How to File Delaware Articles of Incorporation

Your Guide to Incorporating in Delaware

Delaware articles of incorporation are filed to create a corporation. This guide provides instructions and tips when preparing and filing this legal document.

Overview

Preparing and filing your articles of incorporation is the first step in starting your business or nonprofit corporation. Approval of this document secures your corporate name and creates the legal entity of the corporation. Only after this approval can the corporation apply for tax IDs, obtain business licenses, sign contracts, and otherwise conduct business.

Incorporating provides many important benefits:

• Limits the liability of directors, officers, and shareholders
• Fulfills statutory requirements to register your business’s or organization’s name
• Provides governance and adds credibility to the business or organization

As you get ready to file your articles of incorporation, it is important that you take time to understand the specific information required on those documents. Failure to file these documents correctly can delay starting your business or cause unexpected problems down the road. In Delaware, it is also expensive to file a correction to the articles of incorporation, starting at $179. This guide walks you through preparing and filing your Delaware articles of incorporation so you can get your business or nonprofit corporation off to the right start.

How to Incorporate

The Delaware Department of State offers articles of incorporation templates and instructions. Be sure to locate the correct forms for your type of corporation.

Although the Delaware articles of incorporation forms appear straightforward, articles filed by non-professionals typically do not include important information such as add-on provisions required for 501(c)(3) eligibility. Articles of incorporation will be approved if they contain the minimum amount of information required by Delaware statute. You may not learn about errors in your articles of incorporation until the IRS, a licensing board, bank, or other agency refuses to accept them. It is a lot easier to incorporate correctly the first time than try to fix mistakes later on.

You do not need an attorney to file your articles of incorporation. You can file the articles of incorporation yourself or we can help.

Business Corporations

Stock, Nonstock, and Close Corporations

How to File Articles of Incorporation for a Delaware Business Corporation

Delaware offers three forms of business corporations: stock, nonstock, and close. Consider which form of business corporation applies and obtain the correct forms. A typical close corporation is owned and run by a limited group of private parties, such as a family. Stock corporations issue stock certificates to shareholders to document ownership and shareholders vote their shares. Consider that Delaware filing fees and annual report fees will be based on the number of shares issued.

Articles of incorporation include the information listed below. Please note that certain information is noted as optional.

1

Name

Corporate names must be distinguishable from all other Delaware registered entities (including LLCs, LPs, and other corporations). Search that your desired corporate name is available prior to filing your articles of incorporation. Be sure to include a corporate designator as a suffix to your business name. Corporate designators include corporation, incorporated, or a similar abbreviation.

2

Registered agent

You are required to choose and declare your registered agent on your articles of incorporation. A registered agent is the individual or company that will receive service of process (notice of a lawsuit) and other official legal or government documents for the business. List the name and address of your registered agent. You may legally use any physical address located in Delaware (not a PO Box). You can also hire a registered agent service, which is a company that serves on your behalf. If you have a home office, are regularly out of the office, or wish to have added privacy of keeping your address off the public record, then using a registered agent service may be in your interest. If you later need to change your registered agent, the Delaware change fee starts at $50.

3

Declaration of Purpose

Your corporation must state a purpose of incorporation. Delaware accepts a general statement such as “The purpose of the corporation is to engage in any lawful activity or activity for which corporations may be organized under the General Corporation Law of Delaware”.

4

Stock

For a stock corporation, indicate the number of shares authorized to be issued and the par value per share. You do not have to issue all shares authorized, that way you have the flexibility to add more shareholders at a later date. In the example of a corporation with three owners, you may authorize 1,000 shares and issue 250 shares to each owner. This leaves 250 shares to issue to future investors or partners. The articles of incorporation can be amended to increase the maximum number of shares.

For a nonstock corporation, state that the corporation shall not have any capital stock.

5

Shareholders

A shareholder is an individual who owns shares (stock) in the corporation. Owning stock gives the shareholder the right to vote in company matters such as electing the board of directors, determining the amounts and classifications of shares, and authorizing mergers. Corporations must have at least one shareholder, but listing those individuals on the articles of incorporation is not required. You may optionally list the shareholders, the types of stock issued (such as common stock and preferred stock), and whether the board has the authority to change the types of shares.

6

Conditions of membership

Nonstock corporations must declare in the articles of incorporation the conditions of membership or that the conditions of membership will be defined in the corporate by-laws.

7

Incorporators

The incorporator is the individual responsible for executing the articles of incorporation. Include the name, address, and signature of the incorporator. The incorporator must also sign a statement certifying the contents of the articles of incorporation are true and a statement of execution - that they have made, filed, and recorded the certificate under the laws of the State of Delaware. Include a signature, printed name, and date.

8

Close Corporation Provisions

Businesses intending to form a close corporation would include the following information in their articles of incorporation.

• All of the Corporation’s issued stock of all classes, exclusive of treasury shares, shall be represented by certificates and shall be held of record by not more than a specified number of persons, not exceeding 30.
• All of the issued stock of all classes shall be subject to 1 or more of the restrictions on transfer permitted by Section 202 of the General Corporation Law of State of Delaware.
• The Corporation shall make no offering of any of its stock of any class which would constitute a “public offering” with in the meaning of the United States Securities Act of 1933 as it may be amended from time to time.

9

Other Provisions

You may choose to include statements that provide more information about your company. Be aware that any information you include will become part of public record.

• You may choose to include statements that provide more information about your company such as the corporate purpose(s)
• Some people prefer to include the initial directors and officers are listed. Certain banking purposes require this information on the articles of incorporation.
• Obtaining certain licenses, tax statuses, or other government classifications sometimes requires other provisions listed on your articles of incorporation.

10

Special corporate structures

There are special types of corporations available. For exampl:

• Professional corporations are formed to provide a specific professional service that requires a license, such as medicine or law.
• As of April 2013, the Delaware General Assembly began considering offering B-Corporations that are certified to meet rigorous standards of social and environmental performance, accountability, and transparency.

Supplementary Information Filed with the Articles of Incorporation

Cover letter

You will receive your documents back faster if your articles of incorporation include a cover letter to the Delaware Department of State Division of Corporations that includes your name, address, and telephone/fax number.

Necessary government approvals

It may be necessary for you to obtain approvals from other government agencies, such as licensing board if you wish to use a word or words that are regulated (e.g., engineering).

Consent to appropriation of name

Your corporation may need to obtain consent to use the business name from another business entity.

How to Elect S-Corporation Status

S-Corporation is not a type of corporation as much as a tax election. By default, your corporation will receive tax treatment as a C-Corporation. Many small businesses elect S-Corporation tax treatment.

• Electing Subchapter S status helps shareholders avoid the double taxation that applies to traditional C-Corporations.
• S-Corps can also help the owners avoid paying the 15.3% Self-Employment Tax (Social Security and Medicare) on distributions.

Corporations must file form IRS-2553 within 75 calendar days of incorporation to be taxed as an S-Corp.

Nonprofit Corporations

Exempt and Nonstock Nonprofit Corporations

How to File Articles of Incorporation for a Delaware Nonprofit Corporation

Delaware offers two forms of nonprofit corporations: exempt and nonstock. Determine which applies to your organization and leverage the corresponding articles of incorporation templates from the state Department of State website.

An exempt corporation is one that is exempt from Delaware’s annual franchise tax. To qualify for exemption the organization must meet the requirements of §501(b). Your organization likely qualifies if one or more of the following apply. Your organization:

1. Is exempt under US Internal Revenue Code §501(c)(3) or similar section
2. Is a civic organization
3. Is a charitable/fraternal organization
4. Is listed in §8106(a) Title 9
5. Is organized primarily for religious or charitable purposes
6. Is organized not for profit and no part of net earnings inures to the benefit of any member of individual

If your organization does not qualify for exemption, file as a nonstock nonprofit corporation. As of the writing of this article in June 2013, the Delaware General Assembly is also considering offering B-Corporations (Benefit Corporations) which are profit corporations certified to meet rigorous standards of social and environmental performance, accountability, and transparency.

Articles of incorporation include the information listed below. Please note that certain information is noted as optional.

1

Name

The name of your nonprofit corporation must be distinguishable from all other Delaware registered entities (including LLCs, LPs, and other corporations). Search that your desired corporate name is available prior to filing your articles of incorporation. Be sure to include a corporate designator as a suffix to your business name. Corporate designators include corporation, incorporated, or a similar abbreviation.

2

Registered agent

You are required to choose and declare your registered agent on your articles of incorporation. A registered agent is the individual or company that will receive service of process (notice of a lawsuit) and other official legal or government documents for the corporation. List the name and address of your registered agent. You may legally use any physical address located in Delaware (not a PO Box). You can also hire a registered agent service, which is a company that serves on your behalf. If you have a home office, are regularly out of the office, or wish to have added privacy of keeping your address off the public record, then using a registered agent service may be in your interest. If you later need to change your registered agent, you will need to file a certificate of change with the Delaware Department of State.

3

Declaration of Purpose

Your corporation must state a purpose of incorporation. Delaware accepts a general statement such as “The purpose of the corporation is to engage in any lawful activity or activity for which corporations may be organized under the General Corporation Law of Delaware”. Even if you choose to include a more specific statement of purpose, also include an explicit declaration of “This corporation shall be a nonprofit corporation.”

4

Stock

For both a nonstock and exempt corporation, state that the corporation shall not have any capital stock.

5

Conditions of membership

Declare the conditions of membership or that these conditions will be defined in the corporate by-laws. By-laws are a separate legal document; this is the governing document of the corporation and is not filed with the Department of State.

Members are those who elect the board of directors and provide a layer of oversight that is important to many nonprofits, especially larger ones. Having members comes with added complexity in management, recordkeeping, and maintenance. If there are members, you may wish to include a statement that the majority of the members of the committee authorized to incorporate the nonprofit have made the vote required to authorize the incorporation. If there is a common bond among the members or shareholders, you may wish to provide this description or condition of membership.

7

Incorporator

The incorporator is the individual responsible for executing the articles of incorporation. Include the name, address, and signature of the incorporator. The incorporator must also sign a statement certifying the contents of the articles of incorporation are true and a statement of execution - that they have made, filed, and recorded the certificate under the laws of the State of Delaware. Include a signature, printed name, and date.

8

Provisions to Qualify for 501(c)(3)

Many nonprofits wish to apply for federal income tax exemption for the corporation under IRC §501(c)(3) or other subsection. The IRS requires specific language in the articles of incorporation for your tax-exempt application. These statements are to the effect of the following:

• The corporation is not for profit
• It will not engage in prohibited political or legislative activity listed in 501(c)(3)
• If dissolved, it will distribute its assets in compliance with 501(c)(3)

It is wisest to check with the IRS for the exact language required for your type of nonprofit and intended tax exemption.

9

Other Provisions

You may choose to include statements that provide more information about your company. Be aware that any information you include will become part of public record.

• You may choose to include statements that provide more information about your company such as the corporate purpose(s)
• Some people prefer to include the initial directors and officers. Certain banking purposes require this information on the articles of incorporation. Directors are the individuals elected by the members to oversee the management of the corporation. The board of directors elects corporate officers to run the day-to-day operations and make certain decisions for the corporation. Officers run the day-to-day operations of the corporation and typically include a president, vice president, secretary, and treasurer.
• Obtaining certain licenses, tax statuses, or other government classifications sometimes requires other provisions listed on your articles of incorporation. In particular, nonprofits can qualify in many states for exemption from sales tax and income tax and should provide any required language in the articles of incorporation.

10

Special corporate structures

There are special types of corporations available. For example, the nonprofit “Doctors Without Borders” is an example of a professional nonprofit corporation formed to provide a specific professional service. Consider if licensed individuals will be part of your corporation, such as medicine, law, accounting, or other professions.

Supplementary Information Filed with the Articles of Incorporation

Cover letter

You will receive your documents back faster if your articles of incorporation include a cover letter to the Delaware Department of State Division of Corporations that includes your name, address, and telephone/fax number.

Necessary government approvals

It may be necessary for you to obtain approvals from other government agencies, such as licensing board if you wish to use a word or words that are regulated (e.g., engineering).

Consent to appropriation of name

Your corporation may need to obtain consent to use the business name from another business entity.

Special corporate structure

Consider if you want to elect to be a nonprofit corporate subtype, such as a cooperative corporation. Check the Delaware Corporations Code for available options and supplementary forms or language required.

How to Register for 501(c)(3), Fundraising, and State Tax Exemption

501(c)(3) Federal income tax exemption

Nonprofits may choose to apply for federal income tax exemption. 501(c)(3) recognition also allows donors to make tax deductible contributions The IRS published rev-557, an informational resource on how to obtain tax exempt status for a nonprofit organization. 501(c)(3) is perhaps the most common and well-known tax exemption category for charitable organizations, however the internal revenue code has exemption categories for many other types of nonprofits organizations. Incorporating the nonprofit and obtaining a Federal Tax ID (EIN) are precursors to applying for 501(c)(3) recognition.

State tax exemption

501(c)(3) recognition provides income tax exemption on federal taxes. Nonprofits can apply to become exempt from paying various state taxes in each state where they conduct activities.

State fundraising registration

Some aspects of fundraising are regulated by state government. Nonprofits that solicit funds may need to submit registrations with the Department of State or Revenue in each state where they solicit residents. Be sure to check the procedures for obtaining the authority to solicit, employee solicitors, or otherwise engage in fundraising in each state where you raise funds.

More filings may also be necessary depending on the specific situation of a nonprofit.

Additional Requirements for All Corporations

Filing Fees for Articles of Incorporation

Delaware filing fees start at $89. Additional pages to the articles of incorporation cost $9 each. Stock corporations may owe an additional incorporation fee based on the stock value. There are two calculators available from the Department of State to calculate the incorporation fees for stock with or without par value. Expedited filing fees are extra as detailed in the next section. Certified Copies cost an extra $50.

Expedited Processing of Articles of Incorporation

Standard processing time is approximately 3 weeks. Delaware offers expedited processing for articles of incorporation. Expedited services include 1 hour service ($1000), 2 hour service ($500), same day service ($100-$200), and next day service ($50-$100).

Understanding the Publishing Requirement for Articles of Incorporation

In some states, for-profit and nonprofit corporations are required to publish notice of their intention to or their filing of the articles of incorporation. This requirement does not apply in Delaware.

Register for Federal Taxes, State Taxes, & Licenses/Permits

After you file your articles of incorporation, it will take the state approximately 3-4 weeks to send back your filed articles. In addition to filing the articles, you will apply for a Federal Tax ID (EIN), a unique nine-digit number assigned by the IRS to identify your business. You should consult your tax professional to determine your state tax registration requirements. Many businesses register for sales tax or employer taxes. You may also need to get local licenses or permits.

Hold an Organization Meeting & Establish Records

Once the registration process is complete, you should hold an organizational meeting of the incorporators and take minutes of that meeting. At that time, you will ratify corporate bylaws, adopt a shareholders agreement, issue stock certificates and complete a stock ledger, elect directors and officers, and anything else you may want to include.

Delaware Annual Report

All Delaware corporations must file an annual report and pay franchise tax. Exempt nonprofit corporations are responsible for filing an annual report but do not pay franchise tax. The annual report fee is $50 + $75-$180,000 franchise tax based on the stock shares and par value. Annual reports are due March 1st starting in the year after the articles of incorporation are filed.

Ongoing Compliance Requirements

Ongoing requirements include annual meetings with minutes, special meetings to make important business decisions, maintaining a registered office, amending your articles of incorporation as needed, and more. For more information on business compliance action items, please consult your Harbor Compliance representative.