Before You Form a Delaware Corporation: The Top 5 Important Things Consider
If you’re interested in forming a Delaware corporation then it’s important that you know the top five things to consider3 min read
If you’re interested in forming a Delaware corporation then it’s important that you know the top five things to consider. With the right considerations in mind, you can ensure your business starts off on the right foot, and you can be well prepared for the potential pitfalls that may occur. Being well- informed can help you to make the most of this important decision and set the trajectory of your business.
What makes Delaware so attractive when it comes to forming a corporation? For starters, Delaware is well-known for its business-friendly regulations and strong court system. Not only are there general business laws that can apply regardless of your location, but there are also laws that are written specifically for Delaware corporations, which can offer a layer of additional protection. Additionally, Delaware is home to the culminating court for corporate legal issues, making them the ideal jurisdiction for corporate affairs.
For all of these reasons, businesses across the country often incorporated in Delaware in addition to their local jurisdiction. This allows them to take advantage of the favorable Delaware laws while gaining access to licensed attorneys who understand the particular nuances of Delaware regulations. Whether you’re based in New York, California, or beyond, a Delaware lawyer is an important asset when forming a Delaware-based corporation.
Below we’ve outlined the 5 important things to consider when forming a Delaware corporation.
1. Incorporator and Registered Agent
The incorporator is the individual who submits the articles of incorporation and is responsible for the overall filing process. The incorporator is typically associated with the company and is the contact person for the Delaware Division of Corporations.
The registered agent is the individual who is responsible for receiving important legal documents on behalf of the corporation. This individual is available to receive documents during normal business hours and must have a Delaware address.
2. Subchapter Selection
Delaware corporations are organized into Subchapters, and you must select the appropriate subchapter in order to effectively comply with the Delaware Corporate Code, which applies to all corporations, regardless of their location. The Subchapter S election enables pass-through taxation and also offers tax savings options for certain businesses.
3. Board of Directors
The board of directors oversees the corporation and is responsible for making key decisions. Depending on the size of the corporation, the board may consist of anywhere from 1 to 15 directors. All board members must be designated by the incorporator or shareholders of the corporation.
4. Corporate By-Laws
In addition to the rules and regulations prescribed in the Delaware Corporate Code, companies must also develop a set of corporate bylaws. These bylaws are typically drawn up and approved by the board of directors and outline the specific rules and procedures that the corporation must follow.
5. Shares of Stock
It’s important to understand how stock is issued and distributed in a corporation. Depending on the size of the business, the number of authorized shares may vary. The owner of the corporation should consider her own needs and the needs of other stakeholders when determining the type and amount of shares to issue.
Forming a Delaware Corporation can be an exciting and rewarding experience. Planning ahead and researching the laws and regulations can help to ensure that the process is successful. Understanding what to consider when forming a Delaware Corporation can save you from potential headaches and provide the basis for a strong and successful business.