Delaware General Corporation Law

A Delaware corporation is a corporation chartered in the U.S. state of Delaware.

Delaware is well known as a corporate haven, and many major corporations are chartered in Delaware. Critics of the predominance of Delaware corporate law believe that its laws and courts are excessively friendly to corporations. Proponents point out that many states' laws are more friendly to corporations than Delaware's, especially in offering protection from hostile takeovers; they believe that Delaware's popularity has other reasons, such as the fact that, because of the large number of major corporations chartered in Delaware, the courts in that state are more experienced in the application of corporate law than the courts of other states. Disputes over the internal affairs of Delaware corporations are usually filed in the Delaware Court of Chancery, which is a separate court of equity (as opposed to a court of law). Because it is a court of equity, there are no juries, and its cases are heard by the judges, called chancellors. There is currently one Chancellor and four Vice Chancellors. The court is a trial court, with one chancellor hearing each case. Chancery litigants may appeal to the Delaware Supreme Court.

It is sometimes said that Delaware's preeminance is related to the fact that Delaware charges no income tax on corporations not operating within the state. However, in this respect Delaware is no different from other states, as no state charges income tax on out-of-state income. A state does levy a franchise tax on corporations incorporated in it. Franchise taxes in Delaware are actually far higher than in most other states, which typically charge little or nothing beyond corporate income taxes on the portion of the corporation's business done in that state. Delaware's franchise taxes supply about one-fifth of its state revenue.

Over half of publicly-traded corporations in the United States and 58% of the Fortune 500 companies are incorporated in Delaware.

A similar strategy is used for financial institutions. Many U.S. states have usury laws limiting the amount of interest a lender can charge, but Federal law allows corporations to 'import' these laws from their home state. Delaware (amongst others) has relatively lax interest laws, in effect allowing banks to charge as much as they want, hence the preponderance of credit card companies in the state.

External links

• Delaware Division of Corporations
• Delaware Court of Chancery
• Delaware Corporate Law Clearinghouse
• General information about Delaware incorporation