One of the questions we get asked most often is, why incorporate in Delaware?
Like so many, your impression of Delaware might be limited to the fact that Delaware is "The First State". There are so many other reasons to love this place! We're partial to the gorgeous beaches but we're also home to Nemours Mansion and Gardens (pictured above), historic New Castle, Winterthur, sixteen state parks, and more.
But specifically, there's a reason that Delaware is home to more than 1,000,000 business entities and over 65% of Fortune 500 companies.
Today, let's take a look at a few of the reasons that so many businesses choose to call Delaware home.
Courts Specializing in Business Law
First, the Delaware Court of Chancery is over 220 years old and has unparalleled experience with business cases, providing skilled and prompt adjudication.
The Court of the Chancery actually stems from the Court of Chancery of Great Britain prior to the establishment of the American colonies. Are you a history buff? Check out the fascinating history of the Delaware Court of Chancery.
Though its role in Delaware's legal system has evolved over the years, today it primarily handles litigation to do with corporate matters, trusts, estates, real estate, land sale, and contractual matters. Our Court of Chancery has actually written much of the modern U.S. corporation case law! The Court of Chancery consists of one Chancellor and four Vice Chancellors (you can read more about our current judicial officers here).
So that's wonderful for Delaware, but what does it mean for you?
It means should any litigation arise regarding the Delaware entity you form, issues may be handled in the Delaware Court of Chancery where there is significantly more experience and precedent (hundreds of years of precedent!) to draw from. Those issues would be addressed by the Chancellor and four Vice-Chancellors instead of a jury. This means quicker resolution and unequaled business law experience.
Now on to the slightly simpler stuff - liability protection!
Forming an LLC or corporation means that the personal financial liability of the owners will be no greater than the shareholders' or members' investment; owners are insured from personal liability for negligent acts of the entities and its debts.
The entity you form is a separate legal entity which means it's affairs are separate from your personal assets. That's all good news for you!
Transferability and Perpetual Life
Another great reason to incorporate or form a Delaware LLC? Ease of transferability of ownership means shares of stock in a corporation or interest in an LLC may be sold or distributed without impairing organization or operation.
This is valuable in the event that an owner or founder is no longer involved with the entity at some point. Additionally, both corporations and LLC's have a perpetual life even upon the death of primary owners or officers.
So what about taxes?
Forming a Delaware LLC or corporation means no Delaware tax to beneficiaries or corporate stock held by nonresidents. There is no sales or use tax in Delaware. No Delaware income tax is levied on corporations or LLC's not doing business in Delaware.
Additionally, if you elect to have Subchapter S Election or LLC Partnership Treatment, this permits tax savings by flowing through deductions and losses to personal tax returns. Here is an FAQ from the State of Delaware site clarifying how S-Corporations work.
Start Your Delaware LLC or Corporation
For all the ways starting a Delaware LLC or corporation can benefit your business, contact your attorney or accountant. If you decide to make Delaware your business home, The Incorporators Ltd. would be happy to form your entity and act as your registered agent.
Want to get started now? Forming a Delaware LLC, corporation, partnership, or non-profit takes just minutes using our simple online ordering system. Just fill out a few forms, submit, and we'll get to work forming your entity! Start now.