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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JAE EN (JEN) KIM  | SENIOR COUNSEL

Jen Kim is Senior Counsel at Parsus LLP. Jen specializes in cross-border M&A, investment and financing transactions. She brings a wealth of cross-border legal experience and cultural knowledge to facilitate multinational clients doing business in Asia and the U.S.

Jen is an English-Korean bilingual corporate attorney who spent the first 8 years of her career at big law firms, initially in the Chicago office of Drinker Biddle & Reath then at Kim & Chang in Seoul, Korea. At Drinker Biddle & Reath, her practice focused on transactional work including M&A, private equity and partnership investments. At Kim & Chang, in addition to transactions, she worked on a broad range of matters for multinational clients in the life sciences, healthcare and chemical industries, serving as the outside general counsel for their operations in South Korea and the broader Asia Pacific region.

Most recently, Jen was in-house at Reckitt Benckiser, a global consumer health company with well-known consumer brands such as Lysol, Mucinex, Air Wick and Enfamil.  At Reckitt Benckiser, she was a member of the senior management team looking after all legal and compliance matters for its Korea and Japan businesses before transitioning to her role in Chicago where she managed the integration of the company’s newly acquired infant formula business and led the North America health business in data privacy matters.

Jen majored in business administration at Ewha Womans University and received her J.D. degree from Northwestern University Pritzker School of Law.

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.

Kristen Lee
| ASSOCIATE ATTORNEY

Kristen Lee is an English-Korean bilingual corporate associate attorney at Parsus LLP.  With a background in defending corporate clients in high stakes litigation, Kristen’s current 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.  

In her role at Parsus, Kristen has represented numerous public companies operating in the US including NHN and CJ. Her recent transactions include representing a group of foreign investors in a minority investment of a US software start-up and representing a Korean company acquiring a US digital media company.

Ju Y. Park, Esq.
Ju Park
| MANAGING & FOUNDING PARTNER

Ju Park is the Managing and Co-Founding Partner of the Firm, and practices in the areas of mergers and acquisitions, corporate finance, corporate governance and general corporate transactions. She also has considerable experience working with companies as their offsite general counsel in providing practical and cost-effective solutions to their general day-to-day business legal matters.

In the area of securities, Ju has represented issuers and investment banks in initial public offerings, private placements of debt and equity securities, 144A securities offerings, foreign public offerings and private equity transactions. Ju’s experience spans a wide array of clients and industries, including individuals, start-ups and Fortune 500 companies with a presence in the food, cosmetics, sports, entertainment and media, real estate and e-commerce industries. Ju also has experience assisting NYSE and NASDAQ-listed companies with public reporting obligations and general corporate compliance matters.

In the area of mergers and acquisitions, Ju has represented both public and private companies on sell-side and buy-side transactions. Ju’s experience in mergers and acquisitions include complex, cross-border deals involving collaboration with foreign counsel in multiple countries.

Before co-founding Parsus, Ju was an attorney in the Hong Kong and Los Angeles offices of Latham & Watkins.