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Reasons to Incorporate in Delaware


 

It is amazing but true that the second smallest state in America is the home of nearly 50% of the companies listed on the New York and American Stock Exchanges. Over half of the Fortune 500 firms are incorporated in Delaware. Many international companies looking to do business in America and in other jurisdictions worldwide choose Delaware because of its corporation law structure, its stability, and its reputations. Below are a few of the reasons why corporations, large and small, foreign and domestic, choose Delaware for their corporate headquarters even though few, if any, have any sales or manufacturing facilities located in Delaware.

Delaware is the least costly state in which to form a corporation.

The annual franchise tax on corporations compares very favorably with other states (as little as $225/year in most cases).

No minimum amount of capital is required when forming a corporation in Delaware. While some other states may require $500, $1,000 or more, your investment in a Delaware corporation can be zero.

There is no Delaware sales tax, no property tax or state corporate income tax for corporations that are formed in Delaware and do not transact business in the state.

There is no estate tax on shares of stock held by non-residents. These shares are taxed only in the state of residence of the corporation's owners.

Shares of stock owned by a person outside the state are not subject to any Delaware taxes.

One person can hold the offices of President, Treasurer and Secretary and be the sole director. Many states require at least three officers and/or directors. Thus, there is no need to bring other persons into a Delaware corporation if the owner so desires.

Delaware is the only state to have a continuous Court of Chancery - a separate business court system. This is meaningful to entrepreneurs for two reasons. First, there is a long-established body of laws relevant to corporations that has been tested in the Delaware courts over many years. In the event of any legal action, therefore, there is a high degree of predictability. Second, Delaware has a long record of pro-management decisions.

Delaware is the friendliest state to corporations. Its Corporation Department revenue is exceeded only by income taxes. The state, therefore, depends on attracting a high volume of corporations and has a great incentive to keep its laws and fees favorable.

One can form a corporation without ever visiting the state. Even annual meetings need not be conducted in Delaware. Meetings can be held anywhere, at the option of the director(s).

The same corporation may conduct different kinds of businesses. If the corporate documents filed with Delaware have the broadest type "purpose clause", any legal business activity of any kind may be conducted. More than one type of business can be conducted by the same corporation without any changes in the documents filed with the state.

Stockholders, directors, or committee members may act by unanimous consent in lieu of formal meetings.

The by-laws of a Delaware corporation may be formulated or altered at any time by its directors.

A Delaware corporation is permitted to pay dividends out of profits as well as out of surplus.

Delaware corporation stock can be privately owned or publicly traded on any stock exchange anywhere in the world when properly registered.

The corporate headquarters and the records of a Delaware corporation may be located in any state in America or in any country in the world as long as the corporation maintains a registered agent to represent you in Delaware. Most of the owners of Delaware corporations have never set foot in Delaware.

A Delaware corporation does do not need to maintain a Delaware business address except for its registered agent address which is required by law for service of process in case of legal action against your company.

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