In today’s business world, running a company can be tough. Off the bat, the founder or manager of a company needs to be making a business model to ensure the business will be successful. For some companies, incorporation is the best way to make sure a business will succeed. However, there are some places that are better than others to incorporate a business. Over fifty percent of U.S. companies and sixty percent of Fortune 500 companies call Delaware their home, indicating that obviously Delaware is doing something right for those businesses. For various reasons, Delaware is one of the best places in the United States to incorporate a company.
1. More privacy. Delaware has laws that do not require businesses to disclose the names of their directors or officers. Many people deeply value that privacy, and not many states can boast that kind of satisfaction.
2. Less expensive. Delaware has lesser startup costs and taxes its businesses and corporations at a lower rate than other states during tax season. Comparing Delaware to other states, these breaks can save a company thousands of dollars a year, which is a large amount of money for a company that is first starting out.
3. The Delaware Court of Chancery. Hopefully, your company will never be involved in a lawsuit of any kind. However, if you do get involved in litigation, the Court of Chancery in Delaware is one of the most favorable for companies and business. This court only uses judges and not juries, and many believe that judges can be much more open-minded in these cases. Additionally, the majority of the laws in Delaware are much more favorable to the corporations compared to laws in other states.
4. Investment Bankers prefer companies in Delaware. When an investment banker sees that you are incorporating your company in Delaware, they will know you are serious about your company and are knowledgeable about what it takes to make the company succeed. They are more willing to invest in a company that will give them a large amount of returns, rather than investing in one that fails and they lose their investment in the end. There are many reasons that Delaware can make your business stronger, and that is important for your backers as well. Note: Some investment bankers will not even consider backing your business unless you are a company that is incorporated in Delaware.
5. Your company instantly becomes national when incorporated in Delaware. If you are living in another state and incorporate in Delaware, investment bankers take that as a sign that you are willing to do what it takes to get their monetary support and that you are serious about making your company succeed, even if that does mean having your company on the other side of the country. To get investment bankers, it’s important to show how you are different from the other companies they could be investing in.
6. Quickly get your company up and running. Your business incorporation application may be reviewed and approved the same day; possibly even in the same hour as when you file it. Many other states are unable to have such a speedy turnaround. If a state does offer fast processing times, they will most likely have a hefty fee attached, something that Delaware does not do.
7. No personal income tax for non-residents. This means that just because your company is based in Delaware, if you do not have residency there, you will not be required to pay income taxes in Delaware. This can save you a lot of money personally when you are running a business, especially in the first few years when money can be tight.
Setbacks to consider:
- There are many people who do not appreciate the tax breaks that businesses in Delaware receive, and if they get their way, Delaware will not be a utopian place to set up a business any longer.
- Delaware laws and practices also tend to favor large, public businesses more than it favors the smaller, lesser earning businesses. Therefore, it may be as hard to be a small business in Delaware as in other states. However, if you are a small business considering incorporation, Delaware is still a good spot to consider.
- Hidden fees in Delaware can also end up hurting a company in the beginning, but in the long run, the benefits of incorporating in Delaware are worth the price you pay in the beginning.
- If you are not living in the state of Delaware, you need to find someone who will act as your “registered agent.” This must be someone who is over 18 or a company who is completely based in Delaware. Their fees range drastically, so this is another unexpected expense.
Incorporating a business is not right for everyone, so discuss with other people in your company who should have a say before making any big decisions. If you should decide to incorporate your company, there is no doubt that Delaware provides the best opportunities for incorporated businesses and companies. Admittedly, there are some cons to incorporating in Delaware, but the benefits of incorporating there drastically outweigh the setbacks, especially for larger and more public businesses and companies.