Top 8 Myths about Incorporating in Delaware

As the first state annexed into the United States, Delaware has long had tremendous significance. Though Delaware is one of the smaller states in the United States, it has long been one of the most important states in the corporate world. With plenty of corporate friendly-laws, Delaware is the perfect place to incorporate your very own small business. On top of that you’ll experience some considerably attractive tax rates for your corporation. But before you form your corporation, there are some things you should know. With enough misconceptions out there about incorporating in Delaware, you’ll want to separate those from the facts. So what’s the big deal with incorporating in Delaware? Here are the top 8 myths about incorporating in Delaware that will help you understand.

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MYTH: Delaware has high tax rates.

Delaware actually has some of the lowest tax rates in the country. Delaware's tax laws have provided corporations with considerably low rates, while avoiding high taxes in your state. Delaware has gone to great lengths to welcome corporations in her state. If a corporation doesn't do business in the state, the state will not collect corporate taxes. Likewise, they will not tax royalty payments and intangible assets. 

MYTH: You don't have to pay any taxes.

It is just as false to say no taxes will be owed. Just because you can avoid corporate taxes by doing business outside of Delaware, there are still franchise taxes to consider.This franchise tax must be paid annually. The tax can be as low as $70 or as high as $200,000.

MYTH: I can name my corporation whatever I want.

This is false. While you may come up with a name of your choice, not anything goes. You must pick an original name. The name of your corporation cannot be the same as the name of an existing corporation in Delaware.

MYTH: There aren't many registration costs.

The cost of registration can actually get pretty high. Incorporating in Delaware requires the hiring of a registered agent that lives in Delaware. You'll also need to pay costs related to registering your business in Delaware so that you can do business there along with all your incorporating fees.

MYTH: You don't need any certificates.

This is also completely false. You'll need a certificate for incorporating in Delaware that will need to be filed with the state's Secretary of State. On the certificate, you'll need to include the name of your corporation, the number of shared stocks, the intended purpose, as well as the name and address of your corporation.

MYTH: You have plenty of time to decide.

Incorporating early can actually help your business tremendously by helping you come up with personal liability protection, longer time on the stock market, and increased success. Additionally, by incorporating early, you'll have more success selling your business should you choose to.

MYTH: You can shelter income if you have a corporation in Delaware.

Just as illegal as it is anywhere else, you must report all income. Keeping money inside a corporation will not work out for you. All income must be reported, and all corporations must pay taxes on that income as well as your returns.

MYTH: You aren't required to make any reports.

Actually, making annual reports is extremely important. You'll need to be sure to follow all annual reporting requirements. Failure todo so can put your corporation in a lot of trouble and could easily see you some hefty fines.