Why Is Delaware In The U.S. So Important For Companies?
Delaware has a very favorable environment for businesses, which is why a large number of businesses are actually setting up corporations and limited liability companies in the state. The push for companies to set up shop in Delaware is nothing new either. It was in 1899 that Delaware initially set up a general incorporation act that would help attract business to the area. Today, 50% of the publicly traded corporations in the country are from Delaware, and 58% of Fortune 500 Companies are in Delaware.
What is the Court of Chancery?
In Delaware, there are two different court systems. They are the traditional court of law and the court of equity, or the Court of Chancery. This type of court does not have any juries. Judges, called chancellors, hear all of the cases when it comes to businesses and corporations. The law in the state often seems to favor the corporations, and they have many years of rulings on which they can base their decisions. Business law in the state has more flexibility than it does in other states.
Benefits of Business in Delaware
In Delaware, one of the things businesses will immediately notice is that they have more privacy than they do in other states. The state does not require that the name of the officers of the director, or members in the case of an LLC be listed in the formation documents. LLCs and corporations that incorporate in the state do not even have to have an office in Delaware. The shareholders, directors, and officers, or members and managers for an LLC, do not even need to be residents of Delaware. Find out more in Delaware official website
The tax laws are very favorable for large companies that have shareholders. Nonresidents do not have to pay personal income tax. They do not have to pay state income tax or state tax on stock they own. If a business does not actually do business in the state of Delaware, they do not have to pay any sales tax, property tax, or corporate income tax. The tax benefits alone are reason enough to see why so many companies want to have their business in the state. Learn more about Delaware company incorporation benefits in this article
Anyone who is starting a company should compare the pros of starting the business in Delaware against their own state. They really may find that it is better to set up in Delaware based on the cost of doing business in their state. Look at all of the costs associated with setting up the business in both areas, as well as the cost of keeping the business going. The tax benefits are there every year, so even if it might be more expensive to start a company there in the beginning, the tax benefits over a couple of years could offset the cost.
Large companies that have the ability to set up a corporation in the state will be able to enjoy all of these advantages. Some smaller companies might not find it quite as advantageous though, simply because the cost of going to the court proceedings in Delaware might be prohibitive. Still, it is something that many upcoming corporations and LLCs may want to consider.