5 Key Benefits Of Starting A Business In Delaware

Content Team3 minute read6 Aug 2021

Delaware is striking among many states of the US thanks to its favorable sets of laws to businesses. Tax advantage is also one of its worth-noting perks. The below article will summarize five key benefits of starting a business in Delaware that you, as an investor, may be looking for.

5 Key Benefits Of Starting A Business In Delaware

1. Delaware’s regulatory framework is a big plus

Delaware is not a tax haven. It is just the second smallest state in the US. But, this small state has a relatively well-established system of law that makes it outweigh many others.

Remarkably, Delaware’s sets of business-related law are attractive to many foreign investors and business players targeting all types of business entities (but not restricted to Corporations). Delaware’s statues, typically Delaware General Corporation Law, and the Limited Liability Company Act, are oftentimes revised and brought up to date by experienced attorneys for further advancement.

Moreover, the statutory framework in Delaware is also made ideal for international businesses. Businesses can expect much more flexible mergers, acquisitions with simple procedures when operating businesses in Delaware, as compared to other models of international business laws.

Evidentially, Delaware law grants businesses easy combinations with other local or overseas entities. Noticeably, there is no need for asking for approval from the competent judiciary in advance for such action of entering.

Delaware has also a specific court for resolving business disputes. It is the Delaware’s Court of Chancery. This court shall deal with such corporate issues and litigations. It is noted that alternatives to juries in many other legal systems are judges in Delaware. Flexibility and quick responsiveness set this Delaware’s distinctive court apart from many other judicial systems.

By dint of its run-time and strongly respected laws, Delaware’s legislative provisions are popularly applied to handle a host of corporate cases and lawsuits. It is also considered an example of law for many other states in the US.

2. Delaware has a business-friendly tax system

Again, Delaware is not a tax haven. But, the state does offer a business-friendly tax policy for foreign businesses. Below are some highlights of why foreign investors wish to choose Delaware as a preferred location for their US operations:

  • Delaware applies no corporate tax for income derived from outside of the US.
  • There is also no corporate tax imposed on interest, royalties or other similar investment income of certain holding companies in Delaware.
  • There is no gross receipts tax, no sales tax applied on a Delaware company that does not conduct business in the state.
  • Delaware has no state tax on intangible assets such as trademarks or patents.

Still, entities registering in Delaware are obliged to pay Delaware franchise tax/annual tax to the Delaware’s Secretary of State every year.

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  • Delaware business entities
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3. Delaware companies are guaranteed a high level of privacy

Another striking benefit of starting a business in Delaware is a high degree of anonymity.

Particularly, both Delaware limited liability companies and corporations can assure a strong layer of privacy. In most cases, identity information regarding the company’s managers and members (for Delaware LLCs) and directors/officers (for Delaware corporations) are kept undisclosed.

Also, Delaware LLCs do not need to specify names and addresses of members in their filings, except in operating agreements of the company. For Delaware corporations, they can be required to list names and addresses of the company’s directors and 1 officer to comply with franchise tax settlement annually.

As such details are difficult to be found on documents of incorporation, or on public records, a company registered in Delaware is therefore granted better protection in comparison with other states of the US.

4. Delaware company formation is processed efficiently

Being well-known for its corporate-friendly system, Delaware facilitates an excellently efficient and straightforward process for investors and business owners to incorporate a company in Delaware. With dedicated support from trusted incorporation service providers like BBCIncorp, you can save a lot of time and resources to register your desired company, rather than registering by yourself.

When it comes to registering a business in Delaware, there is also no requirement for business owners to have an office in the state. In addition, owners and managers (or directors and shareholders of Delaware corporations) are not required to be Delaware residents.

5. There are fewer maintenance requirements to legally operate a business in Delaware

Delaware imposes fewer compliance obligations than some other states do. This, fortunately, enables foreign businesses with their US operation to reduce overloaded burden annually.

The ongoing maintenance requirements for companies may be varied according to the type of company you have selected in Delaware.

Particularly, business owners would need to maintain their registered agent, pay franchise tax/annual tax with Delaware’s Secretary of State, file annual reports (Delaware LLCs do not need to submit annual reports), and other duties as required.

The bottom line

Delaware is well recognized as a desired US state for doing business. A long-standing and well-respected system of law, tons of favorable tax policies, privacy guaranteed are among the outstanding benefits of starting a business in Delaware. Not merely U.S entities, but also numerous foreign businesses and investors are eyeing this small but preeminent state for prospective business opportunities.

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