Delaware has long been known as a popular state for incorporation of a new business. Some entrepreneurs think this is solely because of tax benefits, but there are many legal and practical benefits to incorporating a new business in Delaware. Here are some of the most common:
The Delaware General Corporation Law is considered to be friendly toward the management of corporations. There are many specific provisions that help corporations run more efficiently: for example, Delaware corporations have the option of using cumulative voting, while other states make it compulsory for corporations that are not publicly traded. The DGCL also allows for shareholder approval of mergers without separate votes in each class of outstanding stock. Special meetings can be limited to a call by the Board of Directors, which prevents the complications associated with shareholders calling special meetings. Finally, the DGCL embraces new technologies and now allows corporations to use distributed ledgers or blockchains to create and maintain the corporate records required by law. These and other provisions help corporations run more efficiently under Delaware state law.
Established Corporate Law
The DGCL was adopted in 1899. General corporation acts were a significant legal achievement at the time: prior to the adoption of corporate laws, incorporation required a special act of a state legislature. General corporation acts allowed anyone to start a corporation by following set legal procedures. The Delaware General Corporation Law was not the first corporate law in the United States, but it was among the first, and it quickly became one of the most popular as corporate America expanded exponentially in the twentieth century. Today more than half of the companies that are publicly traded on the New York Stock Exchange are incorporated in Delaware. About two out of every three Fortune 500 companies are also incorporated in Delaware, and almost 90 percent of all initial public offerings made in 2019 in the U.S. were from businesses that incorporated in Delaware.
Dedicated Courts of Chancery
Delaware has established courts that specifically work to arbitrate corporate disputes. These Courts of Chancery have no juries and are administered by judges with experience in corporate matters. This allows them to efficiently arbitrate internal corporate disputes. The Courts have become well known for adjudicated large, high-profile business disputes. Other states have based their own corporate courts on the Delaware system. For corporations, access to an efficient arbitration process can eliminate both the time and cost of internal disputes. The arbitration process can reduce legal fees, lost business opportunities, and the bad publicity that can come with a public disagreement between managers, owners, and shareholders.
Call Us Today to Speak with a California Business Lawyer
The California corporate lawyers at Structure Law Group have experience with many different types of businesses. Whatever your business is, we can help you select the right state for incorporation and set up other critical management infrastructure so that your business can run efficiently on your first day of operations. Call (408) 441-7500 to schedule a consultation with one of the experienced California business lawyers at Structure Law Group.