Incorporating in Delaware - What Advantages Does This Provide my Business?

Previous blog articles have addressed in detail the numerous financial and legal benefits of forming a registered entity (Corporation; LLC; etc.) in your home state.  This article will now address the benefits of incorporating in Delaware. 

The most sought after benefit of incorporating in Delaware is that there is no corporate tax, and the state's laws are well developed in the area of corporate law.  First, shareholders of a Delaware corporation are not required to pay personal income tax to the state if they are not residents.  There is no requirement under Delaware law that shareholders, officers or directors be residents of the state. If you business is looking  to obtain funding from a venture capitalist, or have the hopes of an IPO, then it is (practically) mandatory that you incorporate in Delaware.  It is better to first incorporate in Delaware to avoid the expense and frustration of having to convert your entity to a Delaware corporation when you begin funding discussions. 

Additionally, Delaware law is also structured in favor of upholding the limited liability of a corporation.  This is essential so that the officers and directors, and in some cases shareholders, cannot be held personally liable for acts or omissions while conducting corporate affairs. If a lawsuit is filed against a corporation and the suit falls into the area of corporate litigation, then the fate of the parties will be decided by a Judge rather than a jury.  In this case, a Judge who is experienced in all aspects of corporate affairs and disputes will decide the outcome rather than citizens of a community. 

If you first incorporate in Delaware, and intend on conducting your business operations in Massachusetts or another State, you will need to comply with State law concerning registration of a foreign entity. For example, pursuant to  M.G.L. ch. 156D § 15.03 a foreign corporation must register with the Massachusetts secretary of state within ten (10) days of transacting business in the Commonwealth.  In order to do so, you will need a Certificate of Good Standing from Delaware.  You must then file the applicable form and pay the required fee to the Massachusetts Secretary of State, Corporation Division. 

Selecting the right entity and structuring your organization in two states including Massachusetts and Delaware requires the expertise of a business law attorney. Attorney Stefan Cencarik, a business attorney in Lynnfield is available for consultation and can assist you in selecting the right entity.  

Setting Up Shop in Massachusetts From Out of State

Are you an out-of-state business or entrepreneur interested in expanding your businesses into Massachusetts? If so, stop reading, pick up the telephone and call a Boston area small business lawyer immediately.  Doing in business in Massachusetts can be a lucrative venture, however, this state has a well deserved reputation for being a consumer (and Plaintiff) friendly jurisdiction, and there are many state laws and regulations that determine how a business may operate and conduct its affairs. Depending on your industry, type of business, and procedures for operating under the laws of your home state, you could potentially expose yourself to both criminal penalties and/or civil liability when you begin operating in Massachusetts. The worst way to start off your business is to receive a cease and desist letter from the Massachusetts Attorney General's Office.  

The starting point for any out-of-state business that desires to set up shop in Massachusetts is to register as as foreign entity with the Massachusetts Secretary of State, Corporations Division in Boston. M.G.L. Ch. 156C, s. 48 and M.G.L. ch. 156D s. 15.03 requires that all entities conducting business in Massachusetts must register as a foreign entity within 10 days.   You will be required to file a relatively simple application, a certificate of good standing from your home state, and pay a filing fee.  If you do not intend to maintain an office or other commercial space in Massachusetts, you also need to find a registered agent for service of process.  There are many professional agents for service of process in downtown Boston that will serve as your nominee agent, and take responsibly for timely notifying you of any process that was served on you. 

You will also need to investigate and adapt to the specific regulations and licensing requirements for your industry and type of business. This is the more complex issue for most out of state businesses.  It also is possible that you need a permit or license at the state or city/town level, or both. Finally, if you conduct business in a different name than your legal entity name, you will need to file a d/b/a certificate with the city or town that you are doing business in. 

If you have questions about how to expand you business into Massachusetts, Attorney Stefan Cencarik can be reached at 617-669-9780.