Why Many Companies Still Incorporate in Delaware (Updated)

Delaware attracts incorporations for its predictable corporate law, specialized Court of Chancery, and flexible entity rules, supported by online filing. However, franchise taxes and administrative fees can make home-state incorporation preferable for some small businesses. Consult counsel to compare costs and legal needs.

Why Delaware remains a common choice for incorporation

Delaware continues to attract companies of all sizes because it offers a predictable and developed framework for corporate law. Its statutory code (the Delaware General Corporation Law) and a specialized judiciary create a large body of precedent that lawyers and judges rely on when resolving disputes.

Court of Chancery and predictable case law

The Delaware Court of Chancery is a trial court that focuses on corporate and fiduciary disputes. Cases there are decided by judges experienced in business law rather than juries, which many corporate lawyers say produces faster, more consistent rulings. The Delaware Supreme Court provides appellate review and further shapes corporate doctrine.

Flexible entity options and modern filing tools

Delaware supports many entity types - traditional corporations, LLCs, and Series LLCs - and allows tailored governing documents. The Delaware Division of Corporations offers online formation and filing services that most entrepreneurs and lawyers use for speed and convenience.

Tax and administrative tradeoffs

Incorporation in Delaware does not make a company exempt from federal taxes or necessarily from home-state taxes. Delaware levies a franchise tax on corporations; the method of calculation can make taxes modest for many small companies and significant for certain large or highly authorized-share companies. Businesses also pay fees for registered agents and filing. For many companies, the legal predictability offsets administrative costs; for others, home-state incorporation is more economical.

Privacy and reporting

Delaware's formation process is streamlined, and its public filings focus on the entity rather than a detailed ownership ledger. Specific reporting requirements vary by entity type and by later annual reports or tax filings. Companies should verify which officer or director information becomes public before filing.

When Delaware makes sense - and when it might not

Delaware is often chosen for companies that expect outside investment, complex governance, frequent litigation risk, or plans to go public. For small, closely held businesses with limited outside investment and low litigation risk, incorporating in the home state can reduce costs and compliance burdens.

Practical next steps

Discuss goals with an attorney experienced in corporate formation. Compare initial filing fees, franchise tax calculations, registered-agent costs, and long-term reporting obligations between Delaware and your home state. If you later move operations, check the mechanics and consequences of domestication or re-domiciliation.

1. Confirm current percentage of Fortune 500 and publicly traded U.S. companies incorporated in Delaware and update statistics if cited [[CHECK]]
2. Verify the specific officer/director information required on Delaware annual reports and in formation filings and update privacy language if needed [[CHECK]]