Incorporating in Delaware

[CrossCountry]

Hello,

A friend who is incorproated in California is thinking about incorporating in Delaware, says that tax rate is better. I understood that if you incorproate in another state, you must ACTAULLY do business in that state.

My friend is not doing business in Delaware, but when I mentioned it to other people, they were saying this happens all the time, people incorproating in DELAWARE. Is it possible to incorporate in another state even if we don;t do business there? Why are people choosing Delaware in particular.

Thank you,

[websonalized]

CrossCountry,

I think that people often choose to incorporate in Delaware because the laws are favorable for business, I think that legislation is generally friendly to businesses.

Then the taxes are much lower. In California, there is a base tax fee, if you are a corporation and have no profit for the year, you have to pay $800 a year. In Delaware, I think you pay $75.

However, you may end up paying the difference having a service agent, or some kind of legal service that helps you keep your correspondence and stuff. You need to have some kind of agent in the stat.

So do your math before you buy a flight ticket...

[websonalized]

Error, double post by accident

[Evan]

As he operates in CA, he'll have to register as a foreign business corporation there. So he's going to pay the taxes to CA anyways, in addition to fees in DE and maintaining an agent. Most small businesses don't really make enough for there to be a benefit in doing that. The reason why big corporations incorporate in DE isn't really because of taxes either, it's because of their business friendliness of corporations when it comes to contracts and legal matters. The average person is not going to know the difference.