Why Incorporate in Delaware? Here are 5 Good Reasons

by ExpertEntrepreneur

Trying to decide where you should incorporate your business? Here's a look at 5 good reasons for incorporating in Delaware, including low cost and the business court system.

Before you incorporate your company, there are two big decisions you need to make. First, what type of entity will offer you the most advantages? Next, which state is best for incorporation? Most start-ups just incorporate in their home state, although a growing number choose to incorporate their business in a different state, particularly Delaware. So, what makes Delaware so popular and why is it the legal state of nearly 60% of the Fortune 500? There are many reasons for this.

Let's take a look at the 5 biggest advantages of incorporating in Delaware, regardless of the type of entity you select.

Business-Friendly Laws

Delaware general corporation laws are among the friendliest in the United States, offering you a strong legal platform to operate your business. The state has a great deal of corporate law designed to help your business avoid lawsuits with plenty of precedent. This large body of law makes legal outcomes more certain in the state of Delaware.

Court of Chancery

Delaware operates a separate court for businesses called the Court of Chancery. There are absolutely no juries involved, only judges who decide corporate cases. All decisions are written opinions and judges are appointed based on merit. Because decisions are issued in written form, there is a great deal of legal precedent your lawyers can rely on to avoid litigation.

Low Cost

Incorporating in Delaware can cost as little as $89 -- which is the lowest cost in the country. By comparison, the cost in California is $100 and $300 in Texas. The annual franchise tax ranges depending on the situation, although this can be as low as $75 per year or $250 for an limited liability corporation. Costs to continue operating your business remain low and you won't need to pay corporate income tax if you don't operate in the state. If owners of stock live out of state, they will not need to pay Delaware tax, either. You can electronically file incorporation forms and take advantage of Delaware's easy and fast administrative infrastructure that lets you incorporate your business faster than in any other state.

Privacy

If you value anonymity, incorporating in Delaware offers one huge advantage: the names of directors and officers do not need to be listed on the formation documents. Many states also require you to name a separate individual as a director and officer, which can be impossible if you run a very small business.  

Out-of-State Businesses Don't Pay Delaware Corporate Taxes

There is no residency requirement to incorporate your business in Delaware and this applies to directors along with shareholders. If your business does not plan to operate in the state, you also won't need to pay any Delaware corporate taxes, which can save you substantially. The only tax you'll need to pay is an annual franchise tax.

As you can see, Delaware is one of the most attractive states to incorporate in for a reason. While you have many considerations before you choose to incorporate, including costs, business location and infrastructure, there's a good chance your business can benefit from Delaware corporation law and the many other benefits the state offers. To learn more about how to incorporate in Delaware, contact USA Corporate Services today.

Updated: 11/17/2012, ExpertEntrepreneur
 
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