Known as the United States’ second smallest state, Delaware has a total area of merely 1,982 square miles. It also ranks as one of the least populated states in the country with an estimated population of over 1 million. No wonder, the state has gained the nickname The Small Wonder.
What’s surprising to some, however, is how the tiny state managed to become a global business hub.
Companies from all over the US (and even many from other countries) are choosing Delaware as their legal home. In fact, statistics show us that “66.8%” of Fortune 500 companies are incorporated in the state.
Amazon, American Express, AstraZeneca, Disney, Google, Tesla, and Walmart are just a few of the companies that love Delaware. Of course, that’s on top of many other big and small businesses that opted for the state over others.
If you’re starting a new business and are wondering if you should incorporate your company in Delaware, here are several reasons why companies choose the state.
Delaware has business-friendly laws
First off, the state is known for its corporate-friendly laws. Case in point, the Delaware General Corporation Law (DGCL) was established way back 1899. This was specifically passed to attract businesses to incorporate in the state. Today, corporate law experts continue to review and update the DGCL, ensuring that it continues to be relevant to the needs of modern businesses.
The state also has the Court of Chancery. Established in 1972, this specialized court is dedicated to handling corporate cases. Disputes are resolved in a timely manner.
Processing business requirements is much easier
Next, another advantage is that Delaware has faster processing time for administrative paperwork. Whether you are a solo entrepreneur or are working with a group, you are guaranteed a smooth experience. Red tape is definitely not as elaborate as you incorporate your company in the state.
As a Forbes article tells us:
“Delaware brags about same-day business filings. Often, the incorporation process can take less than an hour to complete. To make things even easier, Delaware law allows one person to hold numerous positions in the company such as the role of officer, director and even shareholder. In other states, this can often only be accomplished with sole proprietorships or LLCs.”
In addition, The Delaware One Stop is an online portal for “small businesses, startups, entrepreneurs, expanding businesses and freelancers.” This useful resource can be perfect for anyone looking for information regarding the state’s registration and licensing requirements.
Non-residents (and even non-Americans) are welcome to do business in Delaware
As mentioned earlier, it’s possible to form a company in the state whether or not you are a resident. Actually, it’s not even a requirement to be an American national. As long as you comply with the requirements and have a Delaware-based registered agent, you can conduct business within the state.
Your registered agent will represent you in the state and even receive legal correspondence on your behalf. The best will also be able to arrange Foreign Qualification, a Certificate of Good Standing, Entity Type Conversion, EIN application, Renewal and Revival support plus more. Some even offer virtual office, virtual mailbox/phone number and receptionist services.
Business entity structures are flexible
Fact: the state allows one person to sign up for different roles in the organization. This means an individual can act as a company’s director, shareholder, and secretary, among other positions.
So instead of filing as a sole proprietorship, you can form a corporation in Delaware. You can fall under the category of single-member LLC.
You can protect your privacy
This is an important point! Protecting your privacy as a business owner is easy in Delaware. With the help of your registered agent, you can conceal your personal information (address, contact numbers, etc.) from public listings. As pointed out previously, your registered agent will represent you and your interests best.
What’s more, with some registered agents offering a range of virtual office services, you’ll never need to use your personal address. As a startup in particular, you may not have official offices – and it’s never a good idea to make your home address public. A registered agent can provide a legitimate business address which will confer credibility on your brand. At the same time, it will ensure that you and your loved ones are safe from any unwanted visitors, like disgruntled former employees or clients.
Finally, Delaware is a “tax haven” for businesses
Last but certainly not least, the state is known as a “tax haven” for implementing tax-friendly policies.
“Delaware does not have a state or local sales tax,” confirms the official Delaware.gov website. “Delaware does, however, have an annual business license requirement, as well as a gross receipts tax that is imposed on the seller of goods or provider of services.”
Flat fee taxes are relatively low, too, compared with other states. While others calculate franchise and LLC taxes based on income, Delaware does it differently. The state has a flat fee you’ll only have to pay every year.
Generally, LLCs only have to pay $300 dollars annually. On the other hand, a corporation’s fee is determined based on the number of shares and the type of corporation. Their franchise fee is typically around $175 to $400.
Conclusion
It’s clearly understandable why many companies, in the US and abroad, have chosen Delaware as their home. With the majority of Fortune 500 companies opting to incorporate there, you’ll be in great company. The business-friendly environment afforded by state institutions mean that when you incorporate your company you’ll be in the best possible territory from day one.
What’s more, as cited by SCU.edu: “Part of the ‘Delaware advantage’ revolves around the Chancery court, whose appeal… lies not just in the no-jury system and the corporate law skills of its five judges — avoiding the need to educate an uninformed jury – but in the state’s law itself.”
Plus the fact that non-residents (and even foreign nationals) are welcome to incorporate there, there’s flexibility for business structures, privacy protection and great tax benefits!
If you’re planning to incorporate your company in the state, be sure to consult with a registered agent in Delaware. Ask about how you can make the most of your Delaware incorporation and which benefits are available for you. That way, you can make an informed decision for your business.
