The state of Delaware is the most popular state for incorporation, with over half of all Fortune 500 companies incorporated there. Delaware’s corporate and tax laws are friendlier to businesses than many other states’ laws, making it an attractive place for startups to incorporate. This guide explains why many entrepreneurs choose to incorporate in Delaware.
Top 8 Reasons Why Startups Incorporate in Delaware.
The US state of Delaware is one of the best places to incorporate a business. It’s seen as so popular and easy to do, in fact, that it’s not uncommon for startups to form their company there even before deciding where to set up shop.
Why? Because Delaware offers some enticing benefits:
The state has an efficient incorporation procedure.
Delaware is a small state, so getting in and out of it is easy. This makes it easy for corporations to conduct business there. The state also has a reputation for being business-friendly, which means its government is more willing than others to help companies set up shop within its borders.
Delaware’s tax system also attracts companies because it offers them many benefits like lower taxes and fewer regulations than other states. Finally, its courts are known for having good judges who make decisions fairly quickly, which means you won’t have your company tied up in court for years on end if you choose to incorporate there!
The corporation laws are flexible and business-friendly.
In addition to being a very business-friendly state, Delaware has a long history of corporate law. It’s known as the “First State,” and it’s home to more than half of all publicly traded companies in the US. Since corporations have been around for so long in this country, we’ve had time to develop pretty good rules surrounding them.
The flexibility of Delaware’s corporation laws makes incorporating accessible for startups that don’t need special features from their entity structure (like an S-Corp). It also means you don’t have to change your business structure when you grow past its original needs; you can keep things simple!
A Delaware court may be able to avoid the application of the law of a foreign jurisdiction.
In the event of a dispute, a Delaware court may be able to avoid the application of the law of a foreign jurisdiction. Delaware courts are known for their tendency to apply the state law that has the most significant relationship to the company’s activities. As with any general rule, this one is subject to exceptions and will be applied on a case-by-case basis.
Shareholders can bring a lawsuit in Delaware to address corporate disputes.
Delaware law also allows a shareholder to bring a lawsuit in Delaware against the company even if they are not residents or citizens of Delaware. Technically, that means you could sue your own company if you were to become dissatisfied with it!
This is a relatively unique feature of the Delaware corporate code and has made the state popular among startups looking for flexibility in their corporate governance structure.
There are no residency or citizenship requirements for shareholders, directors, or officers.
Delaware does not require you to be a resident or citizen of the United States. In fact, it doesn’t matter if you’re an alien from Mars with three heads. If your business is incorporated in Delaware and meets all the requirements for filing with their Secretary of State, they will allow it.
Delaware does not require residency or citizenship requirements for shareholders, directors, or officers. You could live on Jupiter and still be part owner of a Delaware corporation so long as there are no other restrictions on who can own shares in that company (for example: if someone else already owns 100%.)
There is less information available about the business than in other states.
Another reason Delaware is a good choice for startups is that there is less information available about the business than in other states. As a smaller state, it lacks the same level of competition and regulation as larger states like California or New York. This makes it easier for businesses to set up shop in Delaware without worrying about having their operations scrutinized by an overbearing government agency.
Hiring employees, raising capital, and selling shares in a Delaware corporation are easier.
There are many reasons why you should incorporate in Delaware. One of the main reasons is that it is easier to hire employees, raise capital and sell shares in a Delaware corporation. This makes sense because most publicly traded companies are incorporated in Delaware. After all, it is one of the most accessible states to do business with.
You can keep your company anonymous.
Another reason Delaware is a popular incorporation destination is that it allows the company to remain anonymous. You can keep your company’s management team anonymous, as well as its ownership, address, and activities. Delaware keeps your records private, too; they don’t appear on the public record unless you request them or provide consent.
Delaware also has strict laws about financial disclosures so that if something goes wrong with your business, creditors won’t be able to pry into your personal finances or any other officer or director of the corporation to recover their losses.
Sometimes it makes sense for a startup to incorporate elsewhere, but most companies choose Delaware.
Now that we’ve covered why most startups incorporate in Delaware let’s discuss the other benefits of choosing this state. One reason is cost. In addition to a low tax rate and simplicity of incorporation, Delaware also has lower prices than many other states regarding filing and annual report fees.
Another benefit is access to capital for investors. When you incorporate in Delaware, potential investors can easily find you because your business will be listed on all public websites like Crunchbase and Yahoo Finance, along with other companies from our state. This makes it easier for them to do their due diligence on a company before investing in it, and if they like what they see, this may result in an influx of capital for your startup!
Finally, one last benefit is the ease of hiring employees. Because there are so many companies based here (including major corporations like Bank Of America), there are more job openings available than other places might have available at any given time, and as a bonus: most people who live here already know how things work here so they won’t need training before starting work!
Conclusion
As you can see, there are many reasons startups choose to incorporate in Delaware. It’s a great place to do business, the legal climate is favorable for entrepreneurs and investors alike, and the state provides resources for new companies that other states don’t have. If you are considering incorporating your startup in Delaware, we recommend contacting an experienced attorney who can help guide you through the process.
