How to Form a Delaware C Corp.

By Larissa Bodniowycz, J.D.

How to Form a Delaware C Corp.

By Larissa Bodniowycz, J.D.

Delaware is known for welcoming businesses into its state with open arms. Its laws are friendly to businesses, it has an entire segment of its court system dedicated to hearing corporate law issues, and its business taxes are low. Some of the country's largest corporations have their headquarters in Delaware. Smaller businesses also frequently take advantage of Delaware's welcoming atmosphere by incorporating in Delaware. When a business forms as a corporation, it's called a C corporation, or C corp., because it takes the default corporation tax status under Subchapter C of the Internal Revenue Code. A business can form as a C corp. in Delaware by taking these three steps.

Businesspeople gathering around conference table with laptops and diagrams

1. Draft formation documents.

To properly form a Delaware C corp. that protects you from personal liability for the corporation's debts and liabilities, you must draft a few different formation documents. You can draft the following formation documents on your own or utilize an experienced online service provider to write them for you.

Certificate of Incorporation

To form a C corp. in Delaware, you must prepare a written certificate of incorporation that includes the corporation's name and purpose.

Bylaws

The bylaws of a corporation are a written document that details rules for the internal management of the corporation. Bylaws usually cover topics such as shareholder and board of directors meeting procedures, voting rules, and officers and committees. Corporations have a lot of flexibility in determining what rules they set out in the bylaws, but Delaware law provides a few restrictions.

Actions and Written Consents

A prospective C corp. must prepare written actions and shareholder and board member consents to appoint the board members, record how shares will be distributed, adopt bylaws, and take similar preliminary actions.

Stock Certificates and Shareholder Agreements

Delaware does not require written stock certificates, but many businesses choose to use them anyway. If a corporation will evidence shares of the corporation with a written certificate, it must create stock certificates.

In addition, you can draft one or more shareholder agreements. Shareholder agreements are contracts that shareholders enter into with one another regarding their shareholder rights and responsibilities. For example, shareholders may agree to place restrictions on to whom they can sell shares of the corporation.

2. Submit the certificate of incorporation with the filing fee.

Once you have prepared all the formation documents, the certificate of incorporation must be signed and filed along with a mandatory filing fee. You can file these items with the Delaware Division of Corporations or through an online service provider.

A new business only needs to submit the certificate of incorporation to the State of Delaware. The corporation keeps the other formation documents, which are not public record.

3. Sign formation documents and file copies.

After filing the certificate of incorporation, the remaining documents must be signed. Failing to sign the formation documents is one of the most common mistakes business owners make when forming a corporation.

After the formation documents are signed, copies of the signed versions should be made. Each who signed a document should receive a copy of it, and the corporation should keep a copy of all documents in its formal records. The corporation's secretary should take responsibility for distributing copies and maintaining the corporation's formal records in a safe place and organized format. Binders and online files are common ways of storing these records.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.