fiduciary duty to shareholders.  

While the Delaware interpretation of the business judgment rule may benefit companies of all sizes, the administrative burden of incorporating outside a business's home state may make Delaware incorporation less practical for smaller businesses.  (Generally any business which incorporates outside its state of primary operations will have to file with its state of operation to do business as a foreign corporation.)

Other Advantages of forming an entity in Delaware:

• No corporate functions need to be held within the state:  The founders, shareholders and directors need not visit Delaware to perform any business functions.

• Low Annual Franchise Tax: The annual franchise tax on Delaware corporations is relatively low compared to other states (see below).

• No Minimum Capital Requirement: There is no minimum capital requirement for Delaware corporations. Some states require at least a $1,000 capital investment to incorporate.

• Favorable Income Tax Treatment: There is no corporate income tax for Delaware corporations that are not transacting business in the state. Shares of stock owned by persons outside of Delaware are not subject to Delaware taxes. However, the corporation and the shareholders may be subject to taxes in the states where they physically exist. 

• No Minimum Number of Participants: One person can hold all officer positions of the corporation (president, secretary, and treasurer) and serve as the sole director. 

• No Residency Requirement: Shareholders, directors, and officers of Delaware corporations need not be residents of Delaware.

Statistics  on businesses with their legal home in Delaware:

• More than half a million U.S. entities

• More than 50% of all U.S. publicly-traded companies

• More than 50% of the Fortune 500

Minimum Franchise Tax*:
LLCs & Partnerships	$200
Corporations	$60

Delaware Income Tax:
Businesses not transacting business in Delaware:	No tax imposed
Businesses Located inside Delaware:	8.7%

*All corporations formed in Delaware are required to file an Annual Franchise Tax report and to pay a franchise tax.  The cost to file the report is $25, and the minimum tax is $35 (equaling a minimum total charge of $60). Religious and charitable non-stock corporations are exempt from the tax but must file an annual report.  

Why Use Startup Legal?:

To our knowledge, we are the only incorporation service that provides an all-inclusive startup package.  We offer expert counsel, a full set of customized corporate documents and instruction on how to follow future corporate formalities (proper legal compliance is essential in the event of an audit or law suit).  Additionally, we take care of all necessary filings with the state and federal government.  

Startup Legal was founded as a result of the frustration and delay its principals encountered when forming their own California law practice.  As entrepreneurs, the Startup Legal founders realized that the startup process can be extremely taxing on new business owners.  Incorporating the business, filing with the proper regulatory agency, setting up banking and credit card accounts, establishing the tax treatment of your new entity, and learning how to follow corporate formalities can be overwhelming.  All of these tasks can take valuable time away from what new business owners should be doing-- which is running their business.  At Startup Legal, we aim to take as much of this administrative burden as possible off your shoulders.

We pride ourselves on providing the most comprehensive service in the business.  To compare our service with our competitors, see About Us. 

Preliminary Considerations:

Before you form your entity we advise that you take some time to think about the following factors.  You may also want to call or email us to discuss these issues.

1. Select a name.  Names of corporations should contain the word "Association," "Company," Corporation," "Club," "Foundation," "Fund," "Incorporated," "Institute," "Society," "Union," "Syndicate," "Limited," or the abbreviation "Co.," "Corp.," "Inc.," "Ltd.," or words or abbreviations of like import in other languages.  Names of LLCs should include the words "Limited Liability Company" or the abbreviation "L.L.C."  The name must be distinguishable from the names of other corporations or LLCs organized, reserved or registered as a foreign entity under the laws of Delaware. Use of word "Trust" is prohibited except for corporations under supervision of the Bank Commissioner.

2. In what state should your business have its legal home (Where to form an entity?)

3. Who will be your managers or directors?  In a corporation, Directors are elected by the owners of the business.  Directors act on behalf of the shareholders and elect officers to manage day to day operations of the business.  Usually a President, Chief Financial Officer or Treasurer and a Secretary are elected at the inception of the corporation.  In an LLC, managers can be elected by LLC interest holders.  

4. Who will act as corporate officers (President, VP, Chief Financial Officer, Secretary)? The President usually takes charge of day to day business operations.  The Chief Financial Officer usually tends to financial matters and maintains accounting records.  The Secretary usually tends to administrative matters such as calling meetings and making sure that annual corporate formalities have be satisfied. 

5. How many shares will the corporation authorize to be issued?  And how many of those shares will be designated for original owners, and in what percentage? (In the case of LLCs and Partnerships, how will ownership be divided?)

6. Do you plan on offering investments in your company in the future?  Certain entities may be more restrictive for raising capital in the future.  Consultation may be necessary before you decide on the proper entity.

7. Will you need to obtain particular licenses in the future that require registration as a particular type of entity?  Certain businesses must be registered as Professional Corporations, C Corporations or Limited Liability Partnerships.  To avoid having to form an entity that would later have to be dissolved or converted, it is important to check on such licensing requirements before beginning the incorporation process. 

Overview of the Process:

By clicking the link below, you can begin to form your new business immediately.  The following is a brief outline of the Startup Legal process.

1. Fill out the form on the following page.  This should take 5 to 10 minutes if you have thought through the preliminary questions listed above.

2. Within one business day after submitting our online form, we will contact you for an initial consultation.

3. After your consultation, we will file all necessary forms with the state in which you wish to incorporate.  (Documents will be filed within one business day of your approval.)  State approval generally takes 4 to 6 weeks.  

4. As we wait for state approval, Startup Legal will prepare all corporate documents and federal tax applications, so that your business may open a bank account as soon as we receive approval from the state.

5. Startup Legal will mail you a personalized corporate binder with all necessary startup documents, including a simple guide for following future corporate formalities.

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