Of all the places within the U.S. to incorporate, it may seem odd that Delaware, the nation’s second-smallest state, is one of the most popular places of business. But the truth is, Delaware has been the premier U.S. state for business incorporation since the early 1990s, and it is now the legal home to more than 1 million business entities. More than 60 percent of Fortune 500 companies are incorporated in Delaware, and businesses from around the world take advantage of the business opportunities Delaware provides.
There are many misconceptions about what makes Delaware so attractive to businesses. Some wrongly consider Delaware a tax haven. Others claim that Delaware allows organizations to charter secret corporations hidden from the public record. None of these is the case. Instead, the combination of laws, courts and judges in Delaware create an environment in which companies find the managerial flexibility they need to advance their investors’ best interests balanced by a legal infrastructure especially attuned to corporate decision-making.
Below, we’ll review some of the special aspects of Delaware’s unique system and then look at how electronic filing has made incorporating in Delaware easier than ever.
Delaware’s DGCL Statute
There are several factors that have helped make Delaware an attractive place to initiate a corporation. The first of these is an important statute known as the Delaware General Corporation Law (DGCL). The DGCL is a statute crafted by law experts to provide corporations the maximum flexibility in regard to the ordering of their affairs. The DGCL is designed with the understanding that each company is slightly different, and so it enables and facilitates company-specific procedures. The mandatory provisions of the DGCL place minimum restrictions on the corporations, only addressing those concerns that are necessary to protect investors. Overall, Delaware’s commitment to maintaining the DGCL offers corporations stability and predictability, two things businesses crave. Delaware’s state constitution requires a super-majority vote to amend the corporation law, protecting the DGCL from special interests groups or influential corporations hoping to change the law for their own benefit. This staunch protection provides companies with a reliable legal framework they can depend on as they plan the long-term operations of their business.
Delaware’s Court of Chancery
Working in tandem with Delaware’s business-minded statute is the system of courts that interpret and enforce these laws. Delaware’s judicial system has a long-standing reputation for remaining impartial and being peerless experts of corporate law. The Delaware Court of Chancery is a specialized court of equity dedicated to corporate disputes. The Court of Chancery operates without the normal peer-jury system, relying instead on a selection of five expert jurists who are chosen in a bipartisan, merit-based process. This streamlined jury process allows the court to be more flexible and responsive to ongoing litigation, and to efficiently move cases through the courts with minimal bureaucratic delay.
Delaware’s Case Law
The result of the Court of Chancery’s long-standing dealing with corporate decisions is a wealth of available case law. Since cases are decided by judges, not juries, one can be assured that an individual with an expert understanding of the law has reviewed the case. Both the Court of Chancery and the Delaware Supreme Court maintain a tradition of issuing written opinions to support the decisions they come to. These written opinions accumulate into a significant body of case law precedent, providing corporations and their advisors with substantive and useful guidance.
The Advantages of Electronic Filing
Now that you know the many perks of incorporating in Delaware, perhaps you are ready to begin the process. Since 2015, the Delaware Division of Corporations has made it mandatory for all corporations to process their initial corporation documents and to file their annual reports online. All the documents necessary are available via the Delaware Divisions of Corporations’ website. Electronic filing has replaced the outdated paper and post filing for many reasons. Chief among them are speed, cost, efficiency and security.
A faster way to file
Electronic filing reduces the time and expense associated with the manual preparation of reports and documents. The time spent gathering the necessary information and producing all the appropriate files can now be used more productively elsewhere. Your company is no longer at the mercy of the post or other delivery services; all the pertinent information can be delivered to the Division of Corporations through their online portals. The speed of online filing can help your company avoid the penalties and fees associated with late files. In addition, the Division of Corporations offers expedited service for some of their functions, although some fees will apply.
Making the switch from paper and post delivery services to electronic filing allows companies to reduce cost and waste. Companies need no longer pay postage on documents or file packages; for organizations located outside the U.S., this could lead to substantial savings. Companies also save through the reduced use of stationery and paper. In addition, the Division of Corporations does not charge an additional fee for the use of its website, so electronic filing is absolutely free.
Improved efficiency and workflow
Because digital filing allows users to introduce processes of standardization and automation, companies report a reduction in filing errors and the time spent on creating amended returns. Through the use of registered agents, companies are kept notified as to upcoming filing deadlines, thereby avoiding the hassle and penalties of late filing. In addition, electronic filing can be accomplished from any location that has a secure internet connection, making it more convenient for offshore companies. The Division of Corporations maintains a 15-hour-a-day operating schedule to accommodate international businesses.
Secure data transfers
The Division of Corporations takes data security very seriously, ensuring that your company’s information remains safe from prying eyes. Unlike the post and delivery services of previous years, each file processed with the Division of Corporations is encrypted for maximum security, allowing users the peace of mind of knowing their sensitive data is safe.
Incorporating in Delaware comes with an array of unique opportunities. Electronic filing has made taking advantage of those opportunities easier than ever before. If you have further questions about Delaware’s unique business environment, contact a Blueprint representative.