Delaware is one of the most popular states among entrepreneurs to start an LLC. Many companies incorporate in Delaware, even if the business itself is not physically in the state. In 2019, the total amount of incorporated legal entities in Delaware hit almost 1.5 million, with 226,000 forming in just 2019.
According to Delaware's annual report statistics, Delaware is the top choice for publicly traded companies, with 67.8 percent of all Fortune 500 companies being incorporated there. And approximately 89 percent of U.S. companies that held IPO were Delaware corporations in 2019. A few of these high-profile companies include Uber, Slack and Pinterest.
So why do so many entrepreneurs prefer Delaware? Delaware laws are favorable to startups as they provide a greater degree of flexibility for structuring and shareholders' rights. It has a low cost to register, offers tax advantages and has very strong privacy protections.
Also, many investors prefer Delaware corporations because of the good legal history and confidence in the law system, not to mention the vast number of judges who have years of experience in the state. It has a separate court (the Court of Chancery) for corporate law disputes, and investors are familiar with the corporate history and ease of doing business for corporations in Delaware.
How to Complete a Delaware Business Entity Search
If you want to form a business in Delaware, choosing a business name is important as it represents your business to the customers, suppliers and vendors. It also provides an idea about what your company does and its purpose. That said, there are various rules and regulations that your business name will need to adhere to in order to legally operate in the state.
The first is that your business name cannot already be used by another business in the state. This is why you need to run a Delaware entity search. There are typically two ways to complete your search. You can search a name using Delaware's official name search engine, or you can use free Business Name Search tools found online.
If you plan on doing your own research using Delaware's official website, here are the steps that you need to follow to complete a Delaware business entity search:
- Use the Business Entity search and enter in your entity name.
- A list of companies that match or are similar to your desired name will be displayed. Use this list to determine if your desired business name is available.
- You can also use the Name Reservation search. Select the "Entity Kind" and the "Entity Ending."
- Type in your potential company's name.
- The search engine will tell you if your specific business name is available or not.
- If it is, you can choose to reserve the name for a $75 fee or perform a new search.
Here are a few points that you should keep in mind when choosing your business name.
According to Delaware law, there are some requirements.
- Your LLC name must include one of the following:
- Limited Liability Company
- Your LLC name may include the words:
- The name can use abbreviations like Co, Inc, Ltd and Corp.
- The business name can contain the name of a member or manager.
- The name should be different from any existing entities.
According to the Delaware law, the name must not contain the following elements:
- The name should not contain "Bank" or "Trust" without the prior permission of the Delaware Banking Commissioner or "University" or "College" without the prior consent of the Delaware Secretary of Education.
- Any word that is considered vulgar or disregarded by Delaware law should not be used.
Reserving Your Entity Name
If you want to operate within the Delaware state boundaries, you have the ability to reserve your entity name if you're not ready to form your business right away.
You can reserve the name of the entity with the Delaware Secretary of State after you complete the Delaware entity search. You will need to pay a $75 fee to reserve the name. You can complete the entire process of reservation online or submit a paper application. After reserving your name, you have 120 days to file a Certificate of Incorporation with the state of Delaware.
Revising Your Entity Name
If you complete your Delaware entity search and your selected name is not available, you need to compile other business names for your corporation. If you are dead set on what you have, but it is currently being used, here are a few ways to differentiate the name in hopes of getting the name approved for use:
- Add a generic word like, technology, telecom, etc.
- Use the initials of the business name.
- Substitute a word with a foreign language word of the same meaning.
- Find a synonym of the word that is creating issues related to availability.
Domain and Trademark Issues
While selecting a domain name for your business, make sure that the name does not infringe on another company's trademark. The internet domain is registered through ICANN, and there's a separate database of Delaware Secretary of State entity search. So, before you spend any money, you will want to search the trademark database to avoid any problems that could arise in the future.
Performing a Delaware entity search is one of the first steps to getting your new business up and running. Doing your due diligence will help your incorporation go smoothly and reduce the time it takes to get started. As with many steps in the business formation process, getting help from a trusted partner can ensure your business entity search in Delaware is done correctly and legally.