Incorporating carries multiple advantages ranging from tax incentives to favorable legal implications for a business and the individual owner or owners. The decision of where to incorporate is just as important as the decision to incorporate because of the different benefits and protections each state provides to the business incorporating there.
One popular state of incorporation is Delaware. Due to, among other things, a court system dedicated to commercial and asset transactions, rich case law, use of judges rather than juries, flexible laws, and light initial startup fees, the state has rightfully gained title as a great place to incorporate. The flexibility in state corporate law permits a host of rights arrangements between the founders and shareholders, retaining the founder’s ability to dictate control when going public. Additionally state law provides for the held anonymity of directors and other top-level employees, adding a nuance that other states do not recognize.
The appeal of incorporating in Delaware is better suited for local or public companies, however. For example, a business starting in California, but wishing incorporate in Delaware, should to choose to incorporate in California. One reason is the possibility of having to appear before a Delaware court because incorporation subjects the business to that state’s jurisdiction, conceding avoidable expenses involved in answering legal proceedings. Moreover, the effective legal framework historically moving attorneys to favor Delaware has been widely implemented in states across the nation, diluting the advantage. Corporations in California, though they may not enjoy as a rich legal history, generally have the legal tools at their disposal to enjoy the same results just as if they were in Delaware. As an example of nuances in corporation law among the states, California allows a single individual to fill multiple positions mandated by state corporation law.
Thus, the question of where to incorporate is answered by the particular needs, preferences, and goals of a business and its owner. Such a decision requires the navigation of an experienced attorney to ensure the business owner understands her options and the implications they bring when making an informed decision.
Buda Law Group has extensive experience incorporating and converting businesses in California. For years, we have provided sound legal advice to our clients during the incorporation and conversion processes while pursuing their best interests. If you have any questions, the team here at Buda Law Group will gladly answer them. Please reach out to us to find out more or get a competitive quote on our legal immigration services.
John B. Buda, Esq.www.budalawgroup.net office: 310-452-1872 [email protected] 3301 Ocean Park Blvd. Suite 205 Santa Monica, CA 90405