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Delaware S-Corporation Requirements: Everything You Need to Know

Delaware S-Corporation requirements are extensive. With new rules and regulations, many obligations have come to the forefront.
Whether it’s compliance or tax responsibilities, the S-Corp landscape has evolved.
Sure, you can search on Google and try to figure things out. But it won’t help you much.
Trust us! You need guidance, expert consultation, and formation pros like doola to walk you through the latest changes in the S-Corp world.
For now, take a quick read to understand a few of the key, absolutely non-negotiable Delaware S-Corporation requirements.
And if you’re ready to deep-dive into setting up your Delaware S-Corp, book a free consultation with our formation experts today.
Let’s get started.
Why Incorporate as a Delaware S-Corp?
Here’s why Delaware is a top choice among entrepreneurs:
Pass-Through Taxation
Unlike C-Corps, S-Corps avoid double taxation — profits pass directly to shareholders and are taxed at individual rates, rather than at both the corporate and personal levels.
This structure helps small business owners save on federal taxes while keeping financial reporting simple.
Strong Legal Protections
Delaware’s corporate laws are among the most business-friendly in the U.S., offering strong liability protection for shareholders. Plus, the Delaware Court of Chancery specializes in corporate law, ensuring business disputes are handled efficiently by experienced judges — not juries.
No State Corporate Income Tax on Out-of-State Revenue
Delaware does not tax income generated outside the state, making it a tax-efficient option for businesses that operate nationally or internationally.
S-Corps only pay federal taxes on pass-through profits, reducing the overall tax burden.
Business-Friendly Regulations
Flexible shareholder agreements, allowing companies to operate with fewer restrictions. In addition, you have privacy protection, as Delaware does not require public disclosure of shareholders or officers.
Credibility & Investor Appeal
Delaware is widely recognized by investors, venture capitalists, and financial institutions as the best place to incorporate.
Many Fortune 500 companies and tech startups are incorporated in Delaware, enhancing credibility when raising funds or securing partnerships.
Learn more: Top Delaware LLC Services
How to Form a Delaware S-Corp
Setting up a Delaware S-Corp involves several key steps, from choosing a business name to ensuring compliance with state requirements.
Below is a detailed guide on how to correctly form your S-Corp in Delaware.
Step 1: Choose a Unique Business Name
Before registering your S-Corp, you need to select a distinct and legally available business name. Delaware requires that all business names be unique and not already in use by another registered entity.
How to Check Name Availability:
- Visit the Delaware Division of Corporations website and use their Entity Name Search Tool to see if your desired name is available.
- If the name is already taken, you must modify it or choose a different one.
Delaware Business Naming Rules:
- Your name must include a corporate designator, such as “Corporation,” “Incorporated,” “Company,” or abbreviations like “Inc.” or “Corp.”
- It cannot include restricted words like “Bank,” “Insurance,” or “Trust” unless you obtain special approval.
- The name should be distinct enough to avoid confusion with existing entities in Delaware.
Reserving Your Business Name (Optional)
- If you’re not ready to file your incorporation documents yet, Delaware allows you to reserve a name for up to 120 days for a $75 fee.
- You can file the Name Reservation Request through the Delaware Division of Corporations website.
Once you’ve confirmed availability and compliance, you’re ready for the next step — filing your Certificate of Incorporation.
Step 2: File a Certificate of Incorporation
The Certificate of Incorporation (also called Articles of Incorporation) is the legal document that officially forms your Delaware corporation. This document must be filed with the Delaware Secretary of State.
What to Include in the Certificate of Incorporation:
✅ Company Name: Must match the unique business name you selected.
✅ Registered Agent Information: Details of your Delaware-registered agent (more on this in Step 3).
✅ Business Purpose: A brief statement outlining what your company does. Most companies use a general-purpose statement (e.g., “To engage in any lawful business activity”).
✅ Authorized Shares & Par Value: Delaware corporations must authorize shares (even if privately held). The par value is the minimum share price and can be set to $0.01 or “no par value” for flexibility.
✅ Incorporator’s Information: The person responsible for filing the certificate (this can be you or a formation service).
How to File the Certificate of Incorporation:
- You can file online through the Delaware Division of Corporations website or submit it by mail or fax.
- The filing fee starts at $89, but additional fees may apply depending on the number of authorized shares.
- Delaware offers expedited processing (same-day, 24-hour, or 48-hour services) for an extra fee.
Step 3: Appoint a Registered Agent
Every Delaware corporation, including an S-Corp, is legally required to have a registered agent with a physical address in Delaware.
What Does a Registered Agent Do?
- Receives legal documents (lawsuits, tax notices, compliance mail) on behalf of your business.
- Ensures compliance by keeping track of filing deadlines and state requirements.
- Provides privacy by keeping your personal address off public records (if you don’t have a Delaware address).
Who Can Be a Registered Agent?
- An individual with a physical address in Delaware.
- A business formation service or professional registered agent service like doola that provides compliance support.
How to Appoint a Registered Agent in Delaware:
- If you hire a registered agent service, they will handle the process for you.
- If appointing yourself, you must provide a Delaware street address (P.O. Boxes are not allowed).
- The Registered Agent’s information must be listed in your Certificate of Incorporation.
Step 4: Apply for an EIN (Employer Identification Number)
Once your Delaware S-Corp is legally formed, you’ll need to obtain an Employer Identification Number (EIN) from the IRS. This is a unique nine-digit tax ID that allows your business to:
- Open a US business bank account
- File tax returns
- Hire employees
- Apply for business credit and loans
How to Apply for an EIN:
✅ If You Have a US Social Security Number (SSN):
- Apply online via the IRS website.
- Your EIN is issued immediately upon approval.
✅ If You Are a Non-Resident Without an SSN:
- You must complete Form SS-4 and submit it via fax or mail to the IRS.
- Fax Submission: Typically takes 4-6 weeks.
- Mail Submission: Can take 6-8 weeks due to IRS backlog.
Pro Tip: Mistakes on your EIN application can cause delays. To avoid errors, use a formation service like doola — we handle the EIN process for you, ensuring it’s filed correctly the first time.
Step 5: Draft an S-Corp Operating Agreement
An Operating Agreement is a legal document that outlines how your Delaware S-Corp will be run. While Delaware doesn’t require S-Corps to have an Operating Agreement, having one is crucial for clarity and legal protection.
Why You Need an Operating Agreement:
- Defines ownership structure
- Establishes roles & responsibilities
- Protects your limited liability status
- Prepares for future disputes
Pro Tip: An S-Corp Operating Agreement should be customized to fit your business structure. If you’re unsure how to draft one, doola can create a legally compliant Operating Agreement for you.
Step 6: File IRS Form 2553 to Elect S-Corp Status
By default, your Delaware corporation will be classified as a C-Corp, meaning it will face double taxation — once at the corporate level and again when distributing profits to shareholders.
To avoid double taxation and benefit from pass-through taxation, you need to file IRS Form 2553 to officially elect S-Corp status.
How to File IRS Form 2553:
✅ Download Form 2553 from the IRS website.
✅ Complete the form with the following details:
- Business name, address, and EIN.
- Shareholder information (must have 100 or fewer shareholders who are US citizens or residents).
- Tax year selection.
- Election statement confirming all shareholders agree to S-Corp taxation.
✅ Submit the form to the IRS via fax or mail.
What Happens After Filing?
- The IRS will approve or deny your S-Corp election within 60 days.
- If approved, your S-Corp will now benefit from pass-through taxation, meaning profits flow directly to shareholders and are taxed at individual rates, avoiding corporate-level taxation.
Missing the Form 2553 deadline can result in your business being taxed as a C-Corp for the entire year. To ensure timely filing, let doola handle the process for you.
Essential Compliance Requirements for Delaware S-Corporations
Running a Delaware S-Corp means staying compliant with state regulations.
Here are the key Delaware S-Corporation requirements to keep your business in good standing:
Annual Franchise Tax and Report Filing
Delaware requires all corporations to file an Annual Franchise Tax Report and pay a franchise tax by March 1st each year. The tax amount depends on the company’s structure and number of shares issued.
Shareholder and Corporate Governance Rules
S-Corps must have 100 or fewer shareholders, all of whom must be US citizens or residents. Corporations must hold annual shareholder meetings and maintain meeting minutes for transparency and compliance. Plus, the Board of Directors oversees major decisions and ensures the business operates according to state laws.
Maintaining a Registered Agent
Delaware requires all S-Corps to have a Registered Agent with a physical address in the state to receive legal documents and compliance notices. A professional registered agent service (like doola) ensures you never miss deadlines or important state communications.
Need help with compliance? doola can handle your filings, reports, and registered agent services to keep your S-Corp in good standing. Book a free consultation today!
Tax Obligations for Delaware S-Corporations
While Delaware S-Corporations benefit from pass-through taxation, these entities still have specific tax obligations at both the federal and state levels that must be met to remain compliant.
Here are a few crucial ones:
Federal Tax Requirements
At the federal level, S-Corps do not pay corporate income tax because profits pass directly to shareholders, who report their earnings on their personal tax returns.
However, the IRS requires S-Corp owners who actively work in the business to pay themselves a reasonable salary before distributing profits. This ensures that owners do not avoid payroll taxes by taking all income as distributions.
In addition to regular income tax, shareholder-employees are responsible for self-employment taxes, which cover Social Security and Medicare contributions.
These taxes must be withheld from wages and remitted to the IRS, along with payroll taxes if the company has additional employees.
Delaware State Tax Requirements
Unlike many states, Delaware does not impose a corporate income tax on S-Corporations for income earned outside of Delaware.
However, every S-Corp must pay an Annual Franchise Tax, which is due by March 1st each year. The minimum tax is $175, but the final amount depends on the number of authorized shares.
Failure to pay on time can result in penalties and the potential loss of good standing with the state.
Additionally, Delaware has a gross receipts tax, which applies to companies that generate revenue within the state. This tax is based on total revenue rather than net income, and rates vary depending on the business category, typically ranging from 0.0945% to 0.7468%.
State Taxes in Other Jurisdictions
Since S-Corps are pass-through entities, taxes are usually paid at the individual level in the states where the shareholders reside.
However, if an S-Corp has operations, employees, or a physical presence in another state, it may need to register as a foreign entity and comply with that state’s income tax or sales tax requirements.
Payroll and Employment Taxes
If the S-Corp has employees, it must comply with federal payroll tax requirements and withhold the appropriate amounts for Social Security, Medicare, and federal income tax.
Employers must also register for state unemployment insurance (SUI) in any state where they have employees and may be subject to additional state payroll taxes.
Additional Delaware S-Corporation Requirements for Foreign Owners
If you’re a non-U.S. resident looking to form a Delaware S-Corporation, there are extra compliance steps to consider.
While Delaware is one of the most business-friendly states, S-Corp status comes with strict IRS rules regarding ownership and taxation.
Here’s what foreign owners need to know:
S-Corps Are Limited to US Citizens or Residents
- The IRS does not allow non-resident aliens to own shares in an S-Corp.
- To qualify, all shareholders must be U.S. citizens or resident aliens (Green Card holders or those with substantial presence in the U.S.).
- If a non-resident tries to become a shareholder, the S-Corp automatically converts back to a C-Corp, triggering potential tax consequences.
Setting Up a US Presence
- If you’re a foreign entrepreneur, one workaround is to appoint a U.S. business partner or resident as a shareholder while maintaining control through other agreements.
- Alternatively, you may consider forming a C-Corp or an LLC taxed as an S-Corp, depending on your business goals.
Tax Obligations for Foreign Owners
- Even if you qualify as a resident alien and hold shares in an S-Corp, you must report your income to the IRS and comply with US tax laws.
- Foreign shareholders may be subject to additional reporting requirements, such as FATCA (Foreign Account Tax Compliance Act) if they hold significant financial assets outside the U.S.
US Bank Account Requirements
- A US business bank account is essential for running an S-Corp efficiently, but most banks require a US address and an EIN.
- Services like Mercury and Wise provide non-residents with access to online banking solutions that simplify financial operations.
Common Mistakes to Avoid When Forming a Delaware S-Corporation
Setting up a Delaware S-Corporation offers significant benefits, but getting it wrong can lead to legal, tax, and operational issues.
To ensure a smooth incorporation process, avoid these common mistakes:
❌ Choosing an Ineligible Shareholder
S-Corps have strict IRS ownership rules — only U.S. citizens or resident aliens can be shareholders. If a non-resident tries to own shares, the S-Corp automatically loses its status and reverts to a C-Corp, triggering corporate taxation.
❌ Missing the IRS Form 2553 Filing Deadline
Electing S-Corp status is not automatic. After incorporating, you must file IRS Form 2553 within 75 days of formation or by March 15th of the tax year you want the S-Corp election to take effect. Missing this deadline means your business will be taxed as a C-Corp by default.
❌ Not Appointing a Registered Agent in Delaware
Delaware requires all businesses to maintain a Registered Agent with a physical address in the state. If you fail to appoint or maintain one, your business risks losing good standing with the state and may face legal issues if you miss compliance notices.
❌ Not Issuing Stock or Defining Shareholder Agreements
S-Corps must issue stock to shareholders, even if there’s only one owner. Failure to do so can create confusion in ownership structure and voting rights. A clear shareholder agreement should be in place to prevent disputes and outline how profits are distributed.
❌ Ignoring Delaware’s Annual Franchise Tax
Every Delaware S-Corp must file an Annual Report and pay the Franchise Tax by March 1st. The minimum tax is $175, but it increases based on the number of authorized shares. Missing this deadline leads to penalties and can result in business suspension.
❌ Not Keeping Proper Corporate Records
Even if you’re the sole owner, S-Corps must follow corporate formalities, including:
- Holding annual shareholder and board meetings
- Keeping minutes of key decisions
- Maintaining records of stock issuance and transfers
Failure to do so can weaken liability protection, making you personally responsible for business debts.
Mismanaging Payroll and Owner Compensation
S-Corp owners who work in the business must pay themselves a reasonable salary before taking profit distributions. Underpaying yourself to avoid payroll taxes can trigger IRS audits and penalties.
Assuming S-Corp Status Works for Every Business
S-Corps aren’t ideal for every business. If you want foreign investors, multiple stock classes, or a more flexible ownership structure, a Delaware C-Corp or LLC may be a better choice.
Let doola Handle Your Delaware S-Corp Formation
From choosing a business name to filing Form 2553, setting up a Delaware S-Corp involves multiple steps, each with its own legal and tax considerations.
Instead of figuring everything out yourself, let doola take care of it for you!
Book a free consultation and let’s get your Delaware S-Corp set up quickly and correctly!