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When It’s Best to Incorporate in Delaware

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There is no question that Delaware is a very business-friendly state. In fact, more than half of U.S. publicly traded companies and Fortune 500 companies are incorporated in Delaware and the number of startups incorporated in the state is growing by leaps and bounds.

March 10, 2022
Author: NCH

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So what’s so special about the small, mid-Atlantic state, with a population of one million? And when should companies consider incorporating in Delaware? The answer lies in the long list of benefits that come with incorporating in the state. Let’s take a closer look:

Delaware boasts a high level of privacy. For example, the state allows businesses to file a company without listing the names of any business owners. This helps to protect the identities of owners, as well as their personal information. In addition, Delaware LLCs are not mandated to publicize the names and addresses of its members or managers. Circumstances involving legal proceedings or law enforcement requests are the only scenarios in which registered agents would disclose this type of private information.

The Delaware Court of Chancery is the oldest business court in the country—and considered highly experienced, fair, powerful, and respected. The Court of Chancery is a non-jury trial court that serves as Delaware’s court, and adjudicates a wide variety of cases involving trusts, real property, guardianships, civil rights, and commercial litigation.

The court was established in 1792 and is based on the English model of a Chancery Court. An important facet of a Court of Chancery is the equitable expertise that is executed by judges, rather than a jury. One Chancellor will hear a case and make the rulings, unlike the U.S. Supreme Court, where the case is heard by all nine sitting Justices and a decision is voted upon. This is extremely noteworthy because the Chancellors are extremely skilled and experienced in corporate law. As a result, there is no need to educate an uninformed jury on the intricacies of Delaware corporate law, which saves time and legal fees. Consequently, litigants in Delaware can rely on fair and unbiased decisions based on the law—rather than public opinion.

Delaware offers huge tax savings. For example, there is no state income tax for Delaware corporations that conduct business outside of Delaware, as well as no inheritance tax on any stock held by non-Delaware residents, no sales tax on stock held by individuals who are not residents of Delaware, and stock owned by non-resident aliens are not subject to any Delaware taxes.

The cost to form a corporation or LLC in the state is very low. In fact, the Delaware Division of Corporations charges $90 to file the Certificate of Formation, and you can reserve your LLC name with the Delaware Division of Corporations for only $75. When you compare these costs to Massachusetts’ $500 filing fee, you will realize just how lucky you are to be incorporating in such an affordable state.

Delaware corporations that do not operate in the state are not required to obtain a business license in the state. Additionally, in the state of Delaware, one individual can hold the title of each of the officers of the business.

A Delaware corporation’s Board of Directors is allowed to set any price on shares of stock that it chooses to sell. As a result, it is extremely common for many angel investors, venture capitalists, and others investors to choose to invest in Delaware companies, when compared to corporations that are formed in states other than the state of Delaware.

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Registering a business in Delaware is simple and straightforward. And forming a business in the state does not require you to visit the state. Instead, the Division of Corporations in Delaware enables quick business formation filings from anywhere. The state even allows both U.S. and non-U.S. citizens to form a business and be members of a Delaware LLC.

The state of Delaware does not impose a minimum bank account requirement for an organization. This is quite appealing for many organizations since numerous states require a $1,000 minimum bank balance.

The Delaware LLC exists as a separate entity from owners and members. This helps to protect owners from being held responsible for any debts and liabilities of the LLC.

With this very long list of benefits, there is no question as to why the state of Delaware is considered one of the most corporate-friendly states in which to incorporate. When it comes to ease, flexibility, privacy, and low costs, incorporating in this small Eastern state makes good business sense for every organization—big and small.

NCH is here to get your Delaware business started. Let us take care of your paperwork so you can focus on building your new business. Give us a call at 800-508-1729 to learn more!

Is it time to incorporate your business? Read more here.

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