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Delaware Business License Basics

By: Startup 101
Last Updated: November 15, 2024

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The first step to making your business idea a reality in Delaware is to register it officially. The steps vary for each business, but they generally include deciding on a business structure, picking a name, securing the proper permits and licenses, and signing up for state taxes.

This guide will simplify the process so you can quickly get up to speed and navigate Delaware’s registration requirements.

Related: Starting A Business In Delaware Checklist

Step 1: Choose a Business Structure

The first step in registering a business in Delaware is selecting the right business structure. There are four main types to consider: sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each option has its own benefits and requirements.

Related: Comparison of Business Structures

Sole Proprietorship

A sole proprietorship is the simplest option, with one owner running the business. It’s easy and inexpensive to set up, but if you plan to use a business name, you’ll need to register it with the Prothonotary’s Office in every county where you operate.

Related: How to start a sole proprietorship in Delaware

General Partnership

A general partnership is similar to a sole proprietorship and is set up when two or more individuals agree to share the business’s ownership, profits, and losses. Partners contribute resources like money, labor, or expertise and have equal authority in decision-making.

Corporation

A Delaware corporation is a separate legal entity from its owners. Though more complex and costly to establish, it offers personal asset protection, shielding owners from liability if the business faces legal issues. Corporations have certain formalities, such as having a board of directors, shareholder meetings, appointing a Delaware registered agent, and more.

Related: How to form a Delaware corporation

Limited Liability Company (LLC)

An LLC combines a corporation’s liability protection with a sole proprietorship’s simplicity. Members of an LLC are shielded from personal liability, so their assets typically remain safe if the business runs into financial trouble or legal action.

Related: How to form a Delaware LLC

Step 2: Select a Business Name

Once the business structure is decided, choosing a business name is the next step, and the process varies by the previous decision of the business structure.

In Delaware, if you’re operating a sole proprietorship or partnership and want to use a business name that is different from the owner(s) personal name, you’ll need to register for a Delaware Assumed Name, also known as a DBA (Doing Business As), Fictitious Name, or Trade Name. This registration must be done with the Prothonotary’s Office in each county where you plan to do business.

For corporations and LLCs, the business name is chosen when filing the formation paperwork. However, before submitting the documents, conduct a Delaware business name search with the Delaware Division of Corporations to ensure another entity does not already use the name. This step can help avoid delays and complications in the registration process.

Step 3: Federal Employer Identification Number (FEIN)

A Federal Employer Identification Number (EIN), also called a Federal Tax Identification Number, is a unique nine-digit code issued by the Internal Revenue Service (IRS) to identify businesses for tax purposes.

Most businesses in Delaware need an EIN, including any business that has employees, operates as a corporation or partnership, or files employment, excise, or alcohol, tobacco, and firearms tax returns.

Single-member LLCs or sole proprietors without employees aren’t required to get one. In its place, they can use the owner’s social security number.

Obtaining an EIN is straightforward and can be done online through the IRS website, by fax, mail (or by phone for international applicants).

Step 4: State Business License

A Delaware State Business License is required for all businesses operating within the state. The Delaware Division of Revenue issues this license and applies to any person or entity engaging in trade, business, or professional activities. Whether you’re running a small home-based business, providing professional services, or operating a large corporation, this license is mandatory to conduct business in Delaware legally.

Who Needs It?

  • Sole proprietors, LLCs, partnerships, and corporations.
  • Contractors, retailers, and service providers.
  • Online businesses and home-based operations.
  • Essentially, any business operating within Delaware, regardless of size or structure.

How to Register: You can apply for a Delaware State Business License online through the Delaware One Stop Business Licensing and Registration Service. Alternatively, you can submit a paper form, known as the CRA (Combined Registration Application). Along with the application, businesses are responsible for paying an annual fee, which is based on the type and nature of the business.

The process is fairly straightforward. Once registered, businesses must renew their licenses annually and may be required to file reports and pay the state’s gross receipts tax, which applies to most Delaware businesses in lieu of sales tax.

Step 5: Occupational Licensing

Many occupations and professions in Delaware are regulated and require proper licensing before services can be offered. These licenses are designed to ensure that individuals meet the state’s professional competency and ethics standards. Some common professions that require licensing include accountants, cosmetologists, appraisers, and gun dealers.

The Delaware Division of Professional Regulation provides detailed information on licensing requirements, application fees, and related regulations for various professions. This agency oversees licensing for dozens of fields, including healthcare, real estate, and skilled trades.

In addition, there are special licenses for certain types of businesses, most notably contractors (such as electricians, plumbers, or HVAC technicians), who must be licensed through the Delaware Department of Revenue before performing work. Contractors are defined as individuals or companies that provide labor or labor and materials for construction-related activities.

Step 6: Delaware State Business License

Every person or entity conducting a trade or business in Delaware is required to obtain a business license from the Delaware Division of Revenue. Even though Delaware does not impose a state sales tax, most businesses are subject to paying a gross receipts tax.

The Delaware Business License can be applied online through the Delaware One Stop Business Licensing and Registration Service or on paper form CRA (Combined Registration Application).

Step 7: Local Business Licenses

While the State Business License is required for all businesses operating in Delaware, many municipalities have additional licensing requirements. These local regulations vary depending on the city or town and what your business does. Here are some examples of local licensing requirements:

  • Wilmington: All businesses operating within city limits must obtain a Wilmington Business License from the Business License Division.
  • Dover: The city requires licenses for various types of businesses, including barbers, contractors, daycare providers, and shoe repair shops.
  • Newark: All businesses operating in Newark must obtain a city business license.

It’s important to note that this list is not exhaustive, as each municipality in Delaware has its own licensing requirements. To ensure compliance, business owners should contact the local government offices in the areas where they plan to operate for specific licensing information and requirements.

Step 8: Local Building & Zoning Permits

When starting a business in Delaware, there may be local building and zoning regulations to understand. Here is a brief overview:

Zoning: Delaware’s zoning laws regulate land use and development. Before starting a business, verify that your intended business activities aren’t in conflict with local zoning regulations.

Also, a home occupation permit might be necessary for home-based businesses. For example, in New Castle County, home-based businesses are permitted in residential zones, but specific requirements and restrictions apply. These might include limitations on the number of employees, hours of operation, and the type of business activities allowed.

Building Permits: Construction, alteration, or repair of a building for business purposes often requires a building permit from the local building department. This ensures compliance with the Delaware State Building Code. In Wilmington, the Department of Licenses and Inspections is responsible for issuing building permits. The department reviews plans and specifications to verify compliance with building codes and safety standards.

Signage Permits: Most cities and counties in Delaware have specific regulations governing business signage. Obtaining a sign permit is generally required before installing any new signage. In Dover, the Department of Planning and Inspections handles sign permits.

Take the guesswork out of figuring out what licenses and permits are required to start your business with license research packages from Bizee and LegalZoom.

For only $99, you can save a lot of time and know your business complies with local, state, and federal requirements.


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