Delaware is unique among US states because of its favorable tax benefits and business-friendly legal environment. Delaware is a desirable place to start a business because it gives investors and entrepreneurs several important advantages.
Delaware, one of the smallest states in the country, is home to over a million businesses, including half of all US firms, two-thirds of Fortune 500 companies, publicly traded companies, and the majority of technology startups.
Delaware’s corporate court system is well-established and respected, and its tax, legal, and regulation policies are business-friendly, which is the reason for this.
Benefits of Starting A Business in Delaware
Easy incorporation process
Delaware company incorporation is a very simple and quick process.
It is also not necessary for business owners to have an office in Delaware in order to register a business. Additionally, Delaware residents do not need to be owners, managers, directors, or shareholders of Delaware corporations.
Delaware business law is adaptable
The laws of Delaware are frequently used as models by other states. The state’s laws, such as the Limited Liability Company Act and the Delaware General Corporation Law, serve as the basis for some of the most business-friendly legal frameworks found in other states, but not all of them.
Delaware’s legislators collaborate with corporate attorneys to update these business-friendly statutes regularly, ensuring that the state remains at the top of offering incorporation benefits.
A special court for resolving business disputes
This is one of the oldest law courts in the nation, and they only hear cases involving corporations. The court’s decisions are typically more predictable than those in other states because judges, who specialize in corporate law, make the decisions rather than juries.
You will likely have a judge with a lot of experience in complex law if your company is involved in litigation. In the same way, corporate attorneys are usually very familiar with Delaware business law due to the state’s popularity as a place to incorporate. You can therefore assume that your company’s attorney will be conversant with Delaware law.
Business-friendly tax system
Delaware is not a tax haven. However, the state does provide foreign companies with a business-friendly tax policy. The following are some of the main reasons that foreign investors want to locate their US operations in Delaware:
- Delaware does not impose corporate taxes on income earned outside of the United States.
- Additionally, interest, royalties, and other similar investment income received by specific holding companies in Delaware are not subject to corporate tax.
- For a Delaware corporation that doesn’t do business in the state, there is no sales tax and no gross receipts tax.
- There is no state tax in Delaware on intangible property, like patents and trademarks.
However, businesses that register in Delaware are required to pay the Delaware Secretary of State an annual tax or franchise tax every year.
Less maintenance requirements
Compared to certain other states, Delaware has fewer compliance requirements. Fortunately, this helps international companies operating in the US to lessen the annual burden of excess inventory.
The type of Delaware company you have chosen may affect the ongoing maintenance requirements for that company.
Particularly, business owners would be responsible for maintaining their registered agent, filing annual reports (Delaware LLCs are exempt from this requirement), paying franchise tax and annual tax to Delaware’s Secretary of State, and performing other necessary tasks.
Delaware corporations and limited liability companies can guarantee a high level of privacy. The identities of the company’s directors and officers (for Delaware corporations) and managers and members (for Delaware LLCs) are typically kept private.
Delaware LLCs are exempt from disclosing member names and addresses in their filings, except for the company’s operating agreements.
In order to comply with the annual franchise tax settlement, Delaware corporations may be required to list the names and addresses of each of the company’s directors and one officer.
A company registered in Delaware is therefore given better protection than a company registered in any other state in the US, as such details are hard to find on documents of incorporation or public records.