Why do corporations choose to incorporate in Delaware?
The State of Delaware maintains a certain cache as the favored state for companies seeking to incorporate. While many people are aware of Delaware’s favored status, many are unsure of why Delaware is more popular than its 49 brothers and sisters. So, what factors set Delaware apart?
Age: Delaware’s corporation law originated in the late 1800s and has adapted and grown to keep pace with the needs of the modern corporate entity.
Attitude: Delaware’s small, relatively pro-business population has led to a state corporation law that has a bias against overregulation. This provides corporations and other entities with the leeway to run their businesses as they see fit.
Predictability: Due to the large number of corporations, Delaware courts have created a large body of case law addressing an extremely broad range of corporate legal issues. When confronted with a scenario, a corporation can look to precedent for assistance in determining how the courts may rule on their issue in the future.
Cutting Edge: Again due to the large number of corporations, there is a good chance that issues of first impression will arise in Delaware before other states. This means Delaware courts are often on the forefront of carving out legal solutions for novel corporate problems. As a result, other states often look to Delaware for guidance to see how a previously unaddressed problem in their state should be resolved.
Cooperation: The Delaware legislature is extremely deferential toward the Delaware Bar Association and its Corporation Law Committee. This respect and cooperation between the legislative branch and the judiciary means that the laws that are passed are the product of input from those who have extensive first-hand experience dealing with corporate matters.