You are not legally required to hire a lawyer to incorporate in Delaware. But if it is important to you to form a Delaware corporation or other entity because our laws are helpful to your business, it is penny-wise and pound foolish not to get advice up front.
Disadvantages of Registering in Delaware Here are other factors to consider: There are no real tax savings for small businesses. Although Delaware doesn't tax companies incorporated in the state that don't do business there, your home state will tax your company, so you do not avoid taxation. Filing is more expensive.
The fact is, Delaware is well-known as the “Incorporation State” for both small businesses and large corporations alike. The state of Delaware offers the strongest corporate law structure, bar none. This answers why to incorporate in Delaware.
Best State for Corporations and LLCs Owners Delaware LLCs and corporations are given the strongest legal protection available by any state. Piercing the corporate veil, or making individuals personally liable for claims against their business, is very unlikely in Delaware.
Often referred to as the “Delaware loophole,” the accounting strategy enables huge corporations to declare certain types of revenue in the state where the company is incorporated rather than in the state where the business operates and the revenue is earned. “Pennsylvania is in desperate need of tax fairness.
Tax-Friendly State Nevada often tops the list as places to incorporate for tax considerations given that it has no taxes on corporate income, corporate shares, franchises, or personal income. Be aware though that most states require you to pay taxes on any income generated within that state.
Do I have to live in Delaware to incorporate there? No, you do not have to live or even do business in Delaware to incorporate your company there. You will, however, have to hire a registered agent with an address within the state to accept lawsuits and other legal documents on your company's behalf.
Delaware is often considered one of the best states to form an LLC because it has limited fees and tax obligations. In fact, many businesses choose to form an LLC in Delaware even if they don't intend on doing business in Delaware.
The other major reason corporations choose to incorporate in Delaware is the quality of Delaware courts and judges. Delaware has a special court, the Court of Chancery, to rule on corporate law disputes without juries. Corporate cases do not get stuck on dockets behind the multitude of non-corporate cases.
If you're a Delaware LLC doing business in California, your company is considered domestic to the state of Delaware and foreign to California. To take advantage of strong corporate law structure, Delaware is by far the most popular domestic choice.
The primary reason that the tech startups I work with incorporate in Delaware is finance. Venture capital firms typically require companies to be structured as a Delaware corporation as a condition of funding the company.
For Corporations, the outside investors prefer Delaware, whereas management may prefer Nevada. In sum, both Delaware and Nevada offer more protection and predictability than your home state. Delaware tends to be preferred for corporations and LLCs.