A Delaware Corporation – What’s so great?

Well I wouldn’t call a Delaware Corporation “great” but I would say that they are the best corporate havens that we have in the US. Your first answer when you ask people, “why Delaware” is that they are a corporate tax shelter. Which isn’t really true. Although there is no corporate income tax in the state of Delaware, they have one of the heaviest franchise taxes in the US. It costs more to form a corporation there, and even charges a fee to determine whether a fee is owed against a corporation.

They do have a more lax corporate legal system, and use a court of Chancery vs the state legal system. The Court of Chancery hears disputes over internal affairs, and in lieu of a jury, the case if heard by a Chancellor or one of the Vice Chancellors. Their knowledge of the corporate legal system by far outweighs the court of law. So corporate disputes can get better guidance and counsel.

The privacy laws are pretty strict as well. Company ownership doesn’t need to be disclosed, company transfers doesn’t need to be disclosed, Delaware doesn’t maintain public records of ownership, and there are very minimal reporting and disclosure by the state. So if you wanted to remain discreet, this is the way to go.

The state even issues their own asset protection. Owners of LLC’s and Corporations receive limited liability protection, no matter what. The owners assets cannot be seized as a result of the corporation. Also, due to the privacy protection, it is very difficult for attorneys to track business owners and the owners assets. Numbers show that the amount of suits against Delaware Corporations have a substantial increase in overturns due to lack of evidence.

I’m not trying to encourage any illegal activity or methods in which you could get away with it, but with the states of todays legal system and the litigious society that we belong to, it’s always nice to get a little bit more protection by making a choice like this.