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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 116754
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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I have a small company that I would like to setup as a corporation.

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I have a small company that I would like to setup as a corporation. Although, I live in California several people have suggested I do the corporation in Delaware. I understand I would pay California taxes and some fees to Delaware. My question is why would
it benefit me to corporate in Delaware?
Thank you for your question. I look forward to working with you to provide you the information you are seeking.
The answer to your question depends on the type of corporation you want and the type of business you are doing. The reason many corporations form in Delaware (and now more recently Nevada and Wyoming) are because they benefit from the very loose laws governing corporations and the fact those laws that exist are more favorable to the corporation with less paperwork and documentation and formality. Also, Delaware, Nevada and Wyoming allow for anonymity of the owners and shareholders and members and generally only the person forming the corporation (who may or may not be a member) has to be disclosed.
If you are going to be operating your business or conducting business in multiple states and are not going to have a physical location in CA or deal exclusively with customers in CA, then using the out of state formation is beneficial. However, if you are going to have a retail type store business in CA or are working exclusively in CA, then you are paying to register in DE, WY or NV and then paying CA to register as a foreign business entity conducting business in CA and paying your taxes and franchise fees in CA and in that event registration in DE or the other states is not worth it.
On the other hand, if you are not going to have a physical location in CA and you are conducting business in various states (like an online business)and not primarily in CA only, then the DE, NV or WY corporation makes most sense because you do not have to register as a foreign business in CA, you do not have to pay the franchise taxes and all you have to pay would be your income taxes you earn from the company (not what the company earns as it is a DE corp or WY corp or NV corp) and sales taxes if applicable.
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