Delaware has a long history of housing corporations from all over the world. The state’s incorporation process, coupled with some distinct business advantages, makes it a haven for corporate entities. Citizens for a Pro Business Delaware seeks to inform the public of both the benefits of incorporating a business in Delaware, and its potential for corruption.
The Nationwide Incorporation Process
Incorporating a business means making it into a legal entity almost as if the business were a person. Incorporating your business provides a number of important advantages and protections including:
- Protection from liability for debts
- Continuity after the owner dies
- Ability to raise capital through the sale of securities
- Ease of transfer
- Establishes conditions for a company to become public
While every state has a different incorporation process, there are a few universal steps nationwide. Those steps include:
- Choosing a business name
- Naming an agent to act on your company’s behalf
- Preparing your state’s articles of incorporation
- Establishing bylaws
- Continued compliance with state incorporation laws
Incorporating a Business in Delaware
Under United States’ business laws, you’re allowed to incorporate in whatever state you would like with one caveat: you must register your company in any additional state you wish to do business in.
Delaware is considered the most popular state to incorporate your business in. The process is slightly different, however. Here are the steps to incorporate a Delaware business:
- Choose your business type
- Name a registered agent (must be located in the state)
- Fill out certificate of incorporation
- Obtain certificate in good standing (some financial institutions only)
- Pay annual franchise tax
Why Do Businesses Choose Delaware?
The process for incorporation in Delaware is arguably easier. The question becomes, “Why incorporate a Delaware business?” There are a few distinct advantages to having your company be a Delaware business. The primary advantage rests with the state’s tax laws. Those laws often favor corporations. If your business is incorporated but not physically located in Delaware, you don’t have to pay state income tax. Additionally, Delaware businesses offer a greater level of privacy as they don’t require you to disclose as much information about your business, such as the board of directors.
Business law is a thriving industry in Delaware, which receives much of its state income from the incorporation process.
Potential for Corruption: Delaware Chancery Court
Another reason that companies decide to incorporate in Delaware is because of the Delaware Chancery Court. What might be considered an incredible advantage to some is actually a gateway to corruption. Delaware’s Chancery goes back centuries. Established in 1792, the Chancery Court is considered by some to be the most prestigious business court system in America. It is reliant on its system of judges, rather than juries, to oversee Delaware’s economic concerns.
Because the incorporation process in Delaware requires such little information on the part of the incorporating company, and because of the legal, privacy, and tax protections placed on Delaware businesses, the Delaware Chancery Court is subject to a higher degree of potential corruption regarding business decisions.
The Coastal Network is an outlet committed to providing a voice against corruption and advocating for transparency in the Delaware court system, business world and beyond.
For more on corruption in the United States, including the Delaware Court system, visit www.coastalnetwork.com