Why do corporations often choose to incorporate in Delaware?
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Why do corporations often choose to incorporate in Delaware?
There are two major reasons for Delaware’s dominance of the corporate incorporation business. The other major reason corporations choose to incorporate in Delaware is the quality of Delaware courts and judges. Delaware has a special court, the Court of Chancery, to rule on corporate law disputes without juries.
How many shares should be authorized in the certificate of incorporation? I usually advise companies to authorize around 10 to 15 million shares of common stock. Around 8 or 9 million shares are issued to founders with a 1 million to 2 million share option pool, for a fully-diluted base of around 10 million shares.
Why do investors prefer Delaware corporations?
Angel investors and venture capital firms generally prefer Delaware corporations. The main reason to choose Delaware is for its predictable laws that protect investors. Accordingly, legal professionals and capital investors have always been comfortable with the Delaware laws and procedures governing these entities.
How many shares should I issue when incorporating in Delaware?
A good rule of thumb is to authorize only what the corporation will need. Corporations with 5,000 or less authorized shares are considered minimum stock and will pay the minimum Delaware Franchise Tax each year.
How many shares of stock can an C corporation issue?
A typical start-up corporation may issue 10,000 or 100,000 shares for example, while a start-up S-Corporation might only issue 1000 shares. C-Corporations are able to issue both common and preferred stock. S-Corporations are able to issue only common stock.
Why do investors prefer C Corp?
Investor-Friendly Taxation Unlike other business structures, C corporation shareholders only have to pay taxes when they receive dividends from the company. This is a major reason investors prefer C corps: they only need to worry about paying tax for the money they actually receive.
How do I incorporate a C Corp in Delaware?
How to Form a Corporation in Delaware
- Choose a Corporate Name.
- Prepare and File Certificate of Incorporation.
- Appoint a Registered Agent.
- Prepare Corporate Bylaws.
- Appoint Directors and Hold Board Meeting.
- Issue Stock.
- File Annual Report and Pay Franchise Tax.
- Obtain an EIN.
Why is Delaware franchise tax so high?
Most startups authorize a large number of shares for things like issuing equity grants to employees, which leads to a large tax burden under this calculation method.
Do corporations pay taxes in Delaware?
Every domestic or foreign corporation doing business in Delaware, not specifically exempt under Section 1902(b), Title 30, Delaware Code, is required to file a corporate income tax return (Form 1100 or Form 1100EZ) and pay a tax of 8.7\% on its federal taxable income allocated and apportioned to Delaware.