Delaware is, by far, the most popular state for incorporating a business. In fact, Delaware is the home of more than half of all businesses currently in the Fortune 500, according to Reason.com. This routinely leads many people to ask…why? Well, the answer is multi-faceted and includes different factors such as tax benefits, legal benefits, and practical benefits.
Let’s take a look at just a few of the most common reasons why business owners opt to incorporate in Delaware.
Legal Treatment of Business Managers and Owners
The Delaware General Corporation Law (DGCL) is often interpreted as being quite friendly to the management side of the corporate structure. Specifically, there are many specific statutory provisions that help corporations run more efficiently. Those provisions include the following:
- Delaware corporations have the option of using cumulative voting, while other states make it compulsory for corporations that are not publicly traded.
- The DGCL also allows for shareholder approval of mergers without separate votes in each class of outstanding stock.
- Special meetings can be limited to a call by the Board of Directors, which prevents the complications associated with shareholders calling special meetings.
- The DGCL embraces new technologies and now allows corporations to use distributed ledgers or blockchains to create and maintain the corporate records required by law.
Tax Benefits for Businesses
Another big reason why business owners decide to incorporate in Delaware is due to favorable tax laws. For example, Delaware currently does not impose a sales tax. In addition, there is no corporate income tax on revenue earned outside of Delaware. Finally, there is no corporate income tax levied on investment earnings.
Unique Legal System Designed to Help Resolve Business Disputes
Another attractive aspect of Delaware for business owners is the unique court system specifically designed to help businesses litigate and resolve disputes. Delaware has specifically created courts that help arbitrate corporate disputes. These “Courts of Chancery” have no juries and are administered by judges with experience in corporate matters. The access Delaware offers to an efficient arbitration process is quite beneficial for businesses since it can help mitigate both the time and cost of internal disputes. The arbitration process can also help reduce legal fees, lost business opportunities, and the bad publicity that can come with a public disagreement between managers, owners, and shareholders.
The Courts of Chancery have become well known due to their involvement in resolving high-profile business disputes with large corporations such as Wal-Mart, Apple, Coca-Cola, and so forth.
Have Questions About Incorporating Your Business? Contact an Experienced Business Attorney in Los Angeles Today
If you are looking for professional guidance and legal advice on where to incorporate your business, which may ultimately wind-up being Delaware, then contact the Hakim Law Group to directly consult with an experienced business attorney in Los Angeles. Our law firm stands ready to help small business owners and entrepreneurs. Our team of skilled and highly reputable business attorneys have worked in top tier international law firms and served as general counsel to major companies. This high level of diverse legal and business experience is paramount to our boutique approach – which produces more efficient, responsive and, ultimately, more effective results. For further information or to schedule an appointment with a leading business attorney in Los Angeles please contact HLG at 310.993.2203 or visit www.HakimLawGroup.com to learn more.