Since 1965, the government of Delaware has been developing the region to become an optimum jurisdiction for businesses to be set up in. The government has been successful in its initiative by introducing various business-friendly government policies, providing businesses with tax benefits and incentives, allowing business owners to set up their business without any hassle, and more. Now, Delaware has become a popular jurisdiction for foreign investors and business owners who wish to incorporate their business. By reading this article, you will better understand the reasons why you should register company in Delaware.
What are the advantages of registering a company in Delaware?
1. Tax benefits and incentives:
- The Delaware government offers foreign investors and business owners various tax benefits and incentives with the aim to attract foreign direct investment (FDI) to the country and thus, stimulate the economy.
- Businesses that are set up in Delaware but operate their business in other states if the United States of America or other countries are not subjected to corporate income tax.
- Therefore, business owners who are a non-resident of Delaware are not charged tax on the shares or income held by them there.
- Businesses are also exempted from sales tax, value added tax (VAT), intangible property tax, capital gains tax, and more.
- However, businesses are subjected to a franchise tax which is calculated based on the share value of the business. This tax charged is still relatively lower than that charged in other countries.
- With businesses being subjected to such low tax rates and receive different exemptions, Delaware is considered to be a tax haven state in the United States of America. Despite this, the negative notion of ‘tax haven’ is not associated with Delaware. It is also not on the black list of the Organisation of Economic Cooperation and Development (OECD).
- Moreover, over 63% of the Fortune 500 companies are incorporated in Delaware which shows that this region has developed a good reputation.
- Usually, angel investors and venture capitalists prefer to invest in corporations incorporated in Delaware owing to the business-friendly laws set by the government.
- In Delaware, the government provides businesses with a lot of flexibility when it comes to the business’s structure, guidelines, and procedures. This is because Limited Liability Companies in Delaware create their own operating agreement which highlights the same points and is accepted by the state government.
- The government permits one individual to hold all the necessary positions needed for any business including that of director, shareholder, and officer. This policy is attractive to small businesses, especially for sole proprietors.
4. Privacy and Security:
- Businesses set up in Delaware are offered high levels of privacy and security.
- Businesses are not required to disclose the names, addresses, and other personal details of the various stakeholders of the business, including the director, shareholder, and officers during the registration of the business.
- Instead, the resident director appointed by the business to represent them must share his or her personal information. Moreover, any additional information about the business is also not shared with the public.
- Therefore, businesses are provided with high levels of anonymity and privacy that may not be available in other jurisdictions.
- Besides this, depending on your chosen business entity, the Delaware government offers businesses with security as well. For example: a Limited Liability Company registered in Delaware protects the assets of the owner of the business from lawsuits and more.
5. The Court of Chancery:
- The Delaware government has set up the Court of Chancery to handle all corporate disputes that may arise.
- Cases that arise are presented to a judge who has specialised in the corporate law and commercial disputes instead of juries. Therefore, decisions are made completely on the basis of law.
- Moreover, since this Court only handles disputes in the corporate world, there is a lot of precedents and statutes that have arisen over the past years. Based on the past decisions, the Court can handle cases quickly and efficiently, usually within a few months if not weeks. Moreover, the outcome of the case is usually predictable as the decision is based on past rulings, deals, and the law.
- Besides the above, the State Bar Association in Delaware also reviews the corporate laws regularly.
6. Infrastructure and workforce:
- The government has invested in developing the infrastructure in Delaware for businesses to take advantage of. Currently, there is a well-established transportation network created in the region with various airports, seaports, trains, roads, and more. Moreover, businesses can utilise the infrastructure at their disposal including utilities, energy, and more.
- Moreover, there is a large and educated labour force available in Delaware that businesses can take advantage of.
7. Simple Incorporation Process:
- The setting up process of your business in Delaware is simple and hassle-free.
- Businesses need to meet fewer requirements before registering their business as compared to that in other states and countries. There is no minimum paid-up capital that is required to be invested in the business. Moreover, there are fewer documents required to be submitted during the incorporation process.
- However, you still need to appoint a local resident director to act on behalf of your business who will serve as a link between the business and the authorities. You will also need to have a local office address.
- Besides this, businesses need to meet fewer compliance requirements post-registration as there is no need for the submission of audited financial statements, annual tax returns, and more.
- Moreover, the incorporation process can be completed quickly, within a period of one week.
8. Inexpensive incorporation process:
- The government fees that you will be required to pay depends on the legal entity you have chosen for your business in Delaware. Usually, this fee that is charged is relatively low as compared to what is charged in other states in the United States of America or even other countries.
- Businesses are also required to make timely maintenance fee payments to the relevant authorities on an annual basis. However, this fee that is charged is relatively low compared to that in other jurisdictions as well.