Delaware may be the second-smallest state in the union, but it has long been a strong choice for incorporations. We get a lot of questions in reference to this.
Although we aren’t attorneys, and cannot provide legal advice, here are a couple of issues to consider. Prior to making any decisions in this regard, please consult the attorney of your choice.
A Business-Friendly Court System
Delaware boasts a Court of Chancery which is a separate court system just for corporate issues. This system is widely respected by business and legal experts as a place where corporate rules are well defined.
This leads to a predictability in case law that protects owners, investors, and corporations. The problem is that if you’re a small business owner based in Illinois or whatever other state, you’re not going to get sued in a Delaware court.
As such, incorporating in Delaware probably won’t help any potential legal issues.
A Reputation For Lower Taxes
Delaware does provide some smaller tax incentives for businesses, but its corporate income tax rate is 8.7%. It may have a reputation for lower taxes, but in reality they’re rather high.
It’s certainly true that 60% of the Fortune 500 are incorporated in Delaware, but they have locations there and can take advantage of its legal system. I can only wish that we could find a Cook County Judge who could reach a decision with a map, a seeing-eye dog, a Sherpa Guide, and a compass.
Let me leave you with this.
It’s March 15th and your Partnership and S Corp returns are due today. If you’re one of my clients and your return hasn’t been completed, then an extension has been sent in on your behalf.
In several prior communications, we have contacted you in reference to making a tax deposit with your extension. If you have not yet done so, and would like to, please contact us today.
If you wait until tomorrow, you will be subject to penalties.
Personal Returns, C Corps, Estate, and Trust returns are due Tuesday, April 18th. If you have not sent in your work, please do so today. We will work on everything in the order it was received.
We’re all going to get through this. Let’s get through it together.
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