{"id":4836,"date":"2016-04-04T10:47:45","date_gmt":"2016-04-04T15:47:45","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/incorporation-and-legal-structures\/incorporating-in-delaware-is-it-worth-it-for-my-small.html"},"modified":"2025-10-27T23:16:00","modified_gmt":"2025-10-28T04:16:00","slug":"incorporating-in-delaware-is-it-worth-it-for-my-small","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/incorporating-in-delaware-is-it-worth-it-for-my-small.html","title":{"rendered":"Incorporating in Delaware – Is It Worth It for My Small Business?"},"content":{"rendered":"\n
\n

Incorporating in Delaware: Is It Worth It for My Small Business?<\/h1>\n\n
\n
\n By Jade Yeban, Esq.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
\n

Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
\n

This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
\n

The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

\n
\n
\n

Key Takeaways<\/h2>\n

Incorporating in Delaware is a popular choice for many companies because Delaware offers a well-established body of corporate law<\/span>, specialized business courts like the Court of Chancery, and a friendly legal environment<\/span> for businesses.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

When you\u2019re thinking about starting a new business<\/span>, the state of Delaware<\/span> might come to mind. This state is known for being a hotspot for big companies, with many Fortune 500 companies<\/span>\u00a0incorporated<\/a>\u00a0there. You may have heard about the state\u2019s supposedly business-friendly laws and tax rates. Will they work for your\u00a0small business<\/span>?<\/p>\n

Let\u2019s dive into what it means to be a Delaware corporation<\/a> and see if it\u2019s the right move for you.<\/p>\n

Form your corporation with confidence with\u00a0our trusted partner LegalZoom.<\/a><\/i><\/b><\/p>\n

Incorporating in Delaware: A Brief Overview<\/h2>\n

Incorporating a business in Delaware is popular among many business owners<\/span>\u00a0because they feel that Delaware law creates a business-friendly environment. This small state<\/span> has carved out a significant niche in corporate law<\/span>, attracting not only large <\/span>corporations<\/span><\/a> but also smaller <\/span>business<\/span> entities<\/span>.\u00a0<\/p>\n

When you form a Delaware corporation<\/a>, you\u2019re tapping into a system with a comprehensive and well-established set of corporate laws<\/span>. These laws are overseen by the renowned\u00a0Delaware Court of Chancery<\/span><\/a>, known for its expertise in case law<\/span>. Trials are before chancery court<\/span> judges without a jury. This framework allows for predictability<\/span> of legal actions<\/p>\n

The benefits of incorporating in Delaware include the appeal of potential tax advantages<\/span>, like no state corporate income tax<\/span> for companies that operate outside its borders. There is also a favorable franchise tax<\/span> system. However, this doesn\u2019t eliminate your need to pay franchise taxes<\/span> or file annual reports<\/span>.<\/p>\n

There\u2019s also the anonymity that\u00a0incorporating in Delaware offers.\u00a0You do not have to put your name on the initial filing documents as you do in other states,\u00a0so it can assist in giving a bit more protection and privacy.<\/p>\n

Delaware incorporation<\/span> offers flexibility to entrepreneurs<\/span>. For example, there is no minimum capital requirement. Delaware allows the issuance of stock for capital, services, personal property, or real estate. The ease of managing corporate governance<\/span>, such as the non-requirement of in-state meetings and the ability to have one person hold all officer positions, makes Delaware a compelling choice for many.\u00a0<\/p>\n

It\u2019s important to remember that incorporating here involves understanding and navigating these unique features. You also need to consider how they align with your business\u2019s specific needs.<\/p>\n

You Might\u00a0Not Save on Taxes<\/h2>\n

One of the big reasons business owners<\/span> think about incorporating in Delaware is for\u00a0tax benefits<\/span><\/a>. However, small businesses<\/span> don\u2019t always experience major tax savings. Delaware doesn\u2019t have a sales tax<\/span> or inheritance tax<\/span> and the corporate income tax<\/span> can be considered favorable. However, you\u2019ll still have to pay an annual <\/span>franchise tax<\/span> and file an annual report<\/span> with the state. If you\u2019re not operating in Delaware and conduct business<\/span> in your home state<\/span>, you may have to pay state income tax.<\/p>\n

Your Small Business<\/span> Still Needs To Qualify in Your Home State<\/span><\/h2>\n

A second consideration is that although the fees to incorporate a business in Delaware may be lower than in your home state<\/span>, you will still have to qualify to do business<\/span> in your home state<\/span> if you choose to have a Delaware business<\/span>.<\/p>\n

Going through both of these processes at once and in different states will probably cost you just as much, if not more, than if you had just incorporated in your home state<\/span> in the first place. This means you could face additional costs<\/span> like foreign qualification fees.<\/p>\n

In addition, if you choose to incorporate in Delaware over your home state<\/span>, you will have to find a registered agent<\/span><\/a>\u00a0in Delaware. If you do not already have someone in mind who lives in Delaware, you will end up having to pay for registered agent<\/span> services<\/span> for an agent to represent you. Registration is done with the Delaware Division of Corporations<\/span> by filing articles of incorporation and paying an initial <\/span>filing fee<\/span>.<\/p>\n

You May Have To Go to Delaware for Legal Issues \u200b<\/h2>\n

If you ever run into legal problems, you may be called into court in Delaware. This could involve substantial travel time and expense. In addition, if you already have a lawyer whom you regularly use in your home state<\/span>, they may not be familiar with the laws of Delaware and may not be licensed in Delaware to practice law. Delaware\u2019s court system<\/span> is geared towards complex court cases. It is not always ideal for smaller businesses<\/span>.<\/p>\n

Meet With an Attorney Before You Incorporate in Delaware<\/h2>\n

If you operate a small business<\/span>,\u00a0you probably will not benefit from incorporating within Delaware,\u00a0unless\u00a0you\u2019re already located there. Every business has different needs, so there may be instances where a small operation would, in fact, benefit from doing so.<\/p>\n

Before you make a decision, though, it\u2019s important to get professional advice from a\u00a0business law<\/span>\u00a0attorney<\/a>\u00a0in your state.<\/p>\n\n\n

\n \n Was this helpful?<\/span>\n \n Yes<\/span>\n \n \n \n <\/path>\n <\/g>\n \n \n <\/rect>\n <\/clipPath>\n <\/defs>\n <\/svg>\n <\/i>\n <\/button>\n \n No<\/span>\n \n \n \n \n <\/g>\n \n \n \n <\/clipPath>\n <\/defs>\n <\/svg>\n <\/i>\n <\/button>\n <\/div>\n <\/span>\n