Incorporate. Incorporation.

Are you starting a new business, and while you’re sure you want to incorporate, you’re not sure where? Incorporation and the state where you choose to incorporate is an important business judgment decision, which should not be made lightly.  Recently I had a client tell me he wanted to incorporate his new business and he wanted to do it in Delaware. So of course, my first question to him was, “Why Delaware?” He replied, “Because someone told it was the best place to incorporate.”  Delaware is a great place to incorporate your new business, but incorporation in Delaware is not for everyone.
Here are a few things to take into account:

  1. The greatest advantage of incorporating in Delaware is its exhaustive, well-seasoned case law library.
  2. It has its own Court of Chancery, which primarily deals with corporate law issues.
  3. Another advantage to incorporating in Delaware is that it is a business-friendly state.
  4. Its laws often tend to favor protecting corporate interests, rather than shareholder interests.

But wait, there’s more you should know …

  1. That being said, the initial start up costs and the cost to maintain a Delaware business, if you are doing business in another state can be costly.
  2. Let’s say you reside and do business in California, not only will you have to pay Delaware taxes, but you will also have to pay taxes in California as a foreign business.
  3. You are required to have a registered agent with a physical address in Delaware.  Companies perform this retainer service for a fee.
  4. In Delaware, if your new company will issue stock, you must pay a fee calculated on the number of authorized shares.
  5. There are also shipping and handling costs, as well as the cost of certified copies.

The bottom line is you will have to pay some of these fees regardless of where you incorporate. But, if you are incorporated in one state and do business in another, your  costs will double. This is not to deter you from incorporating in Delaware, it is just to make sure you are well informed before making that all important decision.
Until next time, I’m Attorney Francine Ward helping you protect what’s yours!  Share your thoughts about this case. Join the conversation on my legal Facebook Fan Page, legal Twitter Page, Google+, or in one of my LinkedIn groups.

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