As you think about where to incorporate a business or form an LLC, you may be considering Delaware. More than half of public and Fortune 500 companies are incorporated in Delaware. Be sure to consider your business type and closely assess the state laws and financial considerations before making a choice for your business.
Delaware advantages. For large businesses, Delaware holds many advantages—but smaller business may not find it as beneficial. Here are the highlights:
Delaware’s business law is one of the most flexible in the country.
The Delaware Court of Chancery focuses solely on business law and uses judges instead of juries.
For corporations, there is no state corporate income tax for companies that are formed in Delaware but do not transact business there (but there is a franchise tax).
Taxation requirements are often favorable to companies with complex capitalization structures and/or a large number of authorized shares of stock.
There is no personal income tax for non-residents.
Shareholders, directors and officers of a corporation or members or managers of an LLC don’t need to be Delaware residents.
Stock shares owned by persons outside Delaware are not subject to Delaware taxes.
If you don’t see a direct benefit to forming in Delaware, it probably makes sense to form in your home state. It’s less complicated and you won’t run the risk of needing to pay business entity taxes or registration fees in two states. You can register a business in Delaware, but many states, including Connecticut, will make you register as a foreign corporation or LLC if you want to do business there.
This document is not a substitute for seeking counsel and advice from legal counsel or your accountant.
This post is not intended as legal advice and is not a substitute for talking to an attorney. The facts in each case are different and may lead to different results. Please do not rely on the advice on this page alone.