Get a Tax ID / EIN Number and Form Your New Business in Delaware
Delaware makes it easy for entrepreneurs to start and grow businesses from scratch. You’ll find a number of cities in the state serving as hubs of economic development, including Wilmington, Newark, and Dover. Agriculture and manufacturing are big industries in the state of Delaware, as are financial and healthcare industries. There are many good motivations to start a business in Delaware; you might be interested in building wealth or simply having more control over your work and schedule, or you may just have a bold idea you want to share with the world. In any case, there are some legal and formal steps you’ll need to follow before you can begin operations. Every business must obtain a Federal Tax ID Number at some point in order to run the ship.
Steps to Forming a Business and Getting a Tax ID (EIN) Number in Delaware
- Form a Business in Delaware
- Federal Tax ID (EIN) Number Obtainment
- Delaware State Tax ID Number
- Localized Licenses and Permits in Delaware
1. Form a Business in Delaware
You’ll need to decide how to structure your business before you can begin building it. A good first step in this process is you’ll need to decide on one of the following structures:
- Sole proprietorships. Sole proprietorships are ideal for solitary business owners who don’t plan on growing the business far, and who want something simple to create. These aren’t hard to start, nor are they hard to manage. You’ll pay taxes as an individual in a sole proprietorship, but you’ll be exposed to greater liability; you’ll be facing all debts as business debts, and you may be held liable for issues that arise while running the business.
- Partnerships. Partnerships work like sole proprietorships, for the most part, but are designed for two or more people working together. You’ll each pay taxes as individuals, and will both be exposed to liability issues.
- Limited liability companies (LLCs). LLCs are a bit harder to start, but they exist as separate legal entities, so they’ll provide you some measure of liability protection. They can take on debts independently, and may be held accountable for business-related liability issues. They’re treated as pass-through entities, which means they don’t owe taxes on income they generate; instead, you’ll pay taxes as an individual on income or profits you take from the business. In Delaware, there are no state-level taxes on LLCs, but you’ll be required to file an annual report with a $50 fee.
- Corporations. The big draw of corporations is their ability to issue publicly traded shares, which is useful for fundraising and long-term expansion. In exchange, they’re much harder to start than other businesses, and are subject to more rules and regulations, though because they’re treated as separate legal entities, they offer significant liability protection. They also introduce double taxation; corporate income is taxed, and you’ll also pay taxes on income you take from the business as an individual. The corporate income tax rate in Delaware is a flat 8.7 percent rate.
2. Federal Tax ID (EIN) Number Obtainment
Almost every business, regardless of structure, will need to register with the federal government to get a federal tax ID. This unique, nine-digit number will serve to uniquely identify your business and help you apply for various business needs. It’s also called an employer identification number (EIN) because it’s required of any business that hires employees. You’ll also need one if your business has partners, such as in a partnership, LLC, or corporation. It’s a safe bet to get a federal tax ID number even if you don’t think you need it, since it serves several practical benefits as well.
If you need to get a federal tax ID number for your business, make use of our federal tax ID number obtainment services. The process is fast and easy to understand; you’ll just need to provide us with answers to a handful of questions about your business in our online application. When you’re finished, we’ll email you your tax ID number in an hour or less.
3. Delaware State Tax ID Number
In addition to a federal tax ID number, you may need a Delaware state tax ID number, registering your business with the state of Delaware in the process. Most states offer a state tax ID number as a way of registering businesses for sales taxes, but there’s no state-level sales tax in Delaware. Instead, you’ll need a Delaware state tax ID if you’re hiring employees or if you’ll owe excise taxes on regulated goods.
Before you can get a Delaware state tax ID, you’ll need to get your federal tax ID number. Once you have that, you can use our online application to take advantage of our Delaware state tax ID number obtainment services. Simply answer a few questions about your business, and you’ll receive your state tax ID in 4 to 6 weeks.
4. Localized Licenses and Permits in Delaware
Some Delaware businesses will be required to obtain a business license, permit, or other form of certification. These vary based on your industry and location, as there isn’t a single business license that covers all Delaware businesses, nor is there a single licensing authority in the state. If you’re not sure which licenses or permits may apply to your business, your best bet is to contact your local Chamber of Commerce. They should be able to tell you which business licenses you may need. Note that to apply for a business license or permit, you’ll likely need to provide a federal tax ID number.
Delaware is experiencing a surge in economic growth, outpacing the average economic growth rate across the United States with a growth rate of 5.7 percent at the end of 2017, the last year on record. The state is also home to many small businesses, with more than 79,000 small enterprises. Together, these businesses make up 98.3 percent of all Delaware businesses, and employ more than 180,000 small business employees.
If you want to start your business as quickly as possible, take advantage of our federal tax ID number and Delaware state tax ID number obtainment services. The online application for each tax ID number is easy to understand, and you’ll be able to receive your new tax IDs faster than with other application methods.