When it comes to selecting a base of operations for your business, companies in the United States are often drawn to the advantages that available in the state of Delaware. Although businesses from other parts of the world have seized upon the advantages of establishing a corporate base in Delaware, domestic businesses continue to use Delaware corporation law as their cornerstone for establishing their enterprise. When it comes to selecting the right representation that understands local regulations, businesses in Chicago are turning to UpCounsel, a network of experienced lawyers providing high quality, cost-effect legal services.

The prevalence of Delaware corporations is almost as ancient as the United States itself, with firms across the country looking to the small East Coast state as the best place to establish and operate a business. Although many states that comprise the modern USA now recognize both the advantages and the possibilities present with the Delaware corporation, businesses continue to consider the establishment of a Delaware base first. To understand the advantages of Delaware corporation, a basics understanding of corporation law and its present and possible uses is necessary.

What is a Corporation?

A corporation is an organization, or an ‘artificial person’, that abides by a set of rules and regulation as outlined by a national governing body. Generally speaking, these corporations have the rights of a real person, for example, they have the right to go to court, the right to enter into binding contracts, and the right to pay taxes (although public companies may offer some unique tax stances). A corporation is made up of an owner as well as share holders, and any agreements of stocks issued from the company are subject to the rules and regulation set forth by the governing body. In the United States, the common governing body is the Securities and Exchange Commission (SEC).

The Concept of Incorporating

Incorporation is the process of creating a legal entity and requires filing a set of documents with a national governing body, such as the SEC. From a business perspective, it signals to the public (and potential investors) that the entity in question meets all the criterion for legal status. A company that is considered as ‘incorporated’ can then has access to of a range of benefits ranging from limited liability to taxation advantages.

The Advantages of Incorporating in Delaware

When it comes to choosing to incorporate in Delaware, the advantages are numerous, here are just a few of the main advantages to consider.

The laws and regulations governing corporations in Delaware are quite expansive and created to cover most situations that any business may encounter. This is why some of the largest companies in the United States are incorporated in the state of Delaware, regardless of their operations elsewhere.

It is also true that Delaware has some of the most efficient state bureaucracy when it comes to corporations, meaning it is often much easier to incorporate in the East Coast state than it is to do so elsewhere in the country.

In addition Delaware is a member of the ‘Eight Factor Test’. This test determines whether a corporation is liable for taxes in the state of incorporation. If a company is not conducted solely in Delaware, but it is just incorporated in the state, it may not be liable for the taxes in the state it does its operations in and in the state of incorporation.

Finally, Delaware corporation also offers a range of ‘sisscorp’ (‘smaller’ or ‘sibling’) advantages. These advantages include the option to form a limited liability company whereby members of the firm are not the same entity as the corporation, and the limited liability of corporate assets.

For businesses in Chicago and other areas of the United States, understanding the advantages of Delaware corporations can help you make more informed decisions about the action you want to take when it comes to setting up and incorporating your business. At UpCounsel, our network of experienced attorneys can help provide you with legal services for a one-time or an entire freelance legal department.

Topics:

Delaware Corporation,

Corporation Law,

Eight Factor Test