It’s common for new business owners to think once they’ve taken the steps of incorporation they’re ready to fully operate. However, these are just the first few steps for a start-up.
For tax and liability reasons, it is important to complete the setup of your company before conducting business. Below are the next five steps to take after receiving your documents as “filed” from the Delaware Secretary of State:
1. Maintain records
Keep a copy of the legal documents that were filed and prepared. It is important to keep all those files as you might need them in the future.
2. Appoint the board of directors
The founders select the initial board of directors and their responsibilities. The board will then hold its first meeting or sign the initial board/stockholder consent.
3. Adopt the corporation’s bylaws
This will further outline the responsibilities of the board and how the company will operate. You should also consider drafting the shareholder agreement which will further define the rights of shareholders. Issuance of stock certificates is optional but will give shareholders formal record of their ownership.
4. Complete the post-incorporation setup
There is no hard deadline for completing the post-incorporation setup. However, it is recommended that you complete it as promptly as possible to start conducting business.
5. Keep your business entity active
File an annual report and pay a franchise tax to the Delaware Division of Corporations if you operate a corporation. Annual reports and Delaware Corporate Franchise Taxes (a minimum of $175) are due each year by March 1.
The Delaware corporations pay the same taxes on all US-sourced income as other other US corporations. Your Delaware corporation will also be taxed on all foreign earnings in accordance with US Treasury regulations. Since the corporation was formed in the United States, it is taxed as a domestic corporation and you will file Annual Federal Income Tax Return Form 1120 by April 15.
Ensuring you undertake all necessary post-formation and ongoing requirements for your business is important. It helps protect the personal assets of owners and keeps your company in good standing with the state of Delaware, which means your company has met all state requirements in a correct and timely manner.