Incorporating in Delaware has many advantages over incorporating a business in your home state. Before explaining the advantages of incorporating in Delaware, it is important to know you can form a Delaware corporation or a Delaware LLC no matter where you live. Businesses operating almost anywhere can be incorporated in Delaware. Neither a Delaware LLC nor a Delaware corporation are required to have an office or business address in Delaware. If the business is not located in Delaware the state only requires the appointment of a Registered Agent with a physical address within Delaware to receive service of process and notices from Delaware Secretary of State. Choosing a reliable Registered Agent will ensure your company is in order to maintain good standing with Delaware Secretary of State’s Division of Corporations.
Why Incorporate in Delaware?
The number of successful businesses already incorporated in Delaware are a great testament to using the state as a corporate home. Incorporating in Delaware assures a favorable and fair legal climate. In eight separate studies conducted by the US Chamber of Commerce, Delaware continues to be ranked #1 for state legal systems, in large part because Delaware business owners are protected by a corporate veil shielding owners from personal liability for business debts and judgements. A Delaware business owner is more likely to be struck by lightning than have this corporate veil pierced. The Delaware LLC also has protections where Delaware limits the judgment rights of creditors of LLC members to “charging orders.” This ensures the creditors of a member can at best obtain a judgement to receive that member’s distributions from the LLC, but cannot become a member or cause the LLC to foreclose or liquidate. This protects you from the personal problems of other members of the LLC.
Protection of company liability shields may be the most enticing reason to incorporate within Delaware. In addition to the shield, Delaware laws have been time-tested and allow for predictability. Delaware updates these laws to remain at the cutting edge for corporate governance. The legal decisions are made by sophisticated judges who were previously sharp business lawyers, selected to serve by the governor in a separate court of equity, the Court of Chancery. This court handles business disputes promptly and effectively. The Court of Chancery is not a jury court, and decisions are made by judges (called “Chancellors”) who possess a wealth of experience in business law.
Lastly, the cost to form a Delaware company is affordable, even for a start-up. The annual franchise tax for a Delaware corporation is $175 minimum based upon the number of authorized shares, with a filing fee of $50. Additionally, the Delaware LLC annual fee is only $300, regardless of capitalization or size of a company. Therefore when comparing forums in which to incorporate, Delaware is sought out for protection and predictability above all.
About the author
John Legaré Williams, Esquire practices business law through The Williams Law Firm, P.A. (www.TrustWilliams.com). He is also President of Agents and Corporations, Inc. (www.IncNow.com), a family owned and operated incorporation service that provides filing and registered agent services in Delaware to business owners from around the world. Nationally, Mr. Williams is a frequent speaker nationally on the topic of Delaware LLCs and in particular the Delaware Series LLC, the most cutting-edge entity on the market. He is active in the Delaware start-up community, launching a legal-tech start-up called www.14Rings.com designing software to help people manage the Series LLC.