Did you know that the state of Delaware has more businesses legally incorporated there than it has people? With a population of a little over 900,000, and well over 1,000,000 businesses—including 64% of the Fortune 500—what makes this tiny state such a popular spot to incorporate a business?
Dating back to the 1800s, Delaware has worked to ensure its laws and regulations were advantageous for corporations in order to entice more companies to bring more business—and the economic benefits inherent in that business—to the state.
Delaware has enacted a wide array of statutes and legal structures which allow corporations to operate with far fewer restrictions and liabilities than they are forced to operate under in most other states. For example, Delaware does not charge a personal income tax to non-residents, allowing shareholders to avoid getting taxed in both their state of residence and the state in which their company is incorporated as is the case with most other states.
Perhaps the most valuable benefit offered by Delaware for incorporating companies is flexibility. The corporate regulations, which dictate the rights and duties of board members and shareholders, are much less rigid than the statutes enacted in other states. Known as Delaware General Corporation Law (DGCL), there are minimal mandatory regulatory requirements, allowing corporations to operate in a manner which is best suited to their unique structure and needs.
Additionally, Delaware has a vaunted corporate legal system. If your company is faced with a dispute in many other states, the case could be decided by a judge with minimal knowledge of corporate law or a jury who potentially knows even less. Conversely, Delaware corporate lawsuits are tried in the Delaware Court of Chancery, a specialized court with jurisdiction over all corporate cases. These cases are decided only by professional judges who are experts in corporate law.
Thanks to the reputation of the Court of Chancery, Delaware also has one of the most extensive bodies of corporate case law in the country, allowing for more predictable and reliable outcomes in legal disputes.
However, most of Delaware’s corporate advantages are geared towards very large businesses which operate nationally. It is not necessarily the best option for smaller businesses who only operate on a local scale due to some of the costs involved in incorporating in another state.
If you are considering incorporating your business, it is essential that you incorporate in a location which is best suited to your unique goals and needs. Delaware may or may not be the best option for you, so contact the Trembly Law Firm today to set up a consultation to discuss your options.