Best State to Incorporate: Everything You Need to Know
The best state to incorporate your business is in Delaware. To incorporate in Delaware, you must register in the state. 3 min read
2. Franchise Taxes
3. Legal and Court System.
4. Investor Factor
5. Personal Protections
6. Delaware Filing Process
8. Delaware Services
Best State to Incorporate
The best state to incorporate your business is in Delaware. To incorporate in Delaware, you must register in the state. Delaware is a prime location because:
- The state has flexible business laws
- Delaware has favorable tax codes, especially for companies with large stocks or a complicated capitalization structure
- There are no personal income taxes levied on non-residents
Small and large businesses incorporate in Delaware. Over 60 percent of Fortune 500 companies, including half of U.S. public companies, have a corporate presence in Delaware. Delaware is also favorable to most companies, including LLCs.
Many companies that register in Delaware do not have to conduct business there, but they must pay franchise taxes. Franchise taxes are taxes imposed on companies for doing business in the state. A company is not required to do business in Delaware. Many states levy franchise taxes in various forms, but Delaware bases its franchise tax model on the amount of shares and value. In other words, franchise taxes do not burden smaller companies with fewer shareholders and assets.
Legal and Court System.
Delaware business law allows judges to decide cases as opposed to juries. Many companies want an experienced judge in business law instead of a jury. With that, a judge with a business law background favors larger companies, as smaller businesses usually do not have to contend with complex legal matters. Further, case disputes are solved faster than many other states. In addition, Delaware has a court division solely focused on hearing business disputes.
If you are looking for investors, they may require you to incorporate in Delaware before they invest in your company. Instead, incorporate in Delaware as a natural draw to potential investors, especially if you are seeking venture financing. Each investor has different qualifications when it comes to financing companies, but your business should have the following key factors before pitching to investors:
- Big Ideas
- Customer or Client Engagement
Delaware not only protects profits, but personal assets as well. For example, the manager of a business is protected under Delaware law if an owner decides to sue the manager for his or her personal assets. Managers also receive legal protection even if a management decision causes damage to the company. Such a law allows managers to take risks and can benefit companies through positive returns if those risks are successful.
Delaware law has a unique ability to balance the concerns of managers and shareholders. The U.S. Chamber of Commerce has consistently ranked Delaware as the No. 1 place for personal liability protections for over a decade.
Under Delaware law, an owner’s personal assets is safeguarded as well, which is why Delaware attracts a large number of LLCs. Such a law naturally attracts owners or members of an organization who wish to maximize their liability protections.
Delaware Filing Process
Delaware law applies even if you conduct business out of the state. You can file for Delaware court protection via registration with the state’s Secretary of State Office. You do not need a physical presence in Delaware to qualify. Further, you do not need a bank account or business address in the state. However, you need a registered agent in the state. A registered agent is an appointed representative who receives official papers on behalf your organization and to forward any paperwork in the form of annual reports. Someone within your company can be appointed a registered agent, including yourself, or another company can act on your company’s behalf.
Delaware’s stable business climate allows companies to structure a company in a manner that best suits the organization. In essence, Delaware offers a valuable service to businesses, stability, and consistency. Further, many individuals in the form of sole LLC owners can benefit from Delaware’s laws and gain the confidence necessary to flourish.
For more information on Delaware’s valuable services, you can contact the state’s Division of Corporations. The Division is known for its stellar customer service and can help you expedite the filing process faster. Also, the Secretary of State Office operates on double shifts and operates beyond normal business hours to ensure the filing process occurs quickly.
To find out the best state to incorporate your business, post your legal need on the UpCounsel marketplace. UpCounsel can help you during the incorporation process in Delaware and other states that may be suitable for your business operations. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.