This article is by Doug Bend, a San Francisco startup and small business attorney. Doug helps start-ups and small business owners with forming their companies and serves as their outside general counsel so they can focus on successfully running their business. He is one of the few San Francisco 5 star small business attorneys on Yelp.
There are many reasons why more companies incorporate in Delaware than any other state. This article highlights a few of the explanations the Delaware Secretary of State’s Office has given, as well as factors that have been important to my clients when deciding to join the half a million businesses, including more than half of all U.S. publicly-traded companies and 60% of Fortune 500 companies, which have incorporated in Delaware. It then outlines the biggest drawbacks to incorporating in Delaware and explains why it is not a one-size-fits-all solution.
1. The Corporate Law Expertise Of The Delaware Court of Chancery.
Delaware has a highly respected court that focuses on corporate issues – the Court of Chancery. Because of this specialization, the Court of Chancery has a great deal of expertise and familiarity in resolving complex corporate disputes.
No corporation wants to be involved in litigation, but if you are it is reassuring to know the dispute will be resolved by a very knowledgeable judge who is sophisticated in resolving corporate law matters. In contrast, in other states your business dispute might be resolved by a jury.
2. The Extensive Precedent of Delaware Corporate Case Law.
Corporate case law in Delaware is much more extensive than in other states due to the high volume of corporate cases.
More case law means increased predictability of the likely judicial resolution of a business law dispute. If there have been several similar cases to the one facing your corporation there is less uncertainty about the judicial outcome, which can be key when strategically deciding whether to settle a dispute or invest the time and capital to litigate.
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Several months ago the question “Why are lawyers so expensive even with the excess supply of lawyers?” was posed and answered on Quora. It received a great deal of attention from the Quora and Hacker News community.
