Incorporation in Delaware

Why Delaware?

Delaware is famed to be the "incorporation capital" of America - more than 60% of Fortune 500 companies are incorporated in Delaware. According to Delaware Department of State, Division of Corporation's 2006 Annual Report the number of active business entities in Delaware has grown 50% in the last six years to a total of more than 765,000. In 2006, Delaware welcomed more than 145,000 new businesses.

The reason why so many Fortune 500 companies are drawn to this state is the fact that Delaware has an excellent body of corporate case law spanning 110 years regarding such matters as management/shareholder issues and mergers/acquisitions.

Some Facts

Here are some facts dealing with forming a company in Delaware:

• Names and addresses of shareholders, directors, officers, members or managers of a Delaware Company do not appear within public records. Moreover, during incorporation process, there is no obligation to provide this information to the State of Delaware.
• No minimal capital investment in the Company is required.
• There is no sales tax in Delaware.
• The Company has no obligation to have a bank account in Delaware.
• The Delaware Company headquarters may be located anywhere in the world. The Company has no obligation to have its headquarters in Delaware, nor to conduct any business in this state. The sole obligation for the Company doing business somewhere other than Delaware is to be represented by a Registered Agent in Delaware.
• The same person can be Shareholder, Director and Officer of a Delaware Corporation. Directors can establish the price they wish for the sale of the Company's shares. They can also adopt, modify or repeal any Company bylaw.
• If the Company does not do business in Delaware, it does not have to pay any income tax to the state (this is relevant to C-Corporations only).
• If a Delaware Company shareholder doesn't reside in the state, the said shares are not subject to inheritance tax in case of death.
• The Delaware Court of Chancery is the oldest business court in the country and uses judges instead of juries.
• Delaware adopted a whole set of corporate laws which are very favorable to companies and which recognize contractual freedom. The "General Law Corporation" of Delaware is one of the most evolved and flexible corporate laws in the United States.

With all those advantages in place, Delaware might not be the most suitable place to incorporate your new business. Delaware is one of the three states commonly recognized as "corporate heavens", the other two being Nevada and Wyoming. Before making your choice please see our article that runs a comparison Delaware vs. Nevada vs. Wyoming.