Why Incorporate
in Delaware?
Date Added: June 8th,
2005
By Chris Stallman
| E-mail
Why do so many companies
incorporate in Delaware?
-Mark Webb, Georgia Tech
That's actually
a great question because more than half of the Fortune 500 companies
are incorporated in Delaware. In fact, many companies will incorporate
elsewhere and then later reincorporate in Delaware. So what's
so appealing about Delaware? Certainly, not all of these companies
are located in such a small state, so why are they incorporating their
businesses there? Well, here are five reasons:
Reason #1: It's
Cheap
The costs to incorporate in Delaware are some of the
cheapest in the country. Currently, only eight states have
cheaper incorporation fees than Delaware and even that is a rather
recent development. In attempts to attract more business filings,
many states have made their filing fees more competitive with Delaware.
Even still, Delaware remains one of the cheapest states in the country
to incorporate a business in.
Reason #2: You
Don't Need to be a Resident of Delaware
When incorporating
a business in Delaware, you don't have to worry about any residency
requirement, as it's not required for you to be a Delaware resident.
This applies to shareholders, officers, and directors.
Reason #3: Non-Delaware
Businesses don't pay Delaware Corporate Taxes
If your business
doesn't conduct business in Delaware, you're not obligated to pay
Delaware corporate taxes. However, it will be required to
pay a franchise tax each year.
Reason #4: One Person
can Hold all Officer Positions and Serve as Sole Director
This is actually
a big benefit because many states require that you name separate
people as officers and directors. If your business is relatively
small and you're the only person who runs it, this is a big advantage.
This was one of the big draws for TeenAnalyst.com to form an LLC
in Delaware.
Reason #5: Separate Court
System
Delaware has
a separate court system for corporate law that doesn't involve juries.
The advantage of this is that companies don't have to worry about
juries deciding corporate cases. Instead, a judge who is familiar
with corporate law overseas the case.
So with this in mind, you can see why Delaware is such
an attractive state to incorporate in. However, there are
many things to consider when deciding where to incorporate your
business. These include where you're physically located, the
costs to do so, and the corporate legal structure that best suits
your needs.
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