Among the 50 states, the state of Delaware has some of the most favorable laws for corporations. Delaware’s body of corporation law is known as Delaware General Corporation Law, and it attracts many out-of-state businesses seeking to take advantage of the laws that are very favorable for corporations.
Thus, a “Delaware Corporation” usually refers to an out-of-state business entity (“foreign corporation”) that has filed for incorporation in the state of Delaware. Nevada is another state with similar corporation laws.
The advantages of filing as a Delaware corporation are numerous. They include:
- No income tax on corporations that only conduct business outside of Delaware
- All corporate offices can be held by a single person
- The addresses of the members of the initial board of directors do not need to be provided
- Faster and easier incorporation than in most other states
- No requirement for the company to have an office or address in the state of Delaware, but the company does need to have a registered agent in the state
- Stockholders who are not Delaware residents do not have to pay state personal income tax
- Shareholders have various additional rights, such as the right to change bylaws and the right to be free from liability for corporate debts
- Directors can only serve on the board for a maximum of 3 years
- Restrictions on the transfer of stock cannot be imposed on stock that was previously issued, unless the shareholder consents to it
- Voting trusts cannot last longer than 10 years
These are some selected highlights of the advantages that Delaware corporations enjoy. Delaware’s corporate law also provides many other benefits for both corporate directors and shareholders.
Under general American corporate law, the internal affairs doctrine states that corporations operating in more than one state can only be subject to the laws of the state in which they are incorporated. This doctrine applies to regulations that affect the internal affairs for the corporation.
Thus, businesses that incorporate in Delaware are usually subject only to Delaware corporate law when being sued. This is true even if they conduct business operations in other states. In this sense, the internal affairs doctrine also adds to the attractiveness of incorporating in Delaware.
The Delaware Court of Chancery is a court of equity maintained by the state of Delaware. Most lawsuits and legal actions involving the internal affairs of a Delaware corporation are heard in the Court of Chancery.
In the Delaware Court of Chancery, there are no jury hearings because cases are heard exclusively by chancellors, who are the equivalent of judges. This allows for a more streamlined process for the hearing of corporate affairs. Appeals from the Chancery Court are sent to the Delaware Supreme Court.
As a result of the activities of the Court of Chancery, Delaware has a much more extensive and well-developed body of corporate case law than other states. This body of case law provides much greater guidance for Delaware corporations and their lawyers in the event that they become involved in a lawsuit or regulatory hearing.
Filing as a Delaware corporation can be very advantageous to your business organization. If you need legal guidance on the filing process, you should contact a qualified business lawyer in your area. An experienced business attorney will be able to help you with the filing requirements and can explain how Delaware corporate laws will benefit your company. Also, if you have been involved in a dispute involving a Delaware corporation, a lawyer can help you file a civil lawsuit.