For over five years, the U.S. Chamber of Commerce has consistently recognized Delaware as having the nation’s fairest legal system. This recognition is bolstered by surveys of U.S. businesses, which repeatedly rank Delaware as the leading state in providing a fair and reasonable legal environment. This preference explains why so many businesses, from startups to large corporations, choose Delaware for incorporation.
The Harris Poll’s 2006 study, commissioned by the United States Chamber Institute for Legal Reform, surveyed in-house general counsel and senior corporate litigators nationwide. The survey focused on their perceptions of the fairness and reasonableness of each state’s legal system. To ensure accurate results, respondents were screened for their familiarity with the legal environment in specific states, and only those with sufficient knowledge were asked to provide evaluations.
Choosing a state for incorporation involves careful consideration of several factors, with the legal environment being paramount. While some states have attempted to become more business-friendly, Delaware consistently offers the best combination of fair and competent judges, efficient litigation proceedings, and predictable juries. Moreover, Delaware’s incorporation laws are exceptionally flexible and business-friendly, characterized by minimal regulation and straightforward annual filing requirements.
In contrast, Nevada has actively sought to attract businesses with promises of minimal regulation. However, Nevada lacks Delaware’s fair, competent, and predictable legal environment. In the 2006 rankings, Nevada fared poorly, ranking last for creating a fair and reasonable legal environment and 37th overall. Furthermore, many venture capitalists and angel investors reportedly dismiss business plans from companies incorporated in Nevada, potentially associating them with less reputable ventures.
While Nevada promotes anonymous LLC ownership, this promise is often misleading. Although a Nevada LLC can be created anonymously, the company must disclose the names and addresses of its managers or managing members to the Secretary of State within a month of filing, according to Nevada Revised Statutes 86.263. Delaware, on the other hand, provides genuine privacy. Delaware law does not require the disclosure of managers or members in LLC filings (Delaware Code § 18-102), making it a more suitable choice for those seeking anonymity.
Companies incorporating in Delaware benefit from the most well-developed business laws in the United States. The Delaware Chancery Court is nationally recognized for its expertise in handling complex business matters. Other states often emulate and defer to the Delaware Chancery Court and its rulings, acknowledging Delaware’s superior business climate.
In conclusion, while the decision of where to incorporate is significant, Delaware offers a compelling choice for businesses of all sizes. Whether you’re a startup, family-owned enterprise, small business, large corporation, or subsidiary, Delaware’s premier legal system provides invaluable advantages. Whether forming an LLC, partnership, general corporation, or C-corporation, you’ll benefit from the state’s commitment to a fair, efficient, and business-friendly legal environment.