Pros of Incorporating in Delaware
You can form a variety of businesses in Delaware including Limited Liability Company (LLC), General Corporation (INC), Public Benefit Corporation (PBC), Limited Partnership (LP), S Corporation, Sole Proprietorship, Limited Liability Partnership (LLP), and Delaware Statutory Trust among others. There are several salient benefits of Delaware incorporation and hence a large number of small businesses are registered as corporations. Due to the business friendly laws almost 63% of the Fortune 500 companies have been incorporated in Delaware. The top Delaware incorporation advantages are:
Favorable taxation for businesses
Delaware is one of the few states that are synonymous with favorable taxation for startups and new businesses. If you incorporate in Delaware then one of the top advantages you will enjoy is the absence of state taxes. The favorable business taxation climate is driven by the following facts:
- When you incorporate in Delaware; your company will not be subjected to any tax for in-state purchases
- As a business corporation operating outside Delaware, you will not be subjected to any state corporate income tax on goods as well as services
- A holding company is not subjected to any corporate tax on interest or any other investment income earned in the state.
- There are more benefits of forming a corporation as compared to Delaware llc advantages disadvantages
- If your company owns equity investments or fixed-income investments then there will not be any state level taxation on its gains
- There is no personal property tax although on a county-level, you may be subjected to real estate property tax
- One of the top benefits of Delaware incorporation is that business transactions are not taxed. There are also no value-added taxes (VATs), inventory or unitary tax, and inheritance tax
- Corporations can also benefit from the fact that there are no stock or capital shares transfer taxes
Taxes play a crucial role in the overall growth of a business and also help a business to save money thus reducing the overall cost of formation. Favorable taxation is actually one of the strong points when it comes to Delaware incorporation advantages.
One of the top benefits of Delaware incorporation is the flexibility of structuring your company. The corporate statutes in Delaware are considered as one of the most flexible when it comes to the ways in which you can structure your business and even the directors or board members. Flexibility is also one of the primary Delaware llc advantages and disadvantages as a limited liability company can be managed by its members, managers or board of directors without a manager or board of directors. An LLC enjoys contractual flexibility meaning the Delaware LLC Act allows certain restrictions and elimination of fiduciary duties in accordance with an LLC agreement.
A Delaware corporation enjoys flexibility when it comes to arranging management structures as well as economic rights along with other matters within the organization. When you incorporate in Delaware; the shareholders, directors, and officers of the said corporation can reside outside Delaware. In fact, the directors or shareholders can start a new business in Delaware or apply for a business license without the need to reside in the state and this is one of the top Delaware incorporation advantages. This is one of the biggest Delaware incorporation advantages and hence half of the publicly traded companies in the U.S. are based out of this state.
Delaware is popularly known as the “go to” state for startups and entrepreneurial businesses due to its long standing favorable business laws. There are several other benefits of Delaware incorporation and one of them is the privacy certain businesses enjoy. The Delaware law makes it possible for members to form an LLC without the need to put their names on any form of public documents thus successfully eliminating any paper trail. The same is true for corporations and this provides a lot of privacy to the members or directors of the limited liability company and business corporations.
Well established Delaware court system
One of the benefits of Delaware incorporation is the highly reliable Delaware judicial system. The Delaware Statute is an integral part of the friendly business laws and so is the Delaware courts, which interpret it. The Delaware court system also known as the Delaware Court of Chancery is a specialized court that handles corporate or business issues thus making it one of the top Delaware incorporation advantages for new businesses. The Delaware Court of Chancery was established in 1792 and is famous for its impartial and expert judges. In fact, the court uses judges instead of juries to resolve business issues or corporate disputes. Some of the renowned and top experts in business law are serving as the judges at the Court of Chancery, and cases from this court can be appealed directly to the Delaware Supreme Court.
It is a known fact that new businesses and startups prefer to incorporate in Delaware but did you know investors also prefer Delaware companies? There are numerous reasons for this favoritism and one of the primary reasons is the Delaware law, which is considered to be quite practical. An example of this is any amendment made to the certificate of incorporation for facilitating creation of “Preferred Stock” for a venture capital investor which will be effective when you file in Delaware as compared to some other states like California where the amendment will be reviewed by the Secretary of State thus making the process time consuming. Secondly, one of the Delaware incorporation advantages is that it is quite easy to trade shares in a C Corporation and investors normally like preferred stock vis-à-vis common stock.
The Delaware Division of Corporations is responsible for the issuance of the certificate of incorporation (Stock Corporation) and Certificate of Formation (LLC). One of the advantages you will enjoy if you incorporate in Delaware is a quick and easy filing process. You can download the required forms and submit them with the Delaware Division of Corporations after choosing the type of expedited service 1-hour, 2-hour, same day, and next day service. This will ensure the processing takes place quickly and the Delaware incorporation advantage is that you can receive the formation documents within 24 hours.
Zero sales tax
The sales tax laws are not subjected to the federal regulations and hence each state in the U.S., can control its own sales tax or sales tax rates. The sales tax is normally imposed on specific services and retail transactions. The state of Delaware along with Montana, Alaska, Oregon, and New Hampshire does not impose a state or local sales tax and this is irrespective of the physical location of the business entity and this is one of the benefits of Delaware incorporation.
Let your new business benefit from the Delaware Advantage!