Starting a Business in Delaware
A new business in Delaware could be in your future. Have you been wondering: exactly how do I start a business in Delaware? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Delaware during a recession?
A New Business in Delaware: Pros and Cons
As you might expect, Business Insider puts Delaware in its top five (number five) in a 2016 article. This is for starting a new business. And this is for the entire nation. The market opportunity share of new entrepreneurs is good. Plus the state’s business tax climate is better than most. A key factor is the state’s high productivity score. Delaware has the fifth highest per capita GDP in the nation.
Delaware is also known for its favorable laws and court system. There is a separate court for corporate matters, the Chancery Court). Another plus for Delaware is how close it is to other states. Business owners can take advantage of Delaware’s good tax rates and laws. And they can choose from a hiring pool which can include Pennsylvania, Maryland, and Virginia.
Delaware New Business Programs
A new Delaware Business Resource is the state’s “New Jobs Infrastructure Fund”. It was created to give the state a method to accommodate new businesses seeking to locate in Delaware, as well as provide expansion opportunities for existing businesses. Delaware already has set aside $40 million for this initiative. It is to be supplemented by a further $20 million of bonding authority.
In 2018, Forbes places Delaware right in the center, at number 25. Also in 2018, Fit Small Business clocks in Delaware at number 27. Keep in mind, these three sites all have differing methods.
Forbes praises Delaware for its fifth-best business costs. Labor supply is also ranked well. But growth prospects hover at average, and the economic climate is below average. Even worse, both quality of life and the regulatory environment are in the bottom ten.
Fit Small Business says Delaware is ninth-best for access to capital. The cost of starting a business and taxes are both good. The labor market (a measure of the desirability of the area and the number of people with bachelor’s degrees) is average, at 24th. Delaware’s quality of life and cost of living are both worse than average. And even more concerning is its position for startup activity – 48th.
Hence business people might want to weigh these advantages and disadvantages. Given that Delaware is tiny, the feasibility of starting a business, instead, in nearby Pennsylvania, Maryland, or New Jersey should also be a consideration.
Start a New Business in Delaware – Top Industries in Delaware
The state has sought to capitalize on existing industries and relationships that already work well for Delaware residents. Some of the lesser known industries include automotive manufacturing, biotechnology, chemistry, and the health sciences. However, for over twenty years, Delaware has been known for its banking, financial services, and insurance industries. This industry represents more than 1,000 employers and nearly 40,000 employees in the state of Delaware.
Here is exactly how to start business in Delaware.
Start a New Business in Delaware – Delaware New Business Secretary of State Requirements
Register a Business Name
If a business owner plans to use a fictitious name instead of their own name for a sole proprietorship or general partnership in Delaware, they will have to register a Fictitious Name Certificate. This must be done at the Superior Court Prothonotary’s office in the county where they conduct business.
A fictitious name can also be used for a corporation, LLC, limited or liability partnership, or nonprofit corporation.
To get a DBA form a business owner can call the following phone numbers: Kent County: (302) 739-3184, and Sussex County: (302) 556-5742. They can get an application for a Fictitious Name Certificate in New Castle County here. Search for corporate name availability here.
Business Permits and Getting a Delaware Business License
Use the Delaware One Stop Business Registration and Licensing System. Find out more at the Division of Professional Regulation.
How to Get a Business License in Delaware (Local Permits, too)
Check with your local municipality, city or county office or website. See if there may be any local licensing or permit requirements.
For example, in Wilmington, you will need to go to the Business page on the Wilmington city website. Then select from the menu on the right.
Start a New Business in Delaware – Business Registration
Get forms at the Department of State, Division of Corporations form page for doing business in Delaware.
Register the company with the Delaware Division of Revenue. They have information to guide you through the registration and licensing steps.
Start a New Business in Delaware – Virtual Offices
Business owners in Delaware can only get Delaware virtual business office space in Wilmington from Alliance Virtual Offices.
Regus offers two Delaware virtual business office locations in Delaware.
Neither company offers space in Dover, the state’s capital, although Regus has space in Newark. And neither does DaVinci.
Fortunately, the state is small, so Dover is about an hour from both Newark (not to be confused with Newark, New Jersey) and Wilmington.
For other areas of the state, if a business owner does not wish to travel even these short distances, they might want to seek out local entrepreneurs. Or they might even try computer user groups in an effort to find help in this area.
Start a New Business in Delaware – Build Business Credit
Company credit is credit in a small business’s name. It doesn’t link to a business owner’s personal credit, not even if the owner is a sole proprietor and the sole employee of the company.
Hence, an entrepreneur’s business and personal credit scores can be very different.
Given that company credit is separate from consumer, it helps to protect a business owner’s personal assets, in case of a lawsuit or business insolvency.
Also, with two distinct credit scores, a business owner can get two different cards from the same vendor. This effectively doubles purchasing power.
Another benefit is that even new ventures can do this. Going to a bank for a business loan can be a recipe for disappointment. But building small business credit, when done properly, is a plan for success.
Consumer credit scores depend upon payments but also various other elements like credit use percentages.
But for company credit, the scores actually only hinge on if a business pays its bills timely.
Small Business Fundability™
A business needs to be Fundable to lenders and vendors.
For that reason, a company will need a professional-looking web site and e-mail address. And it needs to have site hosting from a hosting provider.
And, company telephone numbers ought to have a listing via ListYourself.net.
At the same time, the business phone number should be toll-free (800 exchange or similar).
A business will also need a bank account devoted only to it, and it must have every one of the licenses essential for operation.
Dealing with the Internal Revenue Service
Visit the Internal Revenue Service web site and get an EIN for the company. They’re free. Pick a business entity such as corporation, LLC, etc.
A business can start off as a sole proprietor. But they should switch to a type of corporation or an LLC.
This is in order to limit risk. And it will maximize tax benefits.
A business entity will matter when it involves taxes and liability in the event of a lawsuit. A sole proprietorship means the business owner is it when it comes to liability and tax obligations. Nobody else is responsible.
Kicking Off the Business Credit Reporting Process
Begin at the D&B web site and get a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a business into their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s websites for the small business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.
This way, Experian and Equifax will have activity to report on.
First you need to build trade lines that report. This is also called vendor credit. Then you’ll have an established credit profile, and you’ll get a business credit score.
And with an established business credit profile and score you can begin to get more credit.
These sorts of accounts often tend to be for the things bought all the time, like marketing materials, ink and toner, and office furniture.
But first off, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are frequently Net 30, rather than revolving.
So, if you get an approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, like within 30 days on a Net 30 account.
Start a New Business in Delaware –Monitor Your Business Credit
Know what is happening with your credit. Make sure it is being reported and deal with any errors as soon as possible. Get in the practice of taking a look at credit reports. Dig into the details, not just the scores.
We can help you monitor business credit at Equifax, Experian, and D&B for 90% less.
Update Your Record
Update the info if there are errors or the data is incomplete.
Start a New Business in Delaware –Fix Your Business Credit
So, what’s all this monitoring for? It’s to contest any inaccuracies in your records. Errors in your credit report(s) can be corrected. But the CRAs typically want you to dispute in a particular way. Disputing credit report mistakes means you precisely itemize any charges you contest.
Start a New Business in Delaware –A Word about Building Business Credit
Always use credit responsibly! Don’t borrow more than what you can pay off. Monitor balances and deadlines for repayments. Paying off punctually and in full will do more to raise business credit scores than nearly anything else.
Growing company credit pays. Excellent business credit scores help a company get loans. Your credit issuer knows the business can pay its financial obligations. They understand the small business is authentic.
The company’s EIN links to high scores and credit issuers won’t feel the need to call for a personal guarantee.
Business credit is an asset which can help your business for many years to come.
Learn more here and get started toward opening a new business in Delaware.
Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.
Delaware’s Response to COVID-19
Delaware is not falling short on doing something about COVID-19. On March 17, 2020 Governor John Carney submitted an application for the SBA to provide Delaware an Economic Injury Declaration. This makes loans available to small businesses and nonprofit organizations in New Castle, Kent and Sussex counties.
By early April, the Delaware Department of Education had submitted CARES Act waivers. This is to let districts and charter schools carry over more than 15% of their Title I, Part A funds. So this is even if the they had received approval to exceed this limitation in the past three years.