There’s another reason why Delaware is known as “the first state” and it has nothing to do with the fact that it became the first of the 13 original states to ratify the U.S. Constitution. Delaware happens to be the first state many business leaders think of when looking for ideal jurisdiction to incorporate.
From favorable residency and citizenship requirements to an overall favorable financial climate, Delaware offers corporations a wealth of benefits that most other states do not. Beyond the stated positives lie a number of lesser-known points that make Delaware an attractive consideration for one’s business.
Here is a list of various selling points when thinking of making Delaware home:
For over three decades, the Delaware Economic Development Office has worked diligently to create a positive environment that attracts new investors and corporate endeavors. In addition to maintaining a focus on industry expansion and bolstering small businesses, the state has developed a solid infrastructure for new and existing employment opportunities.
Delaware is widely regarded as one of the most business-friendly states in the nation as it pertains to tax laws. The state has had a reputation as such since post-American Revolution times when the state’s Court of Chancery was established in 1792 to help reduce businesses tax bills, making a company more attractive to investors.
Among Delaware’s most attractive tax advantages are: no state or local general sales tax; no personal property or inventory taxes and consistently low real property taxes. Delaware will not tax income from intangible property, does not tax business transactions, capital shares, or stock transfers.
The Delaware revenue allocation strategy is another factor that makes the state an attractive tax haven for businesses, giving them leeway to reduce tax bills. If a company calls Delaware their legal home, even if their physical headquarters are in another state, allocating royalties and other revenue to tax-free holding companies in Delaware lets them reduce their taxes in that other state.
All Judges, No Juries
Should your business ever find itself in the middle of legal troubles, Delaware’s Court of Chancery does not subject businesses to plead their case in front of a jury. Rather, a judge will make the final decision regarding a legal matter.
Moreover, due to the fact that judges preside over business cases and are able to set a legal precedent, companies that call Delaware their legal home frequently bypass the litigation stage since advisors structure business deals with the state’s legal precedents in-mind to head off any lawsuits at the pass.
Delaware offers a number of generous tax credits and incentives to those who incorporate within the state for various reasons. The state offers credits for clean energy and historic creation, but perhaps the tax credit that is most appealing to businesses that make Delaware their legal – and potentially physical -- home is the job creation tax credit. The state incentivizes businesses with a physical presence in the state that create more local jobs.
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In a day and age where just about anything can be found on the Internet, companies that make Delaware their legal home afford their owners and shareholders a great deal of anonymity. Companies registered in Delaware do not have to give the names and addresses of owners on certification, nor are they obliged to publicly name shareholders on their annual report.
A Corporation of One
Businesses that call Delaware their legal home do not have to have a multi-person team to fill positions such as President or Director. One single person can possess all of the titles within the company. Delaware allows you to be either a corporation of one, or an LLC with just one member.
These are just a few of the reasons why more than half of Fortune 500 companies choose Delaware as their legal home and why it’s worth considering if you’re planning to incorporate your own business.