Forming a Delaware corporation can be a great way to protect your business and its interests. Below are a few of the numerous reasons why you may choose to incorporate your business in the state of Delaware. You will be able to take advantage of perks not open to corporations based in other states if you establish your firm in the form of Delaware and incorporate a corporation there. In addition, you will benefit from the protection afforded by Delaware’s robust corporation statutes.
Continue reading this article to find out why incorporating a corporation in the state of Delaware is the most practical choice for your company. After all, it comes with various advantages, including less liability and tax flexibility. But should you go with a Delaware company or another option instead? Consider creating one due to the following reasons:
Delaware Corporations Enjoy Strong Legal Protection
When compared to alternative business arrangements, including sole proprietorships or partnerships, the legal safeguards afforded by a Delaware corporation are particularly attractive. “Limited liability” refers to one such protection. As a result of limited liability, shareholders are shielded from being held personally liable for a corporation’s obligations. This is particularly helpful if your firm is ever sued since the plaintiff will only be able to collect from the business’s assets, and not your own, in the event of a successful lawsuit.
Because investors are less concerned about losing their money if a firm goes bankrupt, limited liability also makes it simpler for big corporations to obtain capital via the issuance of stocks, bonds, and other instruments. Since your company was formed by state law, it must follow the regulations of that state. In case of a lawsuit against your corporation, the court will only consider claims brought under Delaware law rather than California or Texas law. Furthermore, the plaintiff will be required to file a suit in Delaware.
Delaware Corporation Offers Great Tax Flexibility
While there is no inherent benefit to forming a Delaware corporation over creating one in another state, its favorable tax climate has made it a popular option for startups. A company incorporated in Delaware has the same legal standing as a corporation formed in any other state. However, because of its business-friendly legislative framework, Delaware is a popular choice for new business startups. Many companies choose to have their incorporation documents filed in Delaware despite not having any employees based there. Compared to businesses formed in other states, the principal benefit of incorporating a Delaware company is its increased tax freedom for its shareholders. The state has made it easy and affordable to establish a business there, and it provides many benefits unavailable in any other form.
The State’s Court System Is Highly Respected
If you decide to incorporate there, there are significant advantages to having your company’s headquarters in Delaware. Delaware is well-known for its openness and investor-friendly culture, and its judicial system is often regarded as among the most just in the nation. When a company is incorporated there, it may take advantage of the simplified processes and short processing periods offered by the government. Having such a well-respected judicial system in a state positively affects the reputation of businesses headquartered there.
Although it may seem inconsequential now, how you see yourself (and how others view you) may significantly impact your company’s success or failure down the line. It’s important to think about more than just the prestige that a Delaware company may provide when making a long-term decision on where to establish a solid base of operations.
Delaware Has Efficient And Friendly Corporate Governance Laws
One of the state’s primary selling points is its business-friendly corporate governance legislation. To rephrase, Delaware allows you to form your corporation as you choose while providing legal safeguards to preserve your rights as a shareholder. When creating a company, it is optional to include an operating agreement that details the privileges and restrictions of various classes of investors.
If there is a disagreement between you and the other shareholders, you may take your case to the state’s equity courts, which are a subset of the state’s business court system. In addition, Delaware has a wealth of knowledge in the area of company sales and acquisitions. If you’re thinking about selling your business or there’s a chance another company may purchase it in the future, then Delaware law could apply to your situation. This means that the state has already considered most of the difficulties you’ll have in dealing with such possibilities.
Our team members at Corporation Center are here to answer any questions you may have about forming your business in Delaware. You can reach us at (800) 580-4870 or visit our website for more information about Delaware corporations and creating your corporation in this state!
