Ultimately, where you choose to incorporate should be based on your business and its needs. Since you’re comparing New York and Delaware as your options, I’m going to presume that your business operations take place primarily in New York. My guess is that you also live in New York. One advantage of incorporating in New York is convenience. It is easier (and generally less expensive) to incorporate where you live. You can easily get on your Secretary of State website, find the right forms to incorporate, and make note of the filing fee. The forms are easy enough to do yourself or if you want to make absolutely sure that they’re properly completed, you could hire an attorney. You know the courts and at least some of the law because that’s your home base. New York also has good commercial contract laws and courts that will enforce those laws if necessary. If you form an LLC in New York, you get some other added benefits. You can customize financial allocations. You can even form an LLC for an unlimited duration.
Ask yourself how much you know about Delaware law and the fees that would be involved in incorporating. Will you have extra expenses such as finding a registered agent? Will you have to spend extra money to have someone complete your incorporation forms for you? Do you know about the courts and the laws related to business?
Yes, Delaware is business-friendly. They have some great laws that help business owners protect their personal assets and protect themselves from legal liability. Delaware LLCs aren’t required (at this time) to pay income tax if they don’t actually do business there. So, if my presumption that you plan to do most of your business in New York is right, that could be a major benefit for you.
So, if Delaware is so great, why not incorporate there? Well, it won’t necessarily save you any money. Going on the presumption that you will do most of your business in New York if you incorporate in Delaware, you may save some money up front if you do it all yourself, but you’ll still need to register your business in New York as a foreign corporation. So, you’d essentially pay twice to form and run your business Oh, and you’ll still have to pay income tax in New York even if you incorporate in Delaware…because that’s where you’re in business and that’s where you’re getting your income.
With that being said, choosing your state of incorporation is, again, up to you. Those are just some things to consider. Something you should definitely do is more research on your incorporation options – not just which state, but which business entity will best suit your needs. Themarketplace provides access to affordable small business attorneys that can help you determine the best formation for your business. Please feel free to stop by for a complimentary consultation!