How to Start a Contractor Business in Delaware: $75 Division of Revenue License, 0.6472% Gross Receipts Tax and the Labor Notice and Workers' Comp Prerequisites

Starting a contractor business in Delaware requires you to navigate a specific three-layer licensing structure. Unlike many states with a general contractor board and exam, Delaware requires you to obtain a Division of Revenue contractor license paired with a Department of Labor notice and workers' compensation documentation. This guide walks you through exactly what you need to do, in order, to legally operate as a contractor in the state.

What You Need Before You Apply

Before you submit an application for your contractor license, you must have the Department of Labor notice and workers' compensation documentation in place. Without them the Division of Revenue will not issue your license (30 Del. C. 2502(b)).

Prerequisites Checklist

• A Department of Labor certificate of notice (filed under 30 Del. C. 375)
• A workers' compensation certificate of insurance or a Delaware Department of Labor self-insurer certificate
• The Division of Revenue contractor license itself ($75 annually), which you apply for once the items above are in place
• If using a business name other than your legal name, a trade name (DBA) registration through Delaware One Stop

If you are incorporated or forming an LLC, you will also file a formation document with the Division of Corporations, but that is a separate layer from the Division of Revenue business license.

Step-by-Step Instructions

Step 1: Understand Delaware's Definition of "Contractor"

Delaware defines a contractor broadly under 30 Del. C. 2501. You are a contractor if you perform labor or labor plus materials for construction, alteration, repair, dismantling, or demolition of buildings, roads, or other structures, or if you are involved in real estate development. This includes roofers, painters, remodelers, handymen, and general contractors. Delaware does not issue a separate state roofing license or painting license. However, if your work includes electrical, plumbing, or HVACR (heating, ventilation, air conditioning, and refrigeration) installation, those trades still require their own state professional licenses from the Division of Professional Regulation, even if that work is part of a larger remodeling project.

Do not assume that a single contractor license covers all your work. If you install or repair electrical wiring, you must also hold an electrician's license. If you work on plumbing systems, you must also be licensed as a plumber. If you touch HVACR systems, you need that separate license. Mixing unlicensed trade work with licensed contractor work is a violation.

Step 2: File Your Department of Labor Certificate of Notice

Before you can get a contractor license, you must file a certificate of notice with the Delaware Department of Labor under 30 Del. C. 375. This document notifies the state that you are starting a contracting business. Contact the Delaware Department of Labor directly to request the form and submission instructions. This certificate is a prerequisite; the Division of Revenue will ask for proof that you have filed it before they issue your license.

Timeline: Ask the Department of Labor how long the certificate of notice takes. Do not apply for your Division of Revenue license until you have proof that the notice has been filed.

Step 3: Obtain Workers' Compensation Insurance or a Self-Insurer Certificate

The Division of Revenue will not issue a contractor license until you file a workers' compensation certificate of insurance or a Department of Labor self-insurer certificate (30 Del. C. 2502(b)). If you have employees, you must carry workers' compensation insurance. Your insurance carrier will issue you a certificate of insurance showing your policy number, effective date, and coverage limits.

If you are a sole proprietor with no employees, ask the Division of Revenue whether you must file a workers' compensation certificate or an exemption statement. The requirements can vary based on your specific business structure, so clarify this before you apply for your license.

If you are approved as a self-insurer, the Department of Labor will issue you a self-insurer certificate. Either the insurance certificate or the self-insurer certificate must be provided to the Division of Revenue as part of your license application.

Cost: Workers' compensation insurance premiums vary by the type of contracting work you do and your company's payroll. Get quotes from carriers. Self-insurer status requires advance approval and financial documentation.

Step 4: Choose Your Business Structure

You can operate as a sole proprietor, form an LLC, or incorporate. Each structure has different registration and tax requirements.

Sole Proprietor: You do not need to file anything with the Division of Corporations. You operate under your legal name or register a trade name (DBA) with the Division of Revenue through Delaware One Stop for $25. Confirm with the Division of Revenue whether you must file a workers' compensation certificate or exemption.

LLC: File a Certificate of Formation with the Division of Corporations through the eCorp Document Upload Service at https://icis.corp.delaware.gov/ecorp2. The filing fee is $110. Your LLC will owe a flat annual tax of $400 due each June 1, starting in 2027 for formations in 2026. Check https://corp.delaware.gov/ for the current annual tax amount and due date. You will also need the Division of Revenue business license (the contractor license, $75 annually). A registered agent with a physical Delaware street address is required.

Corporation: File a Certificate of Incorporation with the Division of Corporations. The filing fee is $109. You must file an Annual Franchise Tax Report with the Division of Corporations by March 1 each year, along with the $50 annual report fee and franchise tax (minimum $175 under the authorized shares method). You will also need the Division of Revenue contractor business license. A registered agent is required.

Step 5: Register a Trade Name (DBA) if Needed

If you do business under a name other than your legal name, register it as a trade name or "DBA" (Doing Business As) through Delaware One Stop at https://onestop.delaware.gov. The one-time fee is $25. The registration does not expire and does not need to be renewed. You will need an active Division of Revenue business license to hold a trade name registration.

Step 6: Apply for Your Division of Revenue Contractor License

Now that you have your Department of Labor certificate of notice and your workers' compensation documentation in hand, you can apply for your contractor license through Delaware One Stop at https://onestop.delaware.gov. Go to "Apply for a Business License" and select the contractor category.

Application Materials:

• Your Delaware business registration information (or your Social Security Number if you are a sole proprietor)
• Proof of your Department of Labor certificate of notice
• Your workers' compensation certificate of insurance or Department of Labor self-insurer certificate
• If you are a non-resident contractor, you will also need to post a bond, cash bond, or letter of credit (details at https://revenue.delaware.gov/contractors)

License Fee: $75 per year. The license runs on the calendar year and expires December 31.

Processing: Check with the Division of Revenue for current processing times. Print and keep your license certificate for your records.

Step 7: Understand Your Gross Receipts Tax Obligation

Delaware has no sales tax. Instead, contractors pay gross receipts tax to the state. Your rate is 0.6472% of your gross receipts (the total money you receive for contracts), after subtracting the monthly allowance of $100,000 ($300,000 quarterly if your lookback receipts are $1,500,000 or less).

How It Works: If you gross $200,000 in a calendar month, your taxable receipts are $200,000 minus $100,000 = $100,000. Your gross receipts tax for that month is $100,000 times 0.006472 = $647.20. File and pay monthly or quarterly, depending on your annual volume and the Division of Revenue's requirements for new businesses (typically quarterly for the first year).

Important Subcontractor Rule: If you hire a subcontractor who is also licensed under Delaware Code Chapter 25, you can exclude that subcontractor's payment from your gross receipts. However, you must have a written agreement that states the exact dollar amount of the subcontract. Without that written agreement, the subcontractor's payment counts toward your gross receipts and you owe tax on it.

File your gross receipts tax through Delaware One Stop or submit payments directly to the Division of Revenue. The state will send you payment instructions and a tax account number when you receive your license.

Step 8: Meet County and Local Requirements (if applicable)

Delaware has 3 counties and 57 incorporated towns and cities. The state business license and gross receipts tax are handled by the Division of Revenue. However, New Castle County (which includes Wilmington and Newark) licenses contractors under 9 Del. C. 2504. Other jurisdictions may also have local licensing requirements.

New Castle County Contractors: Contact the New Castle County Land Use office to learn about county-specific contractor tiers, licensing fees, and bond requirements. These are in addition to your state Division of Revenue license.

Other Counties and Cities: If you operate in Kent County, Sussex County, Wilmington (separate from county), Dover, or other municipalities, contact each office directly to ask about local contractor licensing, permits, and fees. Requirements and fees vary by jurisdiction.

Step 9: Timing Requirements for Bids and Contracts

Your contractor license must be held before or at the time you sign a contract. If you are bidding on a competitively bid contract over $50,000, you must start your license application before you submit your bid. You do not need a final license in hand, but you must have applied before bidding on large projects.

Keep a copy of your license with your contract files and present it to clients or bid managers on request.

Tips and Common Mistakes to Avoid

Tip 1: Do Not Confuse State and County Layers. The Division of Revenue contractor license is separate from New Castle County contractor licensing and from other local requirements. You may need both. Ask each jurisdiction what you need.

Tip 2: Do Not Assume a Single Contractor License Covers Electrical, Plumbing, or HVACR Work. If your contracts include any licensed trade work, you must also hold that specific professional license. A contractor license does not substitute.

Tip 3: File Your Department of Labor Notice First. The Division of Revenue will ask for proof that you filed this notice. Do not apply for your business license until this step is complete.

Tip 4: Keep Your Workers' Comp Certificate Current. Keep your workers' compensation coverage from lapsing. Renew your policy well before the expiration date.

Mistake 1: Starting Work Before Your License Is Approved. The state requires you to hold a contractor license before or at the time you sign a contract. Working without a valid license is illegal and can result in a fine of up to $3,000 or up to two years in prison (30 Del. C. 2119).

Mistake 2: Not Reporting Gross Receipts Correctly. Delaware tracks contractor receipts closely. If you fail to report or underreport, the Division of Revenue can assess penalties and interest. Keep accurate records of all contracts and payments.

Mistake 3: Forgetting the Subcontractor Written Agreement Rule. If you hire a licensed subcontractor, you must have a written contract that states the exact payment amount. Without it, you owe gross receipts tax on that payment. A verbal agreement or a vague contract does not count.

Mistake 4: Using an Expired Certificate of Notice or Workers' Comp. Your Division of Revenue license application requires current documentation. If either the Department of Labor notice or the workers' compensation certificate has expired, your application will be rejected.

Expected Results

Once you have completed these steps, you will have a valid Delaware contractor license that allows you to legally bid on and perform contracting work in the state. Your license will be issued for one calendar year (expires December 31). You will owe gross receipts tax on your receipts at the end of each month or quarter, depending on your filing schedule.

Your state compliance is not complete with just the contractor license. Depending on your location and the type of work, you may also owe county licensing fees, local permits, and trade-specific professional licenses. Confirm all requirements with each jurisdiction where you operate.

Renewing your license is straightforward. Each year before December 31, you will renew your $75 contractor license through Delaware One Stop and confirm that your Department of Labor notice and workers' compensation certificate are current.

Legal and Tax Disclaimer

This article is informational and is not legal, tax, or professional advice. Delaware contractor licensing, workers' compensation requirements, and gross receipts tax rules are complex and may apply differently depending on your specific business structure, the nature of your work, and your location within the state. Before you apply for your license or make any business decisions, consult with a Delaware-licensed attorney and a certified public accountant or tax professional who specializes in contractor businesses. The Division of Revenue and the Department of Labor can provide guidance on specific questions, but they do not offer legal or tax advice.

Key Contacts and Resources

• Delaware Division of Revenue (Contractor Licensing and Gross Receipts Tax): https://revenue.delaware.gov/ and https://revenue.delaware.gov/contractors
• Delaware One Stop (Business License and Trade Name Registration): https://onestop.delaware.gov
• Delaware Department of Labor (Department of Labor Notice and Workers' Compensation): Check the official Department of Labor website or call for current contact information.
• Division of Corporations (LLC and Corporate Formation): https://corp.delaware.gov/ and https://icis.corp.delaware.gov/ecorp2
• New Castle County Land Use (County Contractor Licensing): Contact directly for licensing tiers, fees, and bond requirements.
• Delaware Small Business Development Center: https://delawaresbdc.org/ for free counseling and resources.