The state of Delaware has been recognized as the leader for US corporations, especially due to its corporation-friendly environment. Not only do corporations have tax advantages in Delaware, but limited liability companies and limited partnerships may also enjoy similar benefits.
Is it better for Florida entrepreneurs to incorporate in-state or seize the benefits of Delaware’s policies? Keep reading to find out.
Why is Delaware Attractive for Corporate Businesses?
The state of Delaware has consistently been a pro-corporation state with friendly corporate laws and tax advantages.
The importance of corporate laws within state jurisdiction is overwhelming. For over 200 years, the Delaware Court of Chancery has existed with the sole focus on handling legal matters associated with corporate law.
The state’s corporate law has been prominent for decades, which led several corporate attorneys to specialize themselves in Delaware law.
Incorporating a business in this type of legal and economic environment may be an advantage for companies that want to attract investors, such as expert firms, angel investors, and venture capitalists.
Another advantage of incorporating in Delaware is the anonymity of the corporate records, which are not open to the public (although it is possible to acquire them for a fee).
Entrepreneurs from other states often complain about the formalities associated with corporations. In Delaware, there are fewer corporate formalities, which include smoother shareholder meetings and no provision of minutes, resolutions, or other records of meetings.
In Delaware, corporations must pay an annual report fee and corporate tax income. There is also an annual franchise tax, which is based on the size of the business. When an out-of-state entrepreneur forms a company within Delaware’s jurisdiction without conducting business there, there is no need to obtain a business license.
Why is Florida Attractive for Corporate Businesses?
In recent years, the state of Florida grew exponentially in terms of cost-effectiveness and convenience to offer corporate businesses fertile soil for their operations.
Currently, entrepreneurs can visit the Florida Department of State website to research documents, obtain accurate information, and file documents conveniently. When compared to other states’ numbers, filing fees in Florida are often lower.
In Florida, a corporation conducting business within state jurisdiction must pay the annual report fee to keep the company as an “active” corporate entity. Additionally, C Corporations are subject to corporate income tax.
Corporate businesses elected as S Corporations are exempt from state corporate income tax (unless the company owes federal income taxes). Additionally, no S Corp shareholder is exposed to personal income taxes.
Florida does not require corporate businesses to pay an annual franchise tax, which has contributed to the exponential growth of franchising companies within the state. Also, there is no minimum capital requirement to incorporate a business in Florida.
State law permit corporations to use several employee benefits plan to attract the best employees, boost productivity and ensure superior operational efficiency. In certain cases, Florida corporate businesses may deduct contributions made by employees for disability and health benefits.
Should I Incorporate in Delaware or Florida? – An Honest Overview
Unless there are specific reasons to justify the incorporation of a business in Delaware or another state, establishing a corporate business in Florida may be the right approach.
If a corporate business has its headquarters established in Florida, conducts most of its operation in Florida, or has most of its working force located within the state, the ideal approach is to incorporate in Florida.