Why incorporate your company in Delaware?

Why incorporate your company in Delaware?

Are you considering incorporating your business in the United States? Many experts recommend incorporating in Delaware. Over half of all publicly traded companies and the vast majority of venture capital-funded startups in the United States are incorporated in Delaware.

Advantages

Business-Friendly Legal System

Delaware's legal system is known for being modern and business-friendly. It keeps pace with evolving legal trends, such as allowing corporations to have a single shareholder and director. For example, Delaware was an early adopter of laws enabling the formation of limited liability companies (LLCs).

Example: Delaware's Court of Chancery specializes in business law and delivers efficient and expert decisions. This ensures quick resolution of business cases, with highly predictable outcomes.
Startup-Friendly Environment

Delaware is an ideal location for startups seeking outside investment. Many investors prefer investing in Delaware C corporations, making it easier for startups to attract funding.

Example: Starting as a Delaware corporation simplifies legal and accounting processes for startups. Even if launched as an LLC, converting to a C corp in Delaware is straightforward.
Mobility and Flexibility

Delaware companies enjoy mobility and flexibility, making them suitable for virtual or mobile businesses. Delaware's lenient requirements facilitate easy registration and deregistration in other states.

Example: A Delaware company can operate nationwide without facing entangling requirements, such as complex annual franchise tax reports.
Industry Gold Standard

Corporate attorneys nationwide are well-versed in Delaware law, providing an advantage when obtaining legal documentation or opinions.

Example: Delaware earns significant revenue from corporate filings, ensuring continuous updates to its laws and maintaining integrity within the ecosystem.
Efficient Formation Process

Delaware offers expedited company formation services, allowing businesses to incorporate quickly based on their needs and budget.

Example: Delaware offers various filing options, including standard, 24-hour, same-day, two-hour, and half-hour options, catering to different urgency levels.

Disadvantages

High Franchise Taxes

Corporations issuing large numbers of shares, especially those with no par value, face high annual franchise tax bills in Delaware.

Example: Delaware's franchise tax calculation is based on authorized shares, with a minimum tax of $175 and a maximum of $200,000.
Additional Overhead for Out-of-State Businesses

Businesses incorporated in Delaware but operating elsewhere incur extra expenses, including foreign entity registration fees and annual fees.

Example: Out-of-state businesses must file foreign entity registrations and pay annual fees and taxes both in Delaware and their home state, adding to operational costs.