There is an attraction for companies to incorporate in Delaware, likely due to the abundance of well-known publicly traded corporations that have chosen to incorporate there. However, it is not necessarily true that the Delaware General Corporation Law (“DGCL”) is better than corporate laws of other states; it is just more developed due to the abundance of case law interpreting it. This usually provides for greater certainty, which is often looked upon favorably by not only directors and management, but investors as well. On the other hand, it is generally more expensive to incorporate and maintain a Delaware corporation. Unless your company has a physical presence in Delaware, you’ll need to pay for a registered agent who is physically located in the state and who can accept service of process on behalf of your company. Delaware also imposes a franchise tax based on a corporation’s capitalization, which is generally higher than similar fees and taxes imposed by other states (for example, Florida’s annual report fee, the only corporate fee that is required to be paid to the state each year to maintain corporate status, is only $150).
Thus, while there may be good reasons for incorporating or reincorporating in Delaware (e.g., because a private equity investor requires it as a condition for investment), the costs of using a Delaware corporation are probably not justified Continue Reading Delaware vs Florida: Where should you incorporate?