Delaware, lovingly known as the First State, is a mid-Atlantic state wedged right below Maryland, New Jersey and Pennsylvania that many people have driven through,
Delaware, lovingly known as the First State, is a mid-Atlantic state wedged right below Maryland, New Jersey and Pennsylvania that many people have driven through, but few people know much about in terms of economic climate or what it does to contribute to the region’s economic stats. While it is often overshadowed by Philadelphia, DC and New Jersey, which are a few hours away (at most) by car, there are several great reasons you should consider starting a business in Delaware or moving your existing operation to this wonderful state. Voted America’s Most Business Friendly State in 2013 by CNBC, it’s no wonder that many large corporations have their head offices here. In fact 60% of Fortune 500 companies have invested in making the move and making the state their home.
Internet-based businesses have taken especially well to several cities in Delaware. From tech startups, to advertising agencies, to search engine optimization firms, Delaware has seen a recent influx of new and hungry entrepreneurs ready to compete in the world market.
Just because CNBC thinks Delaware is a great place for you to grow your business doesn’t mean you should get up and move right away. There are tons more reasons the state is objectively a great place for businesses of all types and structures
What You Need To Start a Business in Delaware
Your source for any specifics on starting a business beyond what is provided below should be the Delaware Economic Development Office. Getting large and small business to transplant to the state is something the government there takes seriously so they’ve made sure resources are readily available for newcomers.
Basically, you should consult a local CPA or attorney to decide what type of business entity you want to start. Which choice depends on several things, but Delaware has some of the lowest state taxation rates in the country. Your best bet is to consult the Delaware Division of Revenue as they have an extremely useful document that can tell you at a glance what you can expect to pay with each type. For example, unlike other states, if you own an existing LLC, or perhaps you’d like to start one in Delaware you and your board members don’t need to be a registered resident.
You’ll also need to consult the Delaware Division of Corporations to reserve your corporate entity name – assuming you’re not going as a Sole Proprietorship or General Partnership. This prevents the situation where multiple entities are operating with the same legal name. As with all things in the state, this can be done online and with the payment of a small fee – only $75.
One aspect of this that is notable is that Delaware has a taxation system that is favorable for businesses that have intricate capitalization structures. For example, there is simply no personal income tax for non-residents and if your business has shareholders they also do not need to be Delaware residents to benefit from a merciful tax policy. Many larger companies appreciate the fact that both parties have created a stable, and simple business climate and often move themselves to Delaware before they go public in order to protect their shareholders. This policy has been such a magnet that
Delaware Has Appropriate Legal Structures
State representatives know they are going to attract large corporations and have created what is known as the Court of Chancery and deals with any conflicts the large amounts of corporate entities that are stationed in the state. If you are moving your enterprise here, you can rest easy knowing there is one of the best processes in place nationwide for resolving corporate disputes and routinely appoints some of the best judges for this precise reason.
Awesome For Small & New Businesses as Well
If you don’t own a multi-million dollar, well established corporation ready to go public, you can certainly still benefit from starting up in Delaware. Not only will you save money by paying zero sales tax on business inputs, which can create great leverage, but the Delaware Small Business Credit Initiative has been created to spur along early stage businesses and help entrepreneurs gain traction. Wonder if you qualify as ‘small’? Don’t worry, Delaware has made it easy for you to apply.
There is also the First State Innovation Angel Network which makes finding those who can help spur on early stage businesses with capital easier to find. Of course you need to have an awesome idea that can actually provide a measurable ROI, but the fact that such resources are readily available in such a fertile economic climate makes it a no-brainer to at least consider before going with your home state. It’s a stark reality that 8 out of 10 small businesses fail, and a contributing factor to that is legislative and regulatory burden. Before you invest your time and money in an entrepreneurial journey, make sure you’re making the best of your available choices by considering Delaware.
These policies as a whole have led to impressive stats at a time when most of the country is struggling to even maintain. From November 2015 to April 2016, the civilian labor force expanded from 472,000 to 482,000 – even after seasonal adjustment. Further, this as well as the previously mentioned light regulatory burdens have made the costs of starting a business from scratch 17% lower than the national average.
All in all, the climate for business development in Delaware is excellent for those looking for a competitive edge. With California in billions of debt, and taxes rising in many of the traditional manufacturing states, there is plenty of space in Delaware for your existing business or for your next great big idea.