Delaware is known as “The First State” because it was the first of the original 13 colonies to ratify the U.S. Constitution. For many business entities, it is also the first state when it comes to business formation. A number of businesses choose to form their business in Delaware but conduct their business — as well as have their physical headquarters — in another state.

Why incorporate in Delaware?

There are a number of advantages to incorporating in Delaware. Delaware offers one of the most advanced and flexible corporation statutes in the nation. The Delaware General Corporation Law (“DGCL”) includes enough provisions to handle any situation corporations are likely to encounter. Delaware also keeps these statutes up to date by considering and enacting amendments to the law each year.

The court system, Delaware’s Court of Chancery, is widely recognized for its expertise in corporate and business entity matters. It is ideal for organizations looking to resolve legal issues justly and quickly.

Delaware’s case law is the largest and most comprehensive in the world, which provides useful guidance for areas involving litigation.

Another reason is an efficient and responsive filing office — the Division of Corporations — which offers specialized services such as expedited, same-day filings.

What are other reasons for doing business in Delaware?

Delaware offers a wide range of tax and other incentives, as well as financing and funding options. The Delaware Strategic Fund was established to help in-state businesses, as well as support out-of-state businesses looking to expand or relocate to Delaware.

Other reasons for doing business in Delaware include an educated and skilled workforce, favorable tax climate, and relatively low operating costs.

What is the cost of doing business in Delaware?

Delaware corporations that conduct business in the state are subject to an 8.7% corporate income tax. Corporations that are incorporated in the state but do not operate in the state are not subject to corporate income tax.

However, all non-exempt businesses that are incorporated in Delaware (regardless of whether they conduct business in the state) must file an annual franchise tax report and pay a franchise tax.

Delaware does not have a state or local sales tax, but it does have an annual business license requirement. A gross receipts tax is imposed on businesses that sell goods or provide services.

What are the challenges of doing business in Delaware?

There are some considerations when doing business in Delaware, especially for businesses that incorporate in Delaware but operate outside the state. For these businesses, the compliance obligations and expenses can multiply. Businesses are still required to meet the filing and licensing requirements of both the home state (state of incorporation or formation) and any state in which they operate. 

Related solutions and resources
Trusted by lawyers and more than 300,000 businesses since 1892.
Back To Top