Setting Up a Bank Account for Delaware Company
Startups usually choose to set up a Delaware entity because many of the companies will ask to do so. However, there is a stigma why people think of setting up a company in Delaware as the startup scene dictates that this is the standard. Well, this might be true, but it complicates the process.
Delaware fees seem to be low. You usually set up a company with 10,000,000 shares and $0.00001 par value. You end up being taxed on the value of $100 (10,000,000 shares x $0.00001) including incorporation fees. So the Delaware franchise tax is calculated based on the authorized shares of the company or value of the shares, whichever is higher.
So, let’s say you register your company in Nevada and you want to operate your company in Delaware. There is this thing called Foreign Qualification (FQ) you might be required to fulfill.
You will need to provide standard company documents to get a bank account
opened for your DE company and operating from NV.
You also need to provide, within one year, articles of incorporation, EIN and current Certificate of Good Standing or printed online verification of Active Status from originating state, Filed List of Officers or printed verification of officers from Nevada Secretary of State (for corporations conducting business in Nevada). Which means you will need to pay two business licenses and file two annual lists with each state!
There are a few ways to fix this:
- You open a bank account in Delaware
- You register the company in a place where you run the business
- You get Foreign Qualification for your company if the original state is different from the state where you should apply for foreign status
- You domicile the company in the state where you are opening a bank account
- Or you might find some bank which accepts the company located in out of state; the Silicon Valley Bank (svb.com) offers services for tech startups
The above is just an example; you might be located in different states, however, you have got the idea of the possible options.
Here is some advice in case you register your office in any of the states below, where you might register in the alternate state (in our case it is Nevada). The compliance test usually covers the key factors of whether you run the business in the state or not. If any of the following points are related to you, then you should register your company in the state as well:
- Your bank (or any other government body or institution) requires you to file for FQ in the state
- Revenue is earned from doing business in NV (Revenue was earned in NV. The corporation conducts, sells, and solicits for business in NV and receives revenue as a result of the activity)
- You rent an office in NV
- You have employees in NV
- Own based asset in the state (e.g., any properties)
- Delaware or Nevada Registered agent is an excellent option if you’re not based in that state. If you’re not registered in DE or NV, it’s always good to hire a registered agent; They usually charge around $100
Delaware or Nevada Registered agent is actually a great option if you’re not based in that state.
The above example is for the DE and NV option. Here are the DE and CA option. Your tech startup is registered in Delaware and operating in/from California.
Since we have many startups in California and are conducting intrastate business, it is better also to register your business in CA. The multi-state registration will trigger multiple fees on annual bases – Franchise Tax, business license fees, and Annual list fee.
- Incorporation Delaware State fee $90
the minimum tax for the Assumed Par Value Capital Method of calculation is $400.00
- The filing fee for the CA Statement is $100 (plus $5 to get a file-stamped copy back) and $50 for a Certificate of Good Standing from Delaware (which is required to file the Statement and Designation)
- California will trigger the minimum franchise tax of $800 once you file for Delaware Foreign Qualification
If you run a tech company you might open a bank account with Silicon Valley Bank and you may not need to register in California or any other state, but check with the bank first. The opening of an SVB account is done online (e-signature to sign bank account opening documents – no need for a wet signature or physical presence). Once you pass the due diligence process, you might get the bank account opened in a matter of 3-5 working days. Since the bank is pro-startup, they will definitely help you out.