funflyer
Posts: 817
Joined: Sat Aug 09, 2003 4:53 am

Everyone Is In Delaware

Sun Jan 21, 2007 7:59 am

Now I was reading some of the dot filings and I came across one for US AIRWAYS and one for DL now I was just wondering why every "large" corporation is Incorporated in Deleware not just airline's. Does anyone know why?

[Edited 2007-01-21 00:00:17]
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commavia
Posts: 9744
Joined: Mon Apr 25, 2005 2:30 am

RE: Everyone Is In Deleware

Sun Jan 21, 2007 8:00 am

Virtually all major companies incorporated as corporations in the United States are incorporated in Delaware as "Delaware Corporations." The airline industry is no different. This is largely because Delaware's laws, legal system and incorporation code are very favorable to businesses (on purpose).
 
aa777sjc
Posts: 46
Joined: Fri Mar 24, 2006 6:19 am

RE: Everyone Is In Deleware

Sun Jan 21, 2007 8:01 am

Large numbers of corporations (most big ones I believe) are incorporated in Delaware. They have the laxest rules in terms of the owners/officers of the company getting in trouble if the corporation does something wrong.
 
vega
Posts: 1161
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RE: Everyone Is In Delaware

Sun Jan 21, 2007 8:14 am

Favorable Corporate Environment, such as:
No Corporation income tax (if business conducted outside of DL).
No sales, personal property or intangible property tax.
No non-resident tax/inheritance taxes on owned stock.
All company Records can be maintained outside of Delaware.
Principal place of business may be outside of DE.
DE courts reputation for ruling favorable to Corporations.
etc.
We are but a moment in this vast Universe and when gone we will never have existed.
 
dank
Posts: 926
Joined: Thu Jul 20, 2006 11:35 am

RE: Everyone Is In Delaware

Sun Jan 21, 2007 8:15 am

Quoting Aa777sjc (Reply 2):
Large numbers of corporations (most big ones I believe) are incorporated in Delaware. They have the laxest rules in terms of the owners/officers of the company getting in trouble if the corporation does something wrong.

It's not that people won't get in trouble if the company does something wrong. In fact, Delaware laws favor shareholders and not corporate management (states like Wyoming and and Nevada tend to do this) It is because of a combination of things (and interestingly, it is not because coroporate fees are low, they are actually fairly high). For banks, the main reason for incorporation in Delaware is the fact that the state does not restrict the amount of interest that can be charged (great if you are a credit card bank). But maybe most important these days is the fact that the state has had a chancery (business) court for a long time. This means that there is a large body of business related case law which can make it easier for a corporation (since they have an idea of how the law will be interpreted). Furthermore, it is easy to incorporate in Delaware without having to be located here (which is lucrative to the state since incorporation fees are not low and now make up a large portion of state revenue). As the first respondent stated, the laws are favorable to businesses, but it doesn't mean that it turn a blind eye to the Enron's of the world.

cheers.
 
N801NW
Posts: 558
Joined: Mon Jul 12, 2004 8:56 am

RE: Everyone Is In Delaware

Sun Jan 21, 2007 8:18 am

Quote:
A Delaware corporation is a corporation chartered in the U.S. state of Delaware. Delaware is well known as a corporate haven, and thus, over 50% of US publicly-traded corporations and 58% of the Fortune 500 companies are incorporated in the state

http://en.wikipedia.org/wiki/Delaware_corporation
 
srbmod
Posts: 15446
Joined: Tue Mar 20, 2001 1:32 pm

RE: Everyone Is In Delaware

Sun Jan 21, 2007 8:29 am

Another state well-known for having a favorable corporate environment is Nevada. Valujet was a Nevada corporation.
 
dank
Posts: 926
Joined: Thu Jul 20, 2006 11:35 am

RE: Everyone Is In Delaware

Sun Jan 21, 2007 8:30 am

Quoting Vega (Reply 3):



Quoting Vega (Reply 3):
Favorable Corporate Environment, such as:
No Corporation income tax (if business conducted outside of DL).
No sales, personal property or intangible property tax.
No non-resident tax/inheritance taxes on owned stock.
All company Records can be maintained outside of Delaware.
Principal place of business may be outside of DE.
DE courts reputation for ruling favorable to Corporations.
etc.

Partially true (btw, it is DE, not DL)... I don't think that there are any (or at least not many) states that charge corporate income tax on business outside of the state. There is no sales tax, but their are business gross receipt taxes. There is no state personal property tax, but the counties do level taxes. It is difficult to compare states directly on all manners of taxation (because of differences in the split between local, county, and statewide organization). If you look at census data from 2005, Delaware actually ranks 5th in overall taxes per capita.

Cheers.
 
vega
Posts: 1161
Joined: Sat Aug 27, 2005 8:56 am

RE: Everyone Is In Delaware

Sun Jan 21, 2007 9:03 am

Quoting Dank (Reply 7):
Partially true (btw, it is DE, not DL)...

Nothing I stated is "partially" true, it's all Facts. You just embellished it in an attempt to lower it's positiveness.
We are but a moment in this vast Universe and when gone we will never have existed.
 
dank
Posts: 926
Joined: Thu Jul 20, 2006 11:35 am

RE: Everyone Is In Delaware

Sun Jan 21, 2007 10:04 am

Quoting Vega (Reply 8):



Quoting Vega (Reply 8):
Nothing I stated is "partially" true, it's all Facts. You just embellished it in an attempt to lower it's positiveness.

Nah, I clarified it because certain statements are not relevant in anyway. Case in point, your first one. No state taxes income not made in the state, so it is in no way a reason a company would incorporate in the state. As for the sales tax, while there is no explicit sales tax, businesses do pay taxes on gross receipts. In addition, Delaware has a number of excise taxes that aren't stated as sales tax (e.g. tax on automobile transactions). Tax on property tax. Just because the state does not tax property, doesn't mean that the counties don't. You need to be able to compare total taxation within the state, not just the tax by one entity. More importantly, these taxes aren't relevant for this issue because one strength of incorporating in Delaware is that you don't have to have offices there, so you can benefit by Delaware business laws without having a physical presence there (other than a corporate name plate somewhere). In fact, the fact that businesses do not actually locate themselves in Delaware, speaks against the role that these taxes play (if taxation as a whole were so low in Delaware, these companies would be running to actually locate in the state, which they don't; in fact per capita tax burden is substantially high, not low in Delaware). And as I stated previously, the fact is that franchise fees are actually substatially higher in Delaware. It's only your last comments that are relevant to why businesses incorporate in Delaware, along with laws such as those on usury fees.

cheers.