If you’re serious about giving your company the best chance of success, you should choose Delaware for your startup. Due to its business-friendly environment and well-established legal structure for businesses, Delaware is a favorite destination for entrepreneurs. You already know some well-known successful startups, such as VideoWise, Lonca, Dropbox, Stripe, Airbnb, etc. They also started their journeys in Delaware.
Delaware is a state of opportunity for business owners. It offers several benefits to an entrepreneur, including various resources, investors, capital facilities, tax benefits, the Court of Chancery, and others. If you want to establish a startup or grow your startup rapidly in Delaware, go through this article to get a clear concept of business establishments and facilities in the state.
What Is Incorporation?
Incorporation is a beneficial business structure for business owners. In one sentence, a corporation is a legal entity separate from its owners. It provides business owners with the security of their assets. Imagine your company goes broke; in that case, your assets cannot be touched.
But you have to separate your personal accounts from business bank accounts. Also, keep records of the separate expenses. For this liability protection, business owners often choose incorporation as their business structure.
Why Is Delaware?
You might have a question about this. The reason is that it is an attractive state for entrepreneurs because of its advantageous state laws. We are going to describe that. Have a look to learn better about the laws and policies of Delaware.
Delaware Is a Business-Friendly State
Delaware has a long history of being a profitable state for business and innovation. Around 500 companies start their journeys in this state. Delaware is considered a business-friendly state due to its favorable business-friendly laws, tax policy, regulatory environment, capital access, court system, and investors.
Delaware is also a profitable state for non-resident business people. Delaware has no residency requirements for incorporating a business. As a result, you can incorporate a business in the state from anywhere in the world. Delaware state laws provide a level of flexibility and protection for non-residents.
For example, Delaware offers strong legal protections for corporations’ shareholders, directors, and officers. That’s why Delaware is called a business-friendly state. If you plan to start your business in the US, choose Delaware first.
The Beneficial Business Ecosystem in Delaware
The business ecosystem in Delaware is known for its high level of innovation, entrepreneurship, and creative spaces. If you are an entrepreneur who started your business in Delaware, the business ecosystem of this state can help you grow faster.
This business-friendly environment is created because of a diverse workforce, a pro-business legal and regulatory environment, a diverse range of industries, and a supportive business environment. Here are some descriptions of the key components of the business ecosystem in Delaware:
Loan and Capital
Delaware has many investors, including angel investors, venture capitalists, and private equity firms. They provide the startups’ with the loans they need for their businesses. There are two programs for Delaware company incorporation: the State Small Business Credit Initiative Participation Loan and the Delaware Capital Access Program. These programs provide financing to entrepreneurs and businesses.
Grants and Credits Program
Delaware also offers some grants and credit programs to encourage development and growth. As a startup, you can get funds up to a maximum of $100,000. Also, Delaware offers two important credit programs: angel investor credit and R&D tax credits. These programs can lower your payments for taxable expenses.
The Diverse Range of Industries
Delaware has different kinds of industries. These industries include healthcare, finance, manufacturing, technology, and agriculture. This diversity can give you many opportunities to establish and grow your business rapidly.
Supportive Business Environment
The Delaware business environment is quite supportive of entrepreneurs and freelancers. It has a business-friendly climate, with favorable tax policies, streamlined business registration processes, and a regulatory environment.
Furthermore, Delaware’s government and private organizations offer a range of resources to support businesses, including access to capital, technical assistance, and workforce development programs.
Encourages Innovation and Growth
Delaware has a strong focus on innovation and entrepreneurship, with many successful startups and established companies in the state. The state offers a range of resources to support innovation and entrepreneurship, including business incubators, accelerators, and venture capital firms.
After starting a business in Delaware, you can join the Delaware Technical Innovation Program. This program gives transition funds to businesses that have applied for the Small Business Innovation Research (SBIR) or Small Business Technology Transfer (SBTT) programs.
Skilled Workforce
Delaware has a strong work ethic, a high level of education, and a skilled workforce with specific skills in fields like healthcare, banking, and technology. So, after establishing your startup, you can easily grab the resources of a workforce.
Why Do Companies Incorporate in Delaware?
The state of Delaware is very flexible in various ways that benefit the owners of Delaware companies. There are several reasons behind the interest of business owners in starting their companies in Delaware. Here are the reasons:
- Geography: Delaware has geographical benefits. To start a company in Delaware, you do not have to live there. You do not need a physical address in Delaware if you retain a Delaware registered agent.
- Structure: In Delaware, you can form different business structures, including an LLC, a sole proprietorship, or a corporation. Because of the corporation law in Delaware, the state contains the country’s most progressive and flexible corporate statutes.
- Convenience: Delaware’s registered agents have a direct online connection to an electronic database. This enables us to offer the fastest document retrieval service in the country.
- Incorporate in Delaware Cost: In Delaware, the cost of forming a startup is lower than in other states. For a business license, you will need between $75 and $300, depending on the type of business.
- Raising Capital: Delaware has other benefits, including loans and capital. Most investors prefer investing in Delaware companies rather than corporations formed in other states.
Why Do Investors Prefer Delaware?
Investors prefer Delaware for several reasons, including strong liability protection, venture capitalists, and flexibility in corporate governance. Here are some other benefits for preferring Delaware:
- Privacy and Confidentiality: Delaware does not require companies to disclose the identities of their owners. And it can provide privacy and protection for investors.
- Multiple Classes of Stock: In Delaware, companies can issue multiple classes of stock. Investors prefer a company to have multiple classes of stock because it provides them greater freedom in negotiating specific deals.
- Easier to Trade Shares: In Delaware, you can easily transfer your company’s shares and corporate stock. Also, you can continue to issue more shares of its stock by selling to new investors.
- Business-Friendly Laws: Delaware has well-established legal frameworks that are favorable to corporations. It makes it easier for investors to navigate the legal system.
- Stock-Based Compensation Incentives: In Delaware, you can also issue stock options to your employees. Startups use stock options as an incentive to attract talented individuals to the company.
What Are the Benefits of Incorporating in Delaware?
After starting a business in Delaware, you can get several benefits. And these benefits can help you grow your business quickly. Some crucial benefits are listed below.
Court of Chancery
The Court of Chancery is the main reason why businesses incorporate in Delaware. One of the best-known things about Delaware’s business-friendly atmosphere is the Court of Chancery. It is a specialized court that deals exclusively with business and commercial law. The Court of Chancery solves all kinds of business-related cases with judges. It is the oldest court of all judges and handles all corporate cases.
The Court of Chancery is known for its efficiency, expertise, and predictability in handling business disputes, and it handles cases more quickly and efficiently than courts in other states.
As a result, Delaware is also a leader in business law. The Court of Chancery has the authority to hear cases related to mergers and acquisitions, shareholder disputes, corporate governance, and other business-related issues. If you have any disputes regarding your company, you can get a fair judgment in the Court of Chancery. The benefits of the Court of Chancery make it an attractive venue for business owners when choosing their business state.
Tax Benefits
Delaware offers several tax advantages. It’s why most famous companies are incorporated in Delaware as startups. Delaware has no corporate tax, sales tax, or property tax, and its corporate income tax is comparatively low compared to the other states. You can also get these tax benefits as a non-resident of the US. With Delaware’s 0% tax rate, your company will save money on taxes each quarter, and you’ll have more capital in hand.
Beneficial Corporate Statutes
Delaware is the perfect business-friendly state because of its flexible corporate laws. The corporate statutes allow businesses to run as per their requirements. Also, this law’s flexibility protects the interests of the investors. Some corporate statutes are –
- Delaware companies can have only one director.
- Delaware allows electronic signatures on documents.
- Delaware allows for voting by electronic proxy.
- Delaware allows virtual attendance at stockholder meetings.
- Delaware courts allow more flexibility by making a fair judgment.
- Delaware allows corporations to indemnify their directors for losses incurred due to legal action.
Flexible Business Structure
Delaware offers a range of corporate structures with business flexibility. Because of the simple business structure, company formation in this state happens in just a few days. In Delaware, you can choose from several business structures to form your company, including an LLC, a sole proprietorship, or a corporation. With this flexibility, you can operate your business from anywhere in the world.
Privacy
Delaware always tries to maintain your privacy while staying in compliance with all state regulations. The state laws protect the privacy of investors, founders, and proprietary information. Also, state laws secure your company by protecting all your confidential documents.
Protect Owner Assets
Because of state laws, you must separate your personal and business assets, including expenses. And this fact can protect your assets from business creditors.
Some Famous Incorporation in Delaware
Nowadays, we know several companies that are famous around the world. They start their startup journey in Delaware due to the state’s favorable business laws and tax structure.
- Google LLC- Who doesn’t know about Google? This giant company has been incorporated in Delaware since 2002. Delaware’s favorable business laws and courts make it an attractive destination for high-profile technology companies.
- Amazon.com Inc.-Like Google, Amazon.com was also incorporated in Delaware in 1994. Delaware’s business-friendly laws and favorable tax structure have helped it become a top destination for startups and tech companies.
- Airbnb, Inc.-Airbnb is an online marketplace for short-term homestays and experiences. Airbnb was incorporated in Delaware in 2008.
- Coca-Cola Co. –The beverage giant has been incorporated in Delaware since 1919. Delaware’s corporate tax structure and business-friendly laws have helped it become a well-known company worldwide.
Some Drawbacks to Keep in Mind
Although starting in Delaware can provide you with many benefits for your business, there are also some drawbacks you have to keep in mind before starting a business in Delaware.
- Complex Legal Requirements: Delaware has favorable corporate laws but could be complex to understand. In that case, you can get help from legal professionals.
- Franchise Tax: We know that Delaware doesn’t have any state corporate income tax, but it does charge a franchise tax. Even if you are a nonresident, you have to pay this franchise tax. Franchise taxes are based on your company’s value or the total number of your company shares.
- Residency Requirement: If you are incorporated from outside of Delaware, you must select a person to stay in this state. Delaware requires a valid member of your company as a Delaware resident. In that case, you can get help from a registered agent in this state.
Bottom Line
From the above discussion, we can understand that forming a startup in Delaware can benefit business growth. Delaware can be a great choice for incorporation for a resident or a nonresident due to its business-friendly ecosystem and business security.
A startup or a new business needs a good business climate, strong but business-friendly laws, state incentives and funding opportunities, economic opportunities, robust infrastructure, and tax savings.
In addition, Delaware can provide you with all of this if you incorporate your company in Delaware. It just takes 10 work days to incorporate in Delaware, in case you want to know How long it takes to incorporate in Delaware.
