With over 50% of all publicly traded companies incorporated in Delaware, there are clearly benefits to incorporating there, even when your business is physically headquartered elsewhere. If you are wondering whether to incorporate your California business in Delaware, read on to get a sense of whether this move might be right for you, and contact the business law attorneys at Verhagen Bennett to get a free consultation.
Even though there are many benefits to incorporating your business in Delaware, the most talked about benefit is taxes. Business that are incorporated in Delaware but do not conduct any business in Delaware do not have to pay a state income tax (although they do have to pay a franchise tax), and if any of your stockholders are located outside of Delaware, they do not have to pay taxes on those stocks.
Another reason businesses may choose to incorporate in Delaware is the flexibility it offers to businesses when it comes to structuring. Unlike some states, Delaware does not require a corporation’s shareholders, directors, or officers to be residents of Delaware, and it only requires one named director and one named officer, whereas some other states require a minimum of three directors and officers. Furthermore, Delaware does not require directors and officers to list their names on the business formation documents, which provides a layer of privacy that some other states do not offer. These relaxed rules make it possible for a California business, which most likely has all of its board members in California, to incorporate in Delaware.
If you are seeking investment from venture capital (VC) firms or investment banks, you may want to incorporate your California business in Delaware, as VCs and investment banks look more favorably on Delaware businesses. Not only will incorporating in Delaware give you an edge in obtaining investments, but it will also save you the headache of potentially having to move your business from California to Delaware in the future should you secure investment from an investor who requires your business to be located in Delaware.
There are a number of judges in Delaware’s Court of Chancery who dedicate their career to hearing business cases. Thus, these judges are extremely well-versed in complex corporate matters, so if you ever have to engage in any litigation arising out of your business, you can rest assured that your matter is being heard by some of the most qualified business law judges in the nation.
Contact a Santa Monica or Los Angeles Business Law Attorney Today
If you are considering incorporating your California business in Delaware, it is wise to consult with a business law attorney to make sure you are taking all factors into consideration and making the best decision for your business. The Santa Monica and Los Angeles business law attorneys at Verhagen Bennett have experience helping advise California companies on whether it is beneficial for them to incorporate their business in Delaware, and subsequently helping these companies incorporate their business in Delaware if that is the best course of action for them. Contact us online or at (310) 917-1064 today to get a free review of your case.
(image courtesy of Joey Csunyo)
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© 2018 Verhagen Bennett LLP — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.