Starting a business in Delaware is one of the best thing that could possible happen to an entrepreneur. The Delaware state is a corporate haven of over 1,000,000 corporations, limited liability companies, limited partnerships, non-profit corporations and other corporate entities, with hundreds of thousands more added each year.-
One can trace this interest back to the 1970’s, when the state’s economy took a downward turn, but was quickly reviewed as Governor Pierre S. du Pont IV (of the Du Pont family) decreased the state expenditure and business taxes. Thus drawing over 50% percent of publicly traded companies in the U.S and 65% percent of Fortune 500 companies to incorporate their business in Delaware.
An entrepreneur looking to attract investment from angel investors, venture capitalists and private equity, incorporating the company in Delaware is often the best way to go, as most investors are likely to invest in a Delaware corporation. Starting with a Delaware law regarding securities and management fit in with the expectations of professional investors. Also converting a Limited Liability Company in Delaware to a Corporation is very easy to do with a one filing and one IRS filling.
A start-up in Delaware corporation or Delaware LLC, tend to save quite a lot of money owing to the:
- no state income tax policy for Delaware corporations that operate out of state,
- no business license required for Delaware not operating in Delaware,
- no inheritance tax on stock policy held by non-residents of Delaware,
- no state tax on intangible property,
- Shares of stock owned by non-natives are not subject to Delaware taxes.
Typically, the court system is not a primary when choosing where to form a business, but Delaware deserves a special mention. Many companies incorporated in Delaware can take advantage of Delaware’s Court of Chancery to settle business disputes. This court only hears business decisions; no judges, no juries and its judges have extensive knowledge of Delaware business Law. For large corporations with thousands or hundreds of thousands of shareholders.
Delaware offers quite some flexibility for structuring a corporation in terms of how you structure your corporation and board members. For instance, a=shareholders, directors and officers don’t need to be residents of Delaware. Delaware allows just one person to be the only director, shareholder and officer of a corporation, whereas, in other states, a minimum of three people may be needed to hold the officer and director positions. For every choice there is always a pro and con. The pros of incorporating a business in Delaware seems to be an advantageous one for corporations. The main drawback occurs when a business is incorporated in Delaware but is not actually headquartered or doing business there. Let us put it this way, you are physically located in California but you choose to incorporate in Delaware, doing this you will need to pay the annual franchise tax in both sides and follow the reporting requirement for both states