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This guide will walk you through each step of starting a business in Delaware while providing you with the resources you’ll need.

Starting a business in Delaware in 12 steps

1. Develop an idea

Every successful business starts with a good idea. Ask yourself these questions:

  • Which product or service can your business provide that doesn’t already exist on the market?
  • How does your business idea refine an existing product or service?

Determine your personal strengths and interests: Developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary to address the myriad challenges you’ll face in getting your business off the ground.

Figure out how to market your expertise: If your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.

2. Do the research

Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:

  • Is there a demand for your product/service in Delaware?
  • Who is your target market?
  • Do existing businesses in Delaware offer a similar product/service?
  • What makes your business unique compared to the competition?

Be patient: Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. You’ll only want to proceed with the next steps after determining that a niche exists in the Delaware market for your business idea.

3. Draft a business plan

Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.

Your business plan ought to include the following sections:

  • Executive summary – An overview of your business and why it will be successful
  • Description of business – Explain the advantages of your business and the problems it solves
  • Market research – Provide research on your industry, target market, and potential competitors
  • Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
  • Product or service description – State what you are selling or offering
  • Marketing plan – Explain your strategy for attracting customers
  • Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
  • Financial forecast – Data and balance sheets providing a financial forecast for your business
  • Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.

Plan on running your business well. Google Workspace helps with email addresses, team collaboration, productivity, and more.

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4. Secure funding

Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.

If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in Delaware.

An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.

Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors.

With the recent passing of a new angel investor tax credit bill in Delaware creating a 25% refundable tax credit for investments over $10K, the state has become one of the most angel-friendly in the nation. There’s never been a better time to seek angel funding in Delaware for a new business.

Delaware Angel Investors and VCs

  • Delaware Crossing – A network of investors founded in 2005 that provides capital and counseling services to early-stage businesses in Delaware.
  • Inflection Point Ventures – A Newark, DE-based venture capital firm focused on providing support for early-stage information technology, telecommunications, and electronic commerce businesses.
  • Leading Edge Ventures – A firm providing seed and early-stage investment in information technology and medical device companies in the Mid-Atlantic region. Initial investments range from $50K to $250K, and can eventually add up to $750K.
  • AngelList: Delaware Angel Investors – A directory of over 4900 investors interested in funding Delaware-based startups. Listings include professional background, total investments, and areas of interest.
  • First State Innovation – A network tasked with connecting angel investors with entrepreneurs in need of funding. 85% of FSI’s investors are based in Delaware.

5. Decide on a legal business entity

The form of business entity you choose will affect many factors. There are three main structures to choose from:

  • Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business.
  • Partnership – It is legally identical to a sole proprietorship, except that it comprises two or more people.
  • Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
  • LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLC provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.

LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.

You may want to consult with an attorney to help decide which entity works best for your business.

6. Register your business

Once you decide on the business entity right for your company, it’s time to make it official by registering with the state of Connecticut.

  • First, use the business name search to see if your chosen business name is available in the state.
  • After determining it is available, you can reserve your entity name online for 120 days for a fee of $75 while you complete the next steps in the process.

For sole proprietorships

This is where the paths break off depending on your chosen business entity. Sole proprietorships do not have to formally register with the state. Instead, you should file your business name with the local county clerk’s office if you are using a name other than your own.

Out of name ideas? Check out our free business name generator

For LLCs and corporations

Forming an LLC or corporation requires you to file incorporation documents with the Delaware Division of Corporations. Unlike many other states that allow you to file online, Delaware requires you to mail or fax your incorporation documents. You can find the applications for forming an LLC, a corporation, and a variety of other entities at the Division of Corporations website.

Appointing a registered agent to represent your company is required to form a business entity in Delaware. A registered agent receives process notices and other government paperwork on a business’s behalf. You can be your own registered agent, as long as you have a physical address in Delaware. However, if it’s your first time forming an LLC or corporation, we advise you to enlist the services of a professional, which can cost $50 to $300 a year.

Our picks for registered agent services

Northwest Registered Agent

Northwest can help. You’ll need to file official documents to establish your business. The process is a little different in each state, but Northwest has offices all over the U.S. and helps business owners with this very thing every day. Northwest also offers registered agent services, annual report filings, and some free legal documents that pertain to starting a business.

ZenBusiness

ZenBusiness aims to help business owners start, run, and grow their businesses. When you’re getting started, take advantage of the filing options, like setting up an LLC and business formation plans. Later on, you might want to take advantage of their registered agent services, domain name registration, or annual report filing. Start for $0 + state fees.

Harbor Compliance

Harbor Compliance is a great fit for organizations that register in multiple states and for those who don’t want to pay excessive service fees. With their network and electronic document delivery, they help ensure your business never misses a legal notification.

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7. Acquire federal and state tax IDs

Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.

For sole proprietorships, an EIN is optional, although it is required for corporations and LLC’s. You can apply online for your EIN through the IRS website, or fill out and mail this form.

Each state has its own laws and taxes regarding businesses. LLC’s and corporations in Delaware must pay an annual franchise tax, which is a minimum of $175. The Division of Corporations offers a guide businesses can use to calculate the franchise tax they must pay.

Be tax-ready all the time. QuickBooks keeps everything organized in one place.

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8. Open business banking and credit accounts

Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.

We recommend Novo for small business banking. Built for small business owners, entrepreneurs, and freelancers.

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It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.

Delaware banks for small businesses

9. Get the necessary licenses and permits

Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.

Delaware.gov hosts a convenient registration and licensing portal for companies to acquire the licenses and permits they need to do business in the state. Simply create an account and follow the step-by-step instructions. You can also check out the index of industries regulated in Delaware for more information on specific licenses and permits.

10. Choose a location

Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?

11. Get insured

No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.

Required forms of insurance:

  • Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
  • Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.

Recommended forms of insurance:

  • Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
  • Commercial property insurance: Covers property damage to business-owned properties and possessions as a result of fire, theft, or storm.
  • Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.

12. Develop an internet presence

Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:

  • Register a domain name for a company website (You can use Domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
  • Create profiles on the popular social media services (Twitter, Facebook, Instagram)
  • Register a Google profile for your business
  • Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor

More than a website builder. Bluehost will get you up and running with a professional website and tailored hosting plan.

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Delaware small business resources

Delaware small business statistics at-a-glance

  • Delaware is sales tax-free while ranking 4th in both property tax and 2nd in unemployment insurance tax among the 50 states.
  • 93,686 small businesses operate in Delaware, accounting for 98.5% of the state’s total businesses.
  • 195,792 Delaware residents are employed by small businesses, which is 47.4% of the state’s workforce.
  • Small businesses with fewer than 100 employees account for the largest share of small business employment in the state.
  • The largest small business employer in Delaware is the accommodation and food services industry, followed by health care and social assistance and construction.

Sources: Tax Foundation, Small Business Administration, U.S. Census Bureau: Statistics of U.S. Businesses

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