What do you preceive as the key advantages of Delaware for an S- or C-Corp.? What advantages would be important to you?
Categories: Operations and Legal
I know there are numerous advantages for incorporating in Delaware, but do those advantages apply to creating an LLC or just to C corporations and S corporations? Please elaborate.
Thanks so much,
Over half of US publicly-traded corporations are incorporated in Delaware. The primary reason is that many years ago (30+ years or so), Delaware became the leader among the various states with a revised corporation code which was updated to provide highly flexible corporate laws. Delaware still is touted as a leading business-friendly state today.
Even though the perception remains that Delaware is the ¬?leader¬?, other states have revised their corporation codes to become more flexible (Georgia, for example). Another state which has made a major effort to attract incorporation business is Nevada by offering numerous benefits (e.g. no corporate income tax, nominal annual fees, stockholders are not public record, etc.).
So, you should be aware that flexible corporate laws can be found in a number of states, not just in Delaware.
One issue to consider is whether to incorporate in your home state. If it has flexible corporate laws, incorporating there may save you in filing fees. This is due to the fact that corporations are required to register in each state in which they do business. For example, a Delaware corporation that has its main business office in Georgia must register as a "foreign corporation" with the Georgia Secretary of State (resulting additional fees to be payable).
Regarding the other questions you raise, there is no difference regarding incorporation procedures for a C corporation as distinguished from an S corporation; the only difference is tax treatment. An LLC is a completely different animal which is similar in concept to a limited partnership (regarding tax treatment) where the operating agreement is usually highly tailored.
In summary, check with a corporate lawyer in your home state to find an answer regarding which type of entity and which state is best for you.
Disclaimer: my comments on this forum are for informational purposes only; they do not constitute legal advice, and should not be construed as such.
When I formed my LLC I found (independently, some time ago) exactly what Chip suggests. Any advantages of forming the LLC anywhere other than California (my home) were outweighed by California's treatment of "foreign" (i.e., out-of-state) LLCs.
I think you may need specific legal advice. You may need to approach a lawyer familiar with the laws of your state and say "my situation is thus-and-such. I am attracted to the ____ advantage of forming my LLC in Nevada. Do you think that will be a favorable idea?"
Right off, my ***guess*** is that you are best off keeping it simple and forming your LLC in your own state. Your mileage may vary.
You ask a very general question regarding creating an LLC in Delaware over creating an LLC in other states. Which states?
Sorry, I do not know the answer to your question, and in any event, I believe it is beyond the scope of this forum.
As Charles suggests, specific legal advice is needed here. You should consult with an attorney in your home jurisdiction for all the answers you seek.
I have spoken privately with Chip. I think we "get it" now. Your question is "what are the advantages of forming an LLC in Nevada, Delaware, or some other 'favorable' state?"
The answer is two-fold:
- Neither Chip nor I know of any specific general advantages for an LLC (as opposed to a corporation) that would result from formation in Nevada, Delaware, or any similar state.
- Any advantages would be "relative" -- relative to your home state, which is the obvious choice. Without knowing what your home state is, and without being an expert on that state (Chip is licensed in Georgia and perhaps one or two other states; I'm somewhat familiar with the LLC situation in California) it's hard to talk about relative advantages.
I say keep it simple. If you don't know you want to take advantage of some particular feature of North Dakota LLCs, keep it simple and organize in your home state. It's not a huge deal to form a new LLC at some future time if you change your mind.
I'm not a lawyer, but if you incorporate outside your home state, you then have domicile in two states and can be sued in Federal Court rather than you state court. Which is easier to deal with? I don't know. But, having one lawyer, rather than threee might be nice.