1. Advantages of Incorporating in Delaware
2. Disadvantages of Incorporating in Delaware
3. How to Incorporate in Delaware

How long does it take to incorporate in Delaware? Delaware is one of the most popular states to form a business, particularly due to the favorable business laws and tax-friendly requirements. In fact, many large companies are incorporated in Delaware, including Apple, Google, and Walmart. There are many advantages to incorporating in Delaware, and before choosing to incorporate, you should be mindful of such benefits, along with how long it takes to incorporate.

Advantages of Incorporating in Delaware

The State of Delaware has favorable business laws for all entities and not only corporations. While most business owners are aware of the favorable laws surrounding Delaware businesses, there are also several other advantages to owning and operating a corporation in Delaware. Such advantages include the following:

  1. Court of Chancery to hear business disputes
  2. Favorable tax laws
  3. Quick formation
  4. Anonymity for owners

The state has a distinct Court of Chancery that hears legal disputes involving business law. These judges have a background in corporate law, and generally, have a much greater understanding as to how business decisions work. Therefore, a jury is not used in such legal disputes.

Delaware also has favorable tax laws, often called a “tax haven” for those choosing to incorporate in the state. It doesn’t collect taxes on those entities that don’t actually transact in the state. Therefore, if you incorporate in the state but do business in another state, Delaware won’t collect corporate tax from your business since you aren’t actually doing business there. Furthermore, Delaware doesn’t take tax royalties or other intangible assets. This can lead to significant financial savings for some businesses.

When forming your corporation in Delaware, the process of formation is quick and easy. It actually takes less time to incorporate in Delaware than most other states, and unlike most states, you can remain anonymous when forming your Delaware Corporation.

Disadvantages of Incorporating in Delaware

While there are several advantages to operating your Delaware Corporation, there are some potential disadvantages too. This might include the following:

  1. Additional expenses
  2. Franchise taxes
  3. Reporting requirements

When forming your corporation in the state, you will have additional fees to pay, including the cost of registering your business in your home state along with the fees associated with incorporating in Delaware. Therefore, if you plan on doing business in another state, then you will incur additional fees due to the fact that you are doing business in a different state from where you are incorporated.

Furthermore, if you incorporate in Delaware, but don’t intend on doing business in the state, then you will be required to obtain a registered agent in the State of Delaware. This is an additional fee.

Delaware Corporations also incur a franchise tax fee, which must be paid annually. The amount of tax to be paid is dependent on the valuation of the company’s shares. Generally, the tax starts at $75 with a $50 filing fee but could be up to $180,000 if the corporation’s shares are worth more.

Delaware Corporations have annual reporting requirements, which involves additional fees. If you are incorporated in Delaware but do business in another state, then you will have to pay fees and file reports in both Delaware and your home state. For large corporations, this might not be an issue, but for smaller businesses, the fees might be too burdensome.

How to Incorporate in Delaware

In order to properly incorporate in the state, you have to file a certificate of incorporation with the Secretary of State, identifying your company’s name, the purpose of its formation, the amount of shares being issued, the name/address of your registered agent, and the names/addresses of the incorporators. You need not list all owner names on the documentation.

When incorporating in Delaware, before you submit the required paperwork, you need to ensure that the business name you want to use is available for use. In order to do this, you can conduct a business entity search on Delaware’s Secretary of State website.

If you need help learning more about how long it takes to incorporate in Delaware, you can post your legal need on UpCounsel’s marketplace. 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.