What is a Delaware Corporation?
A Delaware corporation is a corporation legally registered in the state of Delaware but which can carry on business in any state. Delaware began to adapt its laws in the late 19th century, bringing about changes that would draw businesses away from other states like New York. Over time, Delaware has become a respected state to incorporate into, even though the majority of a business’s activities were outside the state.
Explanation of Delaware Companies
Incorporation in Delaware has become widespread among large American companies; about half of the members of the S&P 500 are incorporated into the state. This is particularly true for the financial sector. Delaware has business-friendly usury laws that allow banks and credit card companies much more freedom to apply high interest rates on loans.
Usury laws are state laws that set limits on the amount of interest that can be applied to loans and other forms of financing. It is a form of consumer protection that regulates the amount of interest that businesses can charge their local customers. Delaware’s usury laws, by comparison, give lenders more flexibility to charge interest.
State law also applies to operations and affairs conducted in other states. In other words, a company incorporated in Delaware may charge interest rates in accordance with Delaware usury law rather than local usury laws even when doing business with clients in the United States. nationwide.
This advantage of incorporation in Delaware has prompted other states to adopt more business-friendly laws. For example, some states now allow locally incorporated companies to charge interest rates at the same level as non-state companies doing business in the state.
Key points to remember
- A Delaware corporation is a corporation legally registered in the state of Delaware.
- Delaware companies can operate in any state, despite their business address
- About half of the companies listed on the S&P 500 are incorporated.
- Delaware is a particularly attractive financial company, because of its business-friendly usury laws, which give banks and credit card companies more freedom to apply high interest rates on loans.
Ways Delaware Companies Benefit From State Incorporation
Incorporation in Delaware offers companies many advantages. Businesses may not be required to disclose who their officers and directors are when they file documents in the state when setting up a business. Also, if the business is not operating in Delaware, state corporate income tax may not apply. Instead of paying this income tax, these Delaware companies instead pay a franchise tax.
The Delaware franchise tax is an annual fee for limited partnerships and limited liability companies. The franchise tax for companies is calculated according to the type of company, the number of authorized shares and other factors.
The Delaware Chancellery Court is a well-respected fairness court that resolves disputes between Delaware companies and has an extensive set of precedents, laws and case studies from their more than 200 years of operation. Decisions of the Chancellery Court have regularly set the benchmark for US corporate law; court experience can be very beneficial to Delaware incorporated companies seeking advice on specific matters.
[Important: Delaware is currently the leading domicile for public companies, but this could conceivably change in the future; New Jersey was once the go-to state, until modern U.S. corporation laws made it a less advantageous location.]