Delaware has a reputation as the best state to incorporate a business in. This comes from a mixture of a well-respected corporate judiciary system and favorable tax laws that are beneficial to most corporations. Over 60% of Fortune 500 companies are incorporated in Delaware, including giants such as Walt Disney and Toys R’ Us.
1.The Corporate Law Expertise of the Delaware Court Chancery
The Delaware Court of Chancery, whose focus is solely on corporate litigation and proceedings, is one of the most knowledgeable and highly respected courts in the country. To go along with this excellent court is the extreme depth of precedent in Delaware corporate law. This precedent, in most cases, lowers the uncertainty of the outcome in a case. These cases are settled by judges, there are no juries involved, which generally means the outcomes of cases are explicit and not question-begging.
2.Corporate Attorneys Are Familiar with Delaware Law
Many corporate attorneys are well-versed in the corporate laws of Delaware. In fact, legal textbooks rely heavily on Delaware case law to teach law students because of the expertise the Delaware Judiciary possesses. Most American corporate attorneys have studied Delaware law while in school, and many must be familiar because of the propensity for large corporations to be based in Delaware.
3.Investors Prefer Corporations Incorporated in Delaware
Angel investors, along with venture capitalists prefer Delaware corporations. They prefer C Corps, which offer liability protection and tax benefits that attract investors. Investment bankers often insist on companies being incorporated in Delaware before going public. Additionally, incorporating in Delaware sends a message to investors that your company is a national company and that you understand the preferences and interests of your investors, which can be an invaluable marketing tool.
In addition to the inherent financial and liability protection forming an LLC provides, Delaware is one of a handful of states that allows a Series LLC, or SLLC. This type of LLC, used mostly in real estate, allows for separate assets (such as properties) to be their own LLC, limiting liability among all of your properties. This, along with the favorable tax laws, is another example of the personal protection incorporating in Delaware offers. Also, Delaware does not require director or officer names to be disclosed on formation documents, which offers some privacy protection.
5.Delaware’s Commitment to Corporate Customer Service
Delaware’s Division of Corporations generates a sizable amount of revenue for the state, so they have invested in state-of-the-art technology and equipment to allow for new filings to be handled at an extremely expedited rate. There are also a handful of Delaware registered agents with links to the DDC electronic database, allowing them to file your proceedings electronically. The Delaware Secretary of State has made it a priority to expedite filings, guaranteeing them to be processed in less than an hour.
For these reasons, among others, Delaware has made a name in the financial sector as the go-to spot for businesses looking to incorporate. Whether it is a publicly traded, Fortune 500 company or a small, family run business, Delaware is the most beneficial state to incorporate in for the majority of businesses.
Author: Tyler Nolan, staff writer, Encompass Accounting, Inc. Twitter—@t_nol_