Why do a majority of all New York Stock Exchange (NYSE) traded companies and Fortune 500 companies have a corporate presence in Delaware? Why do many of these same companies have business entities in other states or offshore? It is all about jurisdiction. There are over 40 locations worldwide that offer benefits, including favorable corporate climates and tax treatments, to business entities. If you are searching for opportunities to protect your assets, reduce tax liabilities, and establish corporate confidentiality, you may want to explore establishing a business entity in an optimal jurisdiction.
How do you choose the jurisdiction and vehicle that's right for your business? And where do most companies go to achieve these goals?
The state of Delaware is well known for its favorable corporate climate. Delaware courts have hundreds of years of legal precedent as makers of corporate law. Delaware's general corporate law is one of the most advanced and flexible corporate statutes in the United States. The Court of Chancery is a separate court system that handles corporate law matters while the Delaware Secretary of State operates similar to a regular business, and both foster a corporate-friendly environment. Advantages include low franchise tax; and no Delaware sales tax, property tax, or state income tax for corporations/LLCs formed in Delaware that do not transact business within the state.
The state of Nevada is becoming increasingly known for corporate advantages. Nevada offers corporate entities privacy, limited personal liability for officers and directors, and tax advantages. Tax advantages include no state tax on corporate profits and no state franchise tax. In addition, there is no state personal income tax.
Offshore jurisdictions such as Grand Cayman, the Channel Islands, Bermuda, the Bahamas, and Switzerland offer many similar advantages, including asset protection, confidentiality, and a sensible regulatory environment. Many companies choose offshore jurisdictions for their often favorable tax laws and to maintain anonymity and protect various assets. There are numerous offshore jurisdictions with unique benefits for various business entities.
Most states/jurisdictions require that you have a registered agent within your state of incorporation. A registered agent can assist you with the incorporation process, including a name check, filing of the articles of incorporation, and processing of the request by the state. Your registered agent also provides an available and local address. In addition, your agent can generally accept tax notices and official documents on behalf of your company.
If you are interested in exploring the benefits of establishing a business entity in another jurisdiction, you will need to answer the following questions:
Updated: January 1, 2013
This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.
© 2013 Wilmington Trust Corporation.