4 Reasons To Incorporate in Delaware

Delaware is known as one of the most business-friendly states.  According to the State’s website, Delaware is home to more than one million business entities, including two-thirds of the Fortune 500 companies.  Why is Delaware so desirable? Should you follow the footsteps of these other businesses and incorporate in Delaware? Here are some of the reasons why Delaware may be the best choice for many businesses.  

  1. Tax Haven. A corporation that does not conduct business in Delaware does not need to pay state corporate income tax.  There is, however, an annual franchise tax, which can be as low as $125, plus reporting fees. Franchise taxes in other jurisdictions can be much higher.  California, for example, has a minimum annual franchise tax of $800.
  2. Court of Chancery.  Delaware has a Court of Chancery that specializes in hearing cases involving corporate issues.  Cases can be decided relatively fast given that there are no juries and the judges have a background in corporate law.  If it’s unavoidable, you may want your case to be heard in the Delaware Court of Chancery.
  3. Predictable Case Outcomes.  As mentioned above, Delaware is home to a striking number of businesses, which means a large database of precedents or previous cases.  Although each case is unique and different, your legal advisors could use these precedents to assess the risks and outcome of your case more accurately than in other states.
  4. Privacy. You can form a corporation in Delaware without disclosing the names of the corporation’s directors or officers.  Compared to states like California, where the names and addresses of corporation’s officers and directors are freely available on the Secretary of State website, Delaware offers a layer of anonymity.

Despite these advantages, however, there are some drawbacks to incorporating your corporation in Delaware if you don’t actually conduct business there.

  1. Cost of Foreign Qualification. You will need to register your corporation in the state in which it is conducting business.  For example, if you incorporate your corporation in Delaware but the headquarter is in California, you have will have to register your corporation with California as well.
  2. State Compliance. You will need to comply with Delaware’s regulations and the regulations of any other state in which your corporation is registered to conduct business.  Regulations vary from state to state and can include reporting and filing requirements.
  3. Cost of Registered Agent Services. Delaware requires that a company’s registered agent have a Delaware address.  Unless you know someone with Delaware address who is willing to serve as your registered agent, you will have to hire a third-party for this service.    

Although Delaware has the reputation of being business-friendly, it may not be the best choice for your particular corporation.  We recommend that you speak to an attorney to discuss the pros and cons of incorporating your business in Delaware. 

Legal Disclaimer: The  information in this article is provided for general informational and educational purposes only.  It is not intended to be legal advice and does not create an attorney-client relationship.

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David Kim| PARTNER

David Kim is a Partner at Parsus LLP. He specializes in corporate and technology transactions, with an emphasis on intellectual property. David has represented a variety of clients from start-ups to Fortune 500 companies in mergers and acquisitions, cross-border investment, financing, and licensing. His clients do business in a range of industries including entertainment, financial services, consumer products, gaming, software, and technology services.

Prior to returning to Parsus LLP, David served as an in-house intellectual property counsel for NBCUniversal, advising on technology and mergers and acquisitions for the various business units of the company. He assisted the company’s corporate development teams in assessing acquisition targets and negotiated NDAs, vendor service agreements, software and hardware licenses, and trial agreements for experimental and prototype technology. David was also one of the company’s primary resources on open source software-related matters.

Before joining NBCUniversal, David co-founded and served as a Partner of Parsus LLP, worked as in-house counsel for start-ups, and was an associate at Winston & Strawn, where he represented clients in intellectual property matters including patent assessment and analysis, IP licenses, and various phases of patent and copyright infringement litigation. At Winston, David also represented clients in general business and securities litigation concerning commercial disputes and business torts.

David received his A.B. degree from Harvard University and his J.D. degree from UCLA School of Law. 

Kristen Lee
Kristen Lee
| ASSOCIATE ATTORNEY

Kristen Lee is an associate attorney at Parsus  LLP.  Her practice is focused on commercial transactions and the various day-to-day legal needs of businesses of all sizes, including business formation, corporate governance, commercial contracts, and mergers and acquisitions. Prior to joining Parsus, Kristen represented corporate clients in high-stakes litigation involving breach of contract, fraud, unfair competition, and other business torts.  

Kristen is a member of the Korean American Bar Association of Southern California.

Kristen received her B.A. degree from the University of Texas at Austin and her J.D. degree from Pepperdine School of Law.  Kristen is fluent in Korean. 

EVELYN SHIMAZAKI
| OF COUNSEL

Evelyn Aguilar Shimazaki is Of Counsel at Parsus LLP. Her practice is focused on the representation of technology companies in intellectual property licensing and commercial transactions, including joint development, manufacturing, procurement, strategic alliances, outsourcing and other services arrangements. Prior to joining Parsus LLP, Evelyn was a Senior Counsel at Apple in Cupertino, California for fourteen years. After Apple, she joined Tesla in Palo Alto, California as Chief Counsel and more recently, Oculus VR, a division of Facebook in Menlo Park, California as a Consultant.  

Evelyn is a Founding Board Member of UCLA Law Women LEAD, an Advisory Board Member of the Lowell Milkin Institute of Business Law and Policy at UCLA School of Law, and a past President and Advisory Board Member of the Philippine American Bar Association of Los Angeles.

Evelyn received her B.A. degree from the University of California, Berkeley and her J.D. degree from UCLA School of Law. A native of the Philippines, Evelyn speaks Tagalog, Spanish and some Japanese.

Ju Park
| MANAGING & FOUNDING PARTNER

Ju is a corporate lawyer by training and an entrepreneur at heart.  After attending the United States Military Academy at West Point for a year where she gained essential life skills including throwing grenades and applying a tourniquet, she graduated from McCombs Business School at the University of Texas majoring in finance.  Ju then graduated from UCLA School of Law where she focused her studies on International Business Law.  After law school, she practiced corporate law and litigation in the Los Angeles and Hong Kong offices of an international renowned law firm, Latham & Watkins, where she advised domestic and foreign clients, including Fortune 500 companies, on various corporate matters including general commercial contracts, corporate finance, IPOs and mergers and acquisitions.

Ju co-founded Parsus in 2009 with a vision to transform the legal services industry to make quality legal advice more available to and affordable for businesses of all sizes while improving the lifestyle and overall happiness of lawyers.  Over the years, and particularly since recently becoming a mother, Ju’s vision for Parsus has expanded to transform our extended community by committing a part of the firm’s profits and resources for charitable purposes.

In her role at Parsus LLP, Ju serves as outside transactional and general counsel to clients of all sizes and across a broad range of industries.  Her clients include domestic and foreign companies to whom she provides practical and cost-effective solutions to their general day-to-day business legal matters as well as major transactions such as mergers and acquisitions, corporate finance and cross-border transactions.  Ju combines her legal expertise with her business acumen to provide practical solutions to her clients’ legal issues without “over-lawyering” their contracts or deals.  Ju’s recent clients have included foreign and US companies acquiring and/or investing in US companies or assets, US companies receiving foreign and domestic investments, US subsidiaries of foreign companies going public, and foreign companies with ongoing US operations.  Ju also enjoys working with like-minded entrepreneurs and start-up executives.