Delaware S Corporation Formation Attorneys & Lawyers

Why use UpCounsel to form an S Corporation in Delaware

Starting an S Corporation in Delaware with a business startup attorney on UpCounsel is easy, informative, and cost-effective. In just three simple steps, our S Corporation attorneys will help you protect your business and personal assets, and help you organize your business for state and federal compliance for an S Corporation.

When forming an S Corporation in Delaware with UpCounsel, the attorney you choose to help you will conduct a business name search for your Delaware S Corporation and assist you in preparing your S Corporation Operating Agreement, along with providing other legal services based on your needs. Once your Certificate of Formation have been prepared and successfully filed with the Delaware Division of Corporations, your Delaware S Corporation has been formed and begins its existence as a corporate entity.

However, a corporation does not register as an S Corporation with the Secretary of State. It registers as a corporation with the state and then may file for S Corporation status with the IRS. S Corporation status is a taxation category which provides income tax advantages to small businesses.

Choosing a Company Name for Your S Corporation

One of the first steps in the process of forming your S Corporation is to choose your business name.

The business name that you choose must contain the words "Incorporated" or "Inc." It must be distinguishable (not the same as or deceptively similar to) the name of an S Corp or foreign S Corporation reserved or registered.

Your S Corporation name may contain the name of one or more members.

By using UpCounsel, you can choose several business names in order of preference. Your attorney of choice can then conduct a name check for your Delaware S Corp before filing to see which names are available. Once you have chosen an available name, your chosen S Corporation attorney can help you properly register your name with the State of Delaware.

Requirements for Forming a Delaware S Corporation

Articles of Incorporation: hen forming an LLC in Delaware, the Certificate of Formation must be filed with the Delaware Division of Corporations. Delaware state law requires that certain information be included in your Certificate of Formation when forming your Delaware LLC.

This information must include:

1. The S-Corp's name
2. Authorized entity's name and signature
3. The name and address of the initial registered agent for service of process on the S Corporation.
4. Date when S Corporation effective, if other than date filed.

Additionally, a Delaware S Corporation formation generally requires inclusion and/or consideration of the following:

S Corporation Qualification Requirements: For a corporation to qualify as a S Corporation for tax purposes, it must meet the following requirements:

1. Must be a domestic corporation.
2. Have only allowable shareholders including individual, certain trusts, and estates; and may not include partnerships, corporations or non-resident shareholders.
3. Have only one class of stock
4. Have no more than 100 shareholders
5. Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).

Additionally, a Delaware S Corporation formation generally requires inclusion and/or consideration of the following:

S Corporation Operating Agreement: Although the S Corporation Operating Agreement is not required with the Articles of Incorporation, it is a good idea for every S Corporation with more than one member to have one. The Articles of Incorporation may contain restrictions or prohibitions on the power of the members to adopt, amend, or repeal an operating agreement. Delaware recognizes operating agreements as governing documents.

Membership: A S Corporation must have one or more members.

Eligibility Requirements: A natural person or an entity.

Procedure for Membership: The member may acquire an interest in the S Corporation directly from the S Corporation at the time of formation and, after formation, at the time provided in and upon compliance with the Articles of Incorporation or the operating agreement or, if not provided, only upon the vote of a majority in interest of the S Corporation members, excluding the vote of the person acquiring the membership interest, and only when the person becomes a party to the S-Corp's operating agreement.

Business Licenses: Business licenses and/or permits are required for most S-Corp's offering specific professional services. Contact the Delaware State Corporations Commission for specific licenses.

Resident Agent needed for a Delaware S Corporation

UpCounsel attorneys can also provide your business with a registered agent in Delaware. Every Delaware S Corporation must have a registered agent in Delaware, which is the person or office designated to receive official state correspondence and notice if the company is "served" with a lawsuit. The registered agent must have a permanent address in Delaware and be authorized to do business in the state. If the S Corporation itself is located in Delaware, it can act as its own registered agent.

Delaware Secretary of State

Once you create an S Corporation in Delaware, the Delaware Secretary of State will require that certain recurring responsibilities and duties be fulfilled. The most important of these are explained below.

For further information, contact the Delaware Secretary of State.

Recurring Responsibilities and Duties for Delaware S Corporations

Annual Report: Each S Corporation shall provide an annual report to the Delaware Secretary of State regarding its financial condition to each of its members.

Records: Each Delaware company must keep the following records open to inspection at its office:

1. A current list of the full name and last known business or residence address of each member and of each holder of an economic interest in the S Corporation company set forth in alphabetical order, together with the contribution and the share in profits and losses of each member and holder of an economic interest.
2. If the S Corporation is manager-managed, you will need a current list including the full name and business or residence address of each manager.
3. A copy of the Certificate of Formation and all amendments thereto, together with any powers of attorney pursuant to which the Certificate of Formation or any amendments thereto were executed.
4. Copies of the S-Corp's federal, state, and local income tax or information returns and reports, if any, for the six most recent taxable years
5. A copy of the S-Corp's Operating Agreement, if in writing, and any amendments thereto, together with any powers of attorney pursuant to which any written operating agreement or any amendments thereto were executed.
6. Copies of the S-Corp's financial statements, if any, for the six most recent fiscal years.
7. The books and records of internal affairs as they relate to the S Corporation for at least the current and past four fiscal years.

Filing Fees for a Delaware S Corporation

Filings must be made with the Delaware Division of Corporations in which the S Corporation was organized, along with the appropriate state filing fee. The filing fee for the Certificate of Formation is $90. This fee can be subject to change, so make sure to keep yourself updated on the latest fee requirements on the Delaware Division of Corporations website.

Taxes for a Delaware S Corporation

A Delaware S Corporation is a special type of corporation created through an IRS tax election. An eligible corporation can avoid double taxation (once to the corporation and again to the shareholders) by a corporation with a Subchapter S designation by the IRS. A corporation must file a Form 2553 to elect "S" status within two months and 15 days after the beginning of the tax year.

Owners of the S Corporation report business losses or profits on their personal tax returns, and therefore the business itself is not taxed. Each shareholder is responsible for paying taxes on their pro rata share of the S corporation's items of income, deductions, and credits (through a Schedule K-1 form).

Delaware state law follows federal law for income tax purposes. Therefore if a corporation is classified as an association taxable as a S Corporation for federal income tax purposes, so will it be taxable as a corporation for state tax purposes.

Federal Income Tax: An S Corporation does not pay federal income tax.

Delaware State Income Tax: Every S-Corporation deriving income from sources within Delaware is required to file a Form 1100S, S-Corporation Reconciliation and Shareholders Information Return. Delaware recognizes the federal S election and does not impose corporate income tax on pass-through income

Federal Tax Identification Number: Your corporation will need to obtain a federal tax identification number, which is also known as an Employment Identification Number (EIN). You do not need to get a new EIN after the corporation choose to become a S Corporation. An EIN is similar to an individual's social security number. You will need an EIN for your S Corporation as long as there is one member, even if the S Corporation does not have employees. For certain tax filing requirements the attorney you choose on UpCounsel can help prepare your Federal Tax ID Application, if you have not done so already.