Introduction – Why Delaware?
What makes this state a popular destination for registration of start-ups and for moving Corporation to Delaware? Today, 67.2 percent of Fortune 500 companies are based out of Delaware and almost 1.4 million legal entities were incorporated in 2018. The number of LLC’s formed in 2018 was 157,142 as compared to 128,852 in 2016 and 44,669 corporation in 2018 as compared to 40,253 in 2016. This is not all, Forbes ranks Delaware #5 when it comes to business costs and the economic growth was at an annual rate of 5.7 percent in 2017, which is faster than the growth rate of the nation at 3.4%.
There are several industries that are contributing towards the $63.86 billion Real Gross Domestic Product (GDP) and every business incorporated in the state, planning to incorporate, or moving LLC to Delaware can benefit from this growing economy. The question is – what benefits or advantages are there for your business? Some of the benefits or advantages that businesses can leverage from:
- Favourable Tax Shelter: Moving Corporation to Delaware or an LLC comes with several benefits as this state is considered to be one of the most favourable tax shelters in the nation. An analysis by New Jersey Business and Industry Association revealed that the state of Delaware had the lowest sales tax rate (zero) in May 2018. Some of the benefits include:
- There is no sales tax in the state of Delaware
- The state does not levy corporate tax on any interest
- A holding corporation in the state that has equity investments or fixed-income investments, will not be taxed on the gains on a state level
- The state doesn’t have any personal property tax
- Real estate property tax is applicable on the county level but it is very low as compared to other states
- The state doesn’t have any value-added taxes (VATs)
- Delaware doesn’t have any inheritance tax or stock transfer taxes
- The Judicial System: One of the greatest benefits of moving Corporation to Delaware is the judicial system. It is different from any other judicial system in the country and is referred to as the Delaware “Court of Chancery”. This court of equity allows the state of Delaware to adjudicate any corporate litigation. The court can provide guidance and help with litigation for businesses incorporated in Delaware.
- State Incentive Programs: Whether you are moving LLC to Delaware or a business corporation; the state offers a wide range of tax and other incentive programs that businesses can leverage from. Some of the top programs include New Business Facility Tax Credit, New Economy Jobs Tax Credit, Research and Development Tax Credit, Green Industries/Brownfield Tax Credit, Delaware Capital Access Program, State Small Business Credit Initiative Participation Loan, EDGE Grants, Delaware Manufacturing Extension Partnership, and New Business Facility Corporate Income Tax Credit among others.