Delaware’s Corporate Allure: Small State, Big Business Appeal
Delaware, the second-smallest state in the U.S., may be pint-sized geographically, but it’s a giant in hosting more than 60% of Fortune 500 companies, a roster that boasts heavyweights like Alphabet (Google’s parent company), Amazon, CVS Health, and CNBC’s parent company, Comcast.
Why does Delaware hold such allure for corporate giants and even small businesses? According to Roey Gilberg, corporate counsel for LegalZoom, it boils down to three key factors: convenience, flexibility, and predictability.
A standout advantage is Delaware’s Court of Chancery, a specialized court system exclusively designed for corporate cases. Gilberg highlights its global reputation, stating, “widely respected as an authority on business matters trusted by both business and legal communities all over the world.” The well-established rules and predictable case law offer a sense of security for investors. In fact, over 90% of U.S.-based companies that went public in 2021 chose Delaware as their registration hub.
Even for small businesses, Delaware’s appeal is strong. Take Cleanster.com, a platform connecting users with cleaning services. Despite its founders residing in Montreal, Canada, the company is incorporated in Delaware. According to CEO Gloria Oppong, this provides a global edge, stating, “When you want to go global and you’ve incorporated in Canada, no one is going to look at you at all. Delaware protects both ourselves, the entrepreneurs, and also the investors eventually that are going to be joining on.”
Beyond the acclaimed court system, Delaware sweetens the deal with some tax incentives, although the state’s reputation as a corporate tax haven is a bit of a misconception. Gigi Tewari, assistant professor at Widener University Delaware Law School, clarifies, “It’s a misnomer that Delaware is a tax haven for corporations. So many people believe that I should incorporate my business in Delaware because I’m going to save so much on corporate tax. Actually, Delaware is on the higher end for corporate tax.”
In essence, Delaware’s magic lies in its blend of legal infrastructure, global recognition, and investor-friendly environment, making it a powerhouse destination for businesses big and small.