Why should I register a business in Delaware?
February 17, 2016
Want to know why Delaware is a top choice in the United States for registering a business? Are you looking to register company in Delaware? This state has emerged as one of the most popular options for setting up a company in the United States. A huge number of companies have chosen to incorporate in Delaware. In fact, somewhere around 60 percent of Fortune 500 companies are incorporated in this rather small state, and as much as 25 percent of the government’s general fund is generated by corporate activity.
Delaware is a top choice because the state government is known for taking good care of its corporate statues and laws. In other words, the state’s laws and regulations regarding incorporation are generally among the most up-to-date, clear, and well thought out in the country.
In fact, the state is considered the leader as far as state laws go and it is not uncommon for other states to model their laws on Delaware’s. Of course, this means many other states not only lag behind Delaware, but they might also be watering their laws down.
Delaware’s legal system makes it a great place to register
For a corporation, clarity is priceless. Companies want to know, very specifically, what they can and cannot do. Ambiguity tends to lead to headaches and headaches that often play out in court. With Delaware, companies have a good idea of what they are getting into, what’s required, and what’s against the law.
In fact, if a corporation does find itself dragged into courts over issues related to state law, they get to use a special court: the Court of Chancery.
Importantly, rulings in these courts are not decided by juries, but instead judges who themselves are top-notch legal experts.
This is especially important because most members of most juries are not business law experts. Asking them to rule on complex corporate legal issues is not only placing a huge burden on them, but also increasing the risk that they will misinterpret the law, or else make judgments based on emotions, not facts.
The judges in the Chancery aren’t normal judges either, but experts specifically in the business law field. This specialized legal system ultimately means that courts are able to address issues quickly. Instead of a case being bogged down for years on end, in Delaware corporations can seek remediation quickly and efficiently. This keeps legal costs down and increases clarity.
Delaware simply out-competes other states in business law
Elsewhere in the United States bi-partisan bickering has led to a breakdown of the political system. Simple bills and budgets can be dragged down in massive political battles that eat up resources, create a lot of noise, and result in ineffective policies. When it comes to Delaware, however, both Democrats and Republicans are united around the idea of keeping the state business friendly.
Other states have tried to copy Delaware’s success, but none have fully succeeded. When it comes to corporations, companies tend to vote with their feet, and most major companies are still incorporated in this one particular state. There are a few other options, like Nevada, that are also popular, but Delaware still takes the cake.
Offshore company formation in Delaware
For about two decades Delaware has been a very popular jurisdiction for incorporation of offshore companies. The United States certainly never liked the idea that a U.S. Corporation is used in an international business structure made to reduce or avoid taxes. However, it has only been in the last few years that they took several effective steps to stop this. Today a Delaware company is still simple to incorporate for international customers but you will hardly find any bank opening an account for it outside the U.S. Most businesses have therefore moved to Belize or Seychelles.
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