Many organizations that have the liberty to be registered or incorporated in any state of the country or its nature of business allows it to be based outside the city and state where it operates are recommended to incorporate in Delaware. There are some serious incorporating in Delaware pros and cons. You should weigh the advantages and disadvantages to make an informed decision.
List of Pros of Incorporating in Delaware
1. Safeguarding Personal Assets
Incorporating in Delaware separates the business entity from the people who own the company. This is applicable in other states too but Delaware law is the sole determiner of what assets should be considered as that of the company and what assets would be personal. Delaware law is very stringent in protecting personal assets which naturally augurs well for investors and business owners should they be held liable for any financial obligation that of the company.
2. Ensuring Continuum
According to the law, incorporating in Delaware would give your business continuum. The organization or the entity will have perpetual existence. It will continue to exist after you and through the generations of succession. This is particularly helpful for businesses that are eyeing a long term future.
3. Limited or No Power Struggle
Delaware law makes it necessary to be very lucid about who owns what, who’s placed where in the organizational hierarchy and what kind of job descriptions various founders or owners will have. There is limited or no power struggle when you are incorporating in Delaware. The law is very clear and requires a neatly organized power structure. While this is particularly helpful for corporations, it also suits family owned businesses wherein different members may fight for more shares or ownership.
List of Cons of Incorporating in Delaware
1. Costly & Complicated
Incorporating in Delaware will prove costly for companies. Not only is the setting up or the process of incorporation costly and tedious, but the taxes too will be higher than other types of registered business entities. Not all companies should go for incorporation in Delaware. The costs wouldn’t make sense and there can be unnecessary complications.
2. Compliance & Regulations
Delaware law protects the owners and limits power struggle but that is accomplished only because of stricter laws and execution of those laws. The same stringency exists in other laws when it comes to compliances and regulations. These can be rather overwhelming for some companies that don’t have the necessary infrastructure and trained manpower to handle those complications.
Brandon Miller has a B.A. from the University of Texas at Austin. He is a seasoned writer who has written over one hundred articles, which have been read by over 500,000 people. If you have any comments or concerns about this blog post, then please contact the Green Garage team here.