There are many benefits associated with incorporating your business, but deciding where S corporation formation will give you the most benefits can be a daunting task. Delaware is one of the best options for S corp forming for a variety of reasons.
#1 – The Laws Are Flexible
S corporation formation requires some knowledge of the state’s corporation laws, and one of the best reasons why Delaware is the best choice is because they have one of the most flexible and advanced statutes in the entire country. If you need flexibility when it comes to allocating rights and obligations among founders or shareholders, and if you appreciate the ability to choose how you structure business entities, then Delaware is perfect for your needs.
#2 – No Juries during Court Disputes
In many states, if you end up going to court, you’ll be faced with a jury that will ultimately decide your fate as a business owner. Delaware is different because its Court of Chancery makes use of judges rather than wildcard jurors who may or may not form biased opinions of you and your company. This means that your legal future rests in the hands of professionals who fully understand the laws in the state at all times.
#3 – Less Overall Litigation
Following up on reason number two, keep in mind that since the state of Delaware relies on judges rather than jurors to make decisions about a company’s future, actual litigation is rare. The judges will often provide a list of written opinions on the problem at hand, which gives your company options. In the vast majority of cases, court issues are settled via deals that do not lead to all-out lawsuits. This can save time and money in the long run, and it provides a sense of security, too.
#4 – It’s Cheap
S corporation formation in Delaware will cost you about $89 – far less than many other states. It’s about $125 in New York, and while S corp forming only costs about $100 to start, you’ll need to pay $300 a year in franchise fees. In states like Texas, the fees top out at $300. It’s easy to see why Delaware is such a budget-friendly choice. Keep in mind, though, that if you incorporate in a foreign state, you may still need to register as a foreign entity and follow the rules of the states in which you do business.
#5 – It Provides More Anonymity
Finally, S corporation formation in Delaware affords a high level of anonymity. In many states, you are required to list the names of directors and officers on the formation documents, which can become problematic if people start snooping around. In Delaware, this is not required, so you can keep those names private and out of the way of prying eyes.
As you can see, there are several reasons why you should consider S corporation formation in Delaware, even if it means you need to become a Delaware entity – and if you are planning to work with an investment bank or a venture capital funder, they may require it for these very reasons.