Incorporating a Delaware C Corporation 

The legal requirement for incorporation

As per Delaware law (the Delaware General Corporation Law), one or more incorporators can form a corporation by filing a certificate of incorporation with the Division of Corporations of the Secretary of State and paying a fee.

That's it. 

There is no other requirement.

To understand incorporation in Delaware, we, therefore, only need to answer three questions:

1. Who can be an incorporator?

2. What must be included in the certificate of incorporation?

3. What is the fee?

Let us examine these question in turn.

Who can be an incorporator?

This is a bit of a trick question. If you are a startup founder or an entrepreneur setting up a Delaware corporation, you are unlikely to be the incorporator who files the certificate of incorporation.

Instead, your lawyer or an agent used by the lawyer will legally serve as the incorporator. As soon as the corporation is formed, the incorporator will typically appoint the founders as the first directors of the corporation and resign as incorporator.

Generally speaking, there is no age, citizenship or residency requirement for being an incorporator. The incorporator does not have to be a real person and can also be an artificial entity like another corporation, a partnership, an association etc.

What must be included on the certificate of incorporation?

The Certificate of Incorporation only requires the following information:

1. The name of the corporation

2. The number of shares that the corporation is allowed to issue and the par value of the shares. If more than one class of shares is to be issued, this needs to be specified as well.

3. Name and address of the registered agent

4. The purpose of the corporation

5. The name and address of the incorporator

Let us look at these requirements in detail:

1. Name of the corporation

The name of the corporation must end with one of the following words: “association,” “company,” “corporation,” “club,” “foundation,” “fund,” “incorporated,” “institute,” “society,” “union,” “syndicate,” or “limited” or abbreviations of these words. 

Similar terms used in foreign countries such as GmbH, an abbreviation of the German phrase “Gesellschaft mit beschränkter Haftung,” which means “company with limited liability” may also be used.

 You cannot use words like 'bank' or 'trust' in the name of a corporation unless the corporation will actually operate as a bank or a trust. Generally speaking, the Secretary of State has wide powers to reject misleading or offensive names and approve names that would otherwise be prohibited.

While you can use special characters like ! “ ” # $ % & ’ () * + ,- . ? / \ : ;@ { } [ ] ~_^ ` | under Delaware law, the Internal Revenue Service only recognizes the letters A through Z, the numbers 0 through 9, ampersand (&) and hyphen (-).

As such, you should only use these characters when choosing a name of your corporation.

See also Choosing a startup name

2. Number of authorized shares and par value

The Certificate of Incorporation must include the number of shares that the corporation is authorized to issue. If the corporation will issue more than one class of share, the certificate must also lay out the different classes of stock and the number of shares of each class the corporation can issue.

Delaware law does not require the par value of the stock to be specified.

All the same, I advise startup founders to authorize 10 million shares of common stock with a par value of $0.00001 per share. 

Note: You can authorize and issue shares with a par value of $0 per share under Delaware law. While this seems like a way to simplify the issuance of stock, it can lead of tax complications so I advise against it.

3. Name and address of the registered agent

Delaware does not require the name of the shareholders, directors or officers of a corporation to be made public. This provides excellent privacy protection for these parties. 

However, other parties may need to contact corporate officers to serve them with legal papers such as summons, documents related to law suits or claims for unpaid taxes. To enable this, Delaware require that all corporations appoint a registered agent with a publicly available address in Delaware to receive notices and legal papers on their behalf. Any document delivered to the corporation's registered agent is legally treated as having been delivered to the corporation itself.  

To incorporate a corporation in Delaware, you can pay one of may professional registered agent firms in Delaware and provide their name in your certificate of incorporation. This can cost between $50 and $100 per year.

4. Purpose of the corporation

The certificate of incorporation must specify the purpose of the corporation. 

However, this is a formality that you can satisfy by just stating that the purpose of the corporation is to engage in any legal activity that the board of directors decide to pursue from time to time.

5. Name and address of the incorporator

We have already seen that the incorporator of a Delaware corporation is usually the lawyer or registered agent who files the certificate of incorporation and not the founder or entrepreneur (or parent company).

Accordingly, the name and address provided here is not your name or address. Leave this to your lawyers or the service that is filing the certificate of incorporation on your behalf.

Optional inclusions in the certificate of incorporation

While the previous sections explained the core information required to form a Delaware C Corporation, the certificate of incorporation offers more flexibility than you might think.  

Beyond the essential details, you can leverage Delaware General Corporation Law (DGCL) to tailor the document to your specific needs through optional provisions.  Section 102(b) of the DGCL empowers you to include a variety of these permissive provisions, allowing for customization on a number of fronts.

By incorporating these optional provisions thoughtfully, you can craft a certificate of incorporation that aligns perfectly with your corporation's unique requirements and goals.  Consulting with legal counsel is highly recommended to ensure these provisions are implemented appropriately and effectively.

Here are some examples of the potential benefits these optional provisions can provide:

1. Protecting founders and managers

The certificate can be designed to safeguard directors, officers, employees, and other agents through indemnification measures.  

In specific situations, it can also limit the liability of directors. You cannot, however, indemnify against fraud or reckless behavior.

2. Defining the corporation's framework

DGCL allows you to establish, restrict, and regulate the powers of various entities within the corporation, including the stockholders, directors, and the corporation itself.  

This fosters a clear and functional governance structure.

3. Streamlining reorganizations

The certificate can grant Delaware courts the authority to order meetings with creditors or stockholders to reach agreements on corporate restructuring or reorganization plans, potentially simplifying these processes for the future.

4. Stockholder rights

Provisions can be included to provide stockholders (or holders or certain classes of stock) with additional rights. 

For example, existing stockholders can be given the preferential right to acquire additional stock in future offerings (known as a pro-rata right).

5. Lifespan and liability

The standard lifespan of a corporation is perpetual unless terminated.  

Optional provisions allow you to limit this duration.  

You can also include language imposing personal liability for corporate debts on stockholders, if necessary.

This may be desirable in corporations set up to operate joint ventures that have a specific purpose and limited time duration — like building a bridge, for example.

6. Voting requirements

The DGCL outlines the baseline voting requirements for stockholders and directors.  

Optional provisions enable you to raise these requirements if your situation warrants a higher threshold for passing certain measures.

7. Dispute resolution

Beyond the aforementioned provisions, Section 115 of the DGCL allows the certificate of incorporation to include a mandatory forum selection clause.  

This clause can specify that internal corporate claims, such as derivative suits, must be heard exclusively in Delaware state courts, potentially streamlining litigation.

What is the fee?

Incorporating a corporation in Delaware involves two main costs:

1. Corporation filing fee

The base fee is $109. However, the total cost may increase depending on the amount of stock that is authorized and/or the stock’s par value.

2. Stock fees

The cost of authorizing shares depends on the number of shares and whether they have a par value:

Shares without par value

• If you authorize more than 1500 shares but not more than 20,000 shares, the filing fee increases by $0.01 per share.

• If you authorize more than 20,000 shares but less than 2 million, the filing fee increases by $0.005 per share.

• If you authorize more than 2 million shares, the filing fee is calculated at $0.004 per share.

• For precise calculations, you can use the fee calculator provided on the Division of Corporation’s website. See Fee calculator for stock with par value

Shares with par value

• Up to $2 million: The filing fee is calculated at a rate of $0.20 per $1,000 of stock.

• From $2 million to $20 million: The fee is calculated at $0.10 per $1,000 of stock.

• More than $20 million: The fee is calculated at $0.04 per $1,000 of stock.

• For precise calculations, you can use the fee calculator provided on the Division of Corporation’s website. See Fee calculator for stock with no par value

That's it. These are all the requirements for creating a Delaware C Corporation.