Okay. Why would a business incorporating
Delaware? Many of you have probably heard
that Delaware is a very popular place
for incorporating a business and lots of
business founders say well you have you
really should incorporate in Delaware
it's more advantageous. So why is
that or why is that a common
understanding? Well for some people it
makes sense, okay,
Delaware as far as the in the creation
process Delaware is very efficient it's
a quick turnaround when you file for
incorporation put in your articles of
incorporation ask for corporate charter
it is the turnaround is extremely quick,
okay, so it's faster than in most states
so that's one advantage but that's
that's not a huge requirement I mean
that's not a huge huge advantage. Now the
maintenance requirements may change in
Delaware, generally there are lesser
requirements for the number of directors
or shareholders that have to be present
to have a quorum to vote in and have
authority to pass any actions that are
intended by the shareholders or
directors, so that's one benefit of
Delaware but other states have similar
laws that are or similar governance
structures that are that are very
similar to that of Delaware. The chief
reason behind choosing Delaware is its
rule of law system, they have a very very
very developed common law system dealing
with corporate or business law. Okay.
So as we discussed in previous lectures, the
common law is the addition to the
statutory law its judicial
interpretation that adds to the state of
the law, okay,
while it's not codified it's still there
in appellate judicial opinions that bear
the force and weight of law, so
corporations can look and see a very
very developed very well treated body of
law and it gives confidence, okay, it
gives confidence to the business in you
that says if I undertake this action
that falls under these rules and I'll be
okay or we won't face liability or
this is the way we need to go about
doing it. Well in other states where it
has a less developed corporate law
structure that may not be the case you
may have less security the state may not
have dealt with it before, okay, so that
really developed body of corporate law
is extremely important
it's think of it as the equivalent of
having a very very very detailed manual
to go by in your corporate
transactions. Okay. Next is there is a
dedicated court in Delaware known as the
Chancery Court,
so these Chancellor's are or or Business
Court judges as you can think of them
they are extremely knowledgeable and
extremely skilled when it comes to
dealing with disputes of the business so
these businesses can feel confident that
if they are called into court for
litigation or challenged on some
corporate action in litigation that
there is an expert at the helm
the judge will have excessive knowledge,
and access to resources, etc that allow
them to adequately and appropriately
deal with the matter at hand, okay, where
other states may have less expertise the
judges may not have the level of
knowledge or prior experience necessary
to adequately deal with these issues. And
furthering the Chancery Court there's
generally no juries, okay, the Chancery
judge can appoint a jury but it's very
rare it's very rare to have a jury the
judge the Chancellor makes the finding
of fact and and determinations of law in
the case, so that's a very important
aspect as well. Also the Supreme Court in
Delaware is quick to accept any issue
decided in the Chancery Court and to
establish further law on it to accept it
for appeal, to review it, and issue an
opinion that adds to the state of the
law for that issue, so again this is
extremely beneficial in that it quickly
deals with any appellate rights of the
individuals and it adds
to the body of law, so again people for
future transactions that are similar to
that can look at the opinion can look at
this situation and rely on that Court's
decision in their further actions. Okay.
And generally lastly Delaware has lacks
rules you generally don't have to pay a
state income tax for revenues generated
outside of the state, where some other
states if you are incorporated in that
state will require some level of the
profits or income generated by the
business to be allocated to that state
to their headquarters office for state
income taxation. So those are the general
rules why Delaware can be a very
advantageous spot for an individual to
incorporate or a group to incorporate
their business and to have business
headquarter there. The downside to
Delaware is if you incorporate in
Delaware you can also be sued there, okay,
so it's no longer just the location
where you committed the tort or entered
into the contract or the place where
you're carrying on active business
individual can go to Delaware and sue
you as well no matter how how little of
business or how little of presence you
had there, so that's the main
downside associated with it and you you
will likely have to pay the annual
filing requirements in that state and in
the state where you routinely carry on
busines. Okay.