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Why Incorporate In Delaware?

The state of Delaware is the corporate home of over 1,000,000 corporations, limited liability companies, limited partnerships, not for profit corporations and other corporate entities, with hundreds of thousands more added each year. For a state with a small population, this is a lot of companies. Why do so many companies want to incorporate here?

 

Why Incorporate In Delaware?

From small businesses to Fortune 500 firms, businesses and their advisers prefer to incorporate in Delaware over any other state. Delaware is not a tax haven, so why is it so popular?

Good Reasons to Incorporate in Delaware

  • Best state to incorporate a startup
  • Favorable laws for corporate governance
  • Clear and consistent legal system
  • State tax laws that favor companies not doing business in the state
  • For the non-resident company looking to expand into the US market, Delaware is a great base to start from

 

Delaware is a great place for a startup to incorporate.

For a new company looking to attract outside investment from angels, venture capitalists and private equity, incorporating in Delaware is often the best way to go. Many investors will only invest in a Delaware C corporation, so starting off with a Delaware corporation from the beginning can save a lot of legal and accounting headaches later. Delaware’s laws regarding securities and management fit in with the expectations of professional investors. Even if you launch your startup as an LLC in Delaware, you can easily convert your LLC to a C corp with one state filing and one IRS filing.

Delaware Companies are the Gold Standard

All around the US, corporate attorneys are well-versed in Delaware law, so if your company needs to obtain a legal opinion or other documentation you will have an advantage. Delaware earns one third of its state budget from the incorporation business, including filing fees, annual fees and taxes and the related legal work. You can be assured that the state has an interest in keeping its laws up to date, relevant to today’s needs and making sure that all the players in the ecosystem have high integrity.

The Court of Chancery and Business Legal System

Many companies in Delaware can take advantage of Delaware’s Court of Chancery to settle business disputes. This court only hears business decisions, and its judges have extensive knowledge of Delaware business laws. Compare this with states where the judges are elected or politically appointed, and who may well have absolutely no business knowledge or experience at all.

Tax Savings from using a Delaware corporation or Delaware LLC

  • No state income tax for Delaware corporations that operate out of state
  • No business license required for Delaware corporations not operating in Delaware
  • No inheritance tax on stock held by non-residents of Delaware
  • No state sales tax on intangible personal property
  • Shares of stock owned by non-resident aliens are not subject to Delaware taxes

Delaware Companies Are Great For Virtual or Mobile Companies

With the advent of cloud computing, mobile internet and easy file-sharing, many companies are spread around the country or around the world. For a company with high mobility, the best place to incorporate is in a jurisdiction where there are few entangling requirements, such as complicated, compulsory annual franchise tax reports to file – even if no business is done in that state. Because Delaware does not tax companies that operate outside of its borders, it is easier for a Delaware company to register and unregister from other states as needed.

A New Delaware Company Can Be Formed Very Quickly

The state of Delaware offers a number of choices for speed of filing, depending on your needs and budget. The options are standard, 24-hour, same-day, two-hour and half hour. There is no additional charge for standard service, although it may wear out your patience waiting for them to process it. Our standard filing package includes 24-hour filing, so that (generally speaking) the company will have the filing date on the same day that we receive and process your order. The “24-hour filing” means that the Delaware Secretary of State will confirm your filing about 24 hours after processing the document. The same-day, 2-hour and half-hour options are very expensive, and should only be used in case of dire emergency.

Thinking to Incorporate Your New Delaware Company?