Delaware is certainly a nice place, it has great beaches (and pizza), tax-free shopping, and is right down I-95. What is less clear on face, however, is why so many companies are incorporated in Delaware.
The short answer is that the laws of Delaware allow investors more control and companies to reap greater benefits, meaning that companies based in another state choose to make Delaware their state of incorporation.
The laws of Delaware are so appealing, in part, because they are so flexible; there are greater options regarding the structure of business entities and the allocation of rights among founders and shareholders. This flexibility allows investors more control and affords founders more ways to structure their companies.
It is also incredibly easy to incorporate in Delaware, the state requires very little information, and even less paperwork, making Delaware home to one of the fastest incorporation processes. While Delaware law requires your business to have an address in Delaware, there are many registered agents that provide this service for a minimal fee. The state also does not require director or officer names to be included on incorporation documents, providing anonymity.
Lastly, Delaware’s Court of Chancery - the special court system for business litigation – creates a uniform system that rapidly solves business disputes. The use of judges (this Court does not have juries) adjudicating disputes provides clearer precedent and a disincentive for litigation, leading to fewer lawsuits and lower legal costs.
Even though the majority of Fortune 500 companies are incorporated in Delaware, that doesn't mean it is the right choice for you - the laws that benefit big corporations often do little to help out smaller businesses.
If you are thinking of starting a business and reside in Merion, Montgomery, or Delaware Counties and want to discuss your options, please contact us at Sallen Law, LLC.