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Delaware
More
than half of the Fortune 500 are incorporated
in Delaware. This is partly because Delaware
has very business-minded legislation, and partly
because Delaware corporate income tax applies
only to business conducted in Delaware itself.
If a corporation does not conduct business in
Delaware, the only tax paid to Delaware is an
annual 'franchise' tax.
The
Delaware courts frequently handle significant
cases on an expedited basis when time is critical
to the litigants. Delaware's Summary Proceedings
Act offers a unique procedure to resolve major
commercial disputes on an expedited schedule
with special rules to minimize the burden and
expense of litigation.
Corporate
offices may be located anywhere in the world,
as long as the corporation maintains a registered
agent in Delaware, and a Delaware corporation,
limited liability company, or business entity
can be formed without a visit to the state.
Delaware corporations have no minimum capital
requirement.
In
Delaware, a special type of corporation, known
as the "professional corporation,"
exists for licensed professionals, such as doctors,
architects, accountants, and attorneys, who
by law or ethical rules may not practice in
the form of a regular corporation. The salient
features of the professional corporation are
that only licensed professionals may be stockholders,
each stockholder participates as a director
in the management of the business, and each
stockholder remains personally liable for his
or her own professional negligence or malpractice
and that of any other stockholder, employee
or agent working under the stockholder's supervision
and control.
For
non-tax purposes, a Delaware general partnership
is a separate entity from its partners, may
conduct business, acquire, hold, and dispose
of property, and sue and be sued in its name,
without the need to join all partners as parties.
Delaware authorizes a special form of general
partnership known as a limited liability partnership.
In a limited liability partnership, the partnership
is required to register with the Delaware Secretary
of State and maintain a specified amount of
liability insurance. In return, partners are
relieved of personal liability for obligations
of the partnership. Partners remain personally
liable for their own negligence or misconduct
and that of persons under their direct supervision
and control. The limited liability partnership
is attractive to professionals who want the
benefits of the partnership form but without
the personal liability for the professional
misconduct of other partners and employees.
Historically,
the price for limited liability was that limited
partners could have no participation in management
of the partnership, which was vested entirely
in the general partner. Delaware's current limited
partnership laws provide great flexibility in
this area, however, and it is possible to structure
a limited partnership agreement that gives considerable
management participation to limited partners
without jeopardizing their limited liability.
Without
loss of limited liability, limited partners
may:
- Transact
business with the limited partnership;
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Be a control person of a general partner;
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Consult with and advise the general partner;
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Serve on a committee of limited partners;
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Vote on matters such as dissolution, a sale
of assets, a merger, and admission or removal
of a general partner.
Limited
Liability Company
Formed by filing a certificate of formation
with the Delaware Secretary of State, a limited
liability company is a separate legal entity
having the power to conduct business, acquire,
hold and dispose of property, and sue or be
sued in its own name. A limited liability company
needs to have only one member. Management may
be by the members or by selected managers who
may or may not be members themselves. As with
limited partnerships, the relationships among
members and the management structure are typically
set forth in a written limited liability company
agreement. A limited liability company agreement
may provide for various classes of members and
managers and their respective rights, powers
and duties and it may also set forth the manner
of allocation of profits and losses of a limited
liability company to its members.
Principal
attributes of a limited liability company include:
-
any member or manager may bind a limited liability
company;
-
except in certain limited situations, no member
or manager is personally liable for the debts
or obligations of a limited liability company;
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perpetual existence.
Delaware
Business Trust
A
Delaware business trust, another extremely flexible
business structure, is an unincorporated association
created by a trust instrument and the filing
with the Secretary of State of Delaware of a
certificate of trust. A governing instrument,
which includes the trust instrument, provides
for the governance of the business trust and
the conduct of its business. A governing instrument
may provide for various classes of trustees
and beneficial owners and define their respective
rights, powers, and duties. A business trust
has perpetual existence. It is managed by one
or more named trustees who are not liable for
the obligations of the business trust. The beneficial
owners have the same insulation from liability
as shareholders of a corporation, have an undivided
beneficial interest in the business trust's
property, and have no interest in specific business
trust property. However, the governing instrument
may alter any of these attributes. In most cases,
at least one trustee must be either a Delaware
resident or have a principal place of business
in Delaware.
Delaware
Investment Holding Company
A
Delaware Investment Holding Company is a corporation
that has been established in Delaware with the
sole purpose to manage and maintain its intangible
assets. These corporations, whose activities
within Delaware are restricted to the realization
of income from intangible investments, are exempt
from Delaware taxation. Intangible investments
include: stocks, bonds, notes and other debt
obligations, patents, patent applications, trademarks,
and other intellectual property.
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