Published: November 12, 2014 at 11:37 by Harrison Law
Delaware is a favored state for incorporation for a number of reason
However, if you incorporate in Delaware but do business in a different state (i.e., maintain an office or warehouse, or hire employees or a sales force, among other things), you will have to register to do business in that state as a “foreign corporation.” Therefore, not only will you have to pay the filing fees for the state in which you are transacting business, but also Delaware filing fees. For example, if your Delaware company has a business office in Los Angeles, you must register the company to do business with the California Secretary of State’s Office and file a California Statement Of Designation Of Foreign Corporation, along with paying a filing fee of $100.
Together with the additional extra filing fees, incorporating in Delaware will require that you have a registered agent for service of process in Delaware, which will cost you additional fees.
If you incorporate in Delaware, you will not only have to pay the annual franchise tax in the state in which you are doing business, but also in Delaware. For example, if your company is headquartered in Texas, but incorporated in Delaware, each year you will not only have to pay the annual Texas Franchise Tax, but also the annual franchise tax in Delaware.
Also, incorporating in Delaware, but doing business in a different state will mean that you will have a second layer of reporting requirements. For example, if you incorporate your company in Delaware, but are headquartered in New York, you would have to comply with the annual reporting requirements in both states.
For these reasons, not every company should incorporate in Delaware. Instead, you should make sure that the benefits of incorporating in Delaware outweigh the extra expense and time of being incorporated there instead of in whichever state your company is actually transacting business.
For more guidance on where to incorporate your US subsidiary, contact Harrison Law at harrison at harrison.pro