What is a Delaware Corporation?

The general corporation, also known as a stock, open or C corporation, is one of the most common types of corporations formed in the State of Delaware. Many people choose to form a corporation based on their structure, ability to raise capital and transferability.

Delaware corporations are formed under the General Corporation Law of the Delaware state code. In fact, over 93% of publicly-traded companies in the U.S. and 65% of Fortune 500 companies are incorporated in Delaware.

The state legislature and the people of Delaware recognize the importance of keeping the state's business laws and corporate statute current, ensuring it will continue to be an attractive home for corporations, LLCs and all other types of corporate entities in the future.

There are three main types of corporations: general, close and non-profit. It’s important to fully understand the differences between these types of corporations before you form a corporation of your own.

In a general corporation, you can go public and/or raise capital as needed by selling stock; in a close corporation, you can run a small, tight business group; in a non-profit corporation, you can run a charitable organization.

It's important to note that while corporations can issue stock, they are not required to do so. Regardless of whether a corporation issues stock, the company is required to file an annual report with the State of Delaware by March 1, which provides basic internal details about the corporation, such as the physical address of the business location and the name and address of at least one officer and all Directors.

The Different Types of Delaware Corporations 

Before you incorporate your business, you'll need to decide which type of Delaware corporation is right for your company. Whether you have a large company, small family business or a not-for-profit organization, there are options for everyone when it comes to choosing which type of corporation is best for your business.

General Corporation: The Delaware general corporation is the most popular type of corporation. Business owners are attracted to its ability to go public and raise capital by selling shares of stock in the company. This type of corporation is also often used by companies that wish to attract venture capital funding. The general corporation has a formal structure: shareholders own the company via shares of stock, directors run the company and are responsible for its overall management, and officers handle the company's day-to-day business. 

Close Corporation: The close corporation was designed for a tight-knit group, as it cannot have more than 30 shareholders. This means that this type of corporation is not publicly traded. The transfer of stock is more restricted than it is for a general corporation -- existing shareholders typically have the right of first refusal to buy stock before a stockholder can sell it to an outsider.

Public Benefit Corporation: Companies that wish to conduct business in ways that are moral, ethical and responsible in regard to society, the environment, the natural world and the world at large may want to incorporate as a Public Benefit Corporation. Unlike a General or Close Corporation, the Certificate of Incorporation for a Delaware Public Benefit Corporation must be clearly marked to demonstrate that the entity is a Public Benefit Corporation.

The Benefits of Delaware Incorporation 

Delaware has been the premier state for incorporating businesses since the early 20th century, with nearly 1.8 million businesses incorporated in Delaware as of the state’s last annual report in 2021. So what is a Delaware corporation? What makes them so different from other states? Forming a Delaware corporation is the right choice for many businesses for the following reasons:

Ability to Raise Capital: General corporations may raise capital by selling shares of stock in the company, either by going public or by a private offering of stock. Typically, this money can then be used at the company's discretion to launch a new product, grow in size or a variety of other options. Companies planning to seek venture capital financing also tend to incorporate as general corporations.

Formal Structure: The Delaware general corporation’s structure has a clear separation of rights and responsibilities. Shareholders own the company via shares of stock, officers handle the company's day-to-day business, and Directors run the company. Stockholders elect Directors, who then select officers and hire key management as well as decide whether the company will declare a dividend.

No Size Limit: There is no size limit for general corporations, so they have the ability to grow as large as needed. The formal corporate structure typically becomes an asset as the company increases in size and is responsible for more employees.

Transferability: Unlike limited liability companies, ownership in a general corporation is easily transferred via shares of stock. These shares can be sold to potential stockholders via public or private offering without approval of the other stockholders. Since a Delaware corporation's stock is freely transferable, ownership and majority share can shift on a whim.

Pass-Through Taxation Option: Unlike the other types of corporations, a general corporation can be taxed twice: once at the corporate level and again at the shareholder level if a dividend is declared. However, general corporations possess the ability to file to become a subchapter S corporation within 75 days of the company formation date. To change your tax status from a C-Corp to an S-Corp, you'll need to file Form 2553 directly to the IRS. Once the IRS approves the application, the company typically does not have to pay federal income taxes. Instead, the tax liability will be passed through to individual shareholders.

Privacy: At the initial time of filing no information is available on the public record when filing your company through a Delaware Registered Agent. After the first year on March 1 and every year thereafter the State of Delaware requires all corporations to file an annual report when paying the annual Delaware Franchise Tax. On the annual report your Delaware corporation is required to provide the physical business address, list all Directors names & address and to provide the name and address of atleast one Officer. The annual report is not listed on State of Delaware's website like most states, but if requested it can be obtained for a small fee.

When Are Corporation Franchise Taxes and Annual Reports Due?

Delaware corporations Franchise Taxes and annual reports are due on March 1st of year year. Both the Franchise Tax and annual reports due at the same time, and are submitted together. As your Delaware Registered Agent, Harvard Business Services will notify you well in advance of the Franchise Tax / Annual Report due date.

The History of the Delaware Corporation

Since the early 1900s, Delaware has been the acclaimed home for companies looking to form a corporation. However, Delaware hasn't always been known as the premier location for corporations. The state's corporation history and the rise of its renowned Court of Chancery is owed in large part to actions taken by the state of New Jersey, once the leading state for incorporation, in the early 20th century.

With a newly-adopted General Corporation Law, Delaware's Court of Chancery, the nation's oldest business court, rose to prominence as the nation's leading forum for settling corporate disputes. Today, the Court of Chancery is one of the most important reasons Delaware is known as the most favorable environment for corporations and LLCs. The Court of Chancery consists of a chancellor and four vice-chancellors, all of whom oversee an average of up to 1,000 civil actions a year, the vast majority of which are business disputes.

The decisions of the court are considered to be more predictable than those of other state courts that decide business cases, for the following reasons:

• There are no jury trials in the Court of Chancery; 

• The decisions of the court have historically respected the good faith decisions of a Board of Directors over the desires of its stockholders;

• The decisions are based on more than 200 years of consistent case law and judicial procedure

Why Choose Harvard Business Services to Form Your Corporation?

Forming a Delaware corporation is easy whether you choose to form your corporation online or over the phone 800-345-2677. We’re also here to help by email, live chat, Skype or WhatsApp.

• Over 40 Years of Experience
  Harvard Business Services, Inc. has formed 250,000+ Delaware corporations and LLCs for clients from the United States and around the world.
• Easy Filing 
  We can prepare the necessary documents to form a Delaware corporation for you. We will also file your company online with the Delaware Division of Corporations and ensure you meet all the state filing requirements.
• The Best Registered Agent Fee
  Harvard Business Services, Inc. is the only Registered Agent to offer a $50 per year, per company, flat-rate Registered Agent service. Even better, we guarantee that our fee will remain fixed at $50 per year for the life of your company.
• We Offer Lifetime Customer Support
  We're happy to answer your questions before, during and after you form your Delaware corporation as part of our excellent Delaware Registered Agent service. You can reach our friendly and experienced staff via phone (800-345-2677), email, live chat, Skype or WhatsApp.