Video instructions and help with filling out and completing Why Form 2220 Incorporating

Instructions and Help about Why Form 2220 Incorporating

Hello everybody so glad to see you I'm Aiden Kramer with the law office of Aiden Kramer in Colorado and you're watching all up and you business okay it's so exciting so it's pretty common general knowledge that a lot of businesses form in Delaware under Delaware law there are really good reasons for many businesses to form in Delaware so a lot of big businesses started forming in Delaware to take advantage of the benefits that it provides and then a lot of other smaller companies started catching on seeing that well if these big businesses are doing it then we probably should - it seems like a great choice for everybody and while that might be the case for some businesses most businesses aren't really going to experience a whole lot of benefit from forming under Delaware law so in this episode I'm going to talk about why so many companies form in Delaware and the pros and cons of doing it and to help you decide if maybe you should file in Delaware or if it might just be a waste of money in time so Delaware as a state is pretty business friendly its statutes and laws related to businesses are written to give businesses a lot of freedom freedom in how they operate the business freedom in their transactions with shareholders and investors and that's a big reason why a lot of companies forum in Delaware is to take advantage of those business friendly laws another benefit that Delaware provides is with its court system when there's an issue that comes up in the court system concerning a business shareholder disagreements owner disagreements things like that a judge what they call a Chancellor a judge makes the decision in court rather than in a lot of states where it's a jury who will make decisions so businesses prefer to have judges these Chancellor's deciding the outcome of the courts because obviously they're experienced they're knowledgeable about the laws and they've made decisions like this before and they know how you follow precedent of the legal system and the decisions that they've made whereas with a jury it's non-lawyers non judges non legal professionals in many cases who are making these decisions so businesses often feel more comfortable that they're having a judge decide the outcome of a trial rather than a jury another benefit of forming under Delaware law is that Delaware doesn't impose any income tax on businesses that operate outside of the state so for many businesses that break in income tax is beneficial and helps them save a lot of money that they would otherwise oh if they were formed under a different state and then finally just in general investors and business professionals are more comfortable typically with Delaware there's a long history of legal precedent businesses have been operating in Delaware for a long time so if venture capitalists are going to be investing a large amount in a business they are familiar with Delaware and that's comfortable for them so that's why many businesses form in Delaware is to ease and comfort potential investors so despite all of those benefits in my opinion at least for many companies most companies most small businesses that drawbacks of forming in Delaware are going to outweigh any of the benefits that you might receive so even if you're formed under Delaware law if your business isn't actually operating in Delaware it would probably still need to be registered as a foreign entity in the state where the business is physically located I've done a video about foreign LLC's in the past so if you have questions about that you can check for that video but to illustrate let's pretend I my law firm was registered in Delaware I'm located in Colorado Colorado requires that foreign entities entities that are registered in a different state but operating in Colorado be registered as a foreign company here in Colorado so I would be registered in Delaware and in Colorado that means two registration fees two annual filing fees the fees to register a foreign company in Colorado are more expensive than they are to register a domestic or a Colorado based company so you have that add an increase just by the fact that you're registered as a domestic entity in Delaware and although Delaware doesn't impose any income tax on the business it does still impose a franchise tax so you might be getting out of one kind of tax but you're still paying a fee to be registered in Delaware so overall unless you are thinking that your company is gonna go public sometime soon or if your company is gonna be seeking a large amount from venture capitalists and investors typically in most situations it's just not going to provide much benefit to be registered in Delaware as opposed to being registered in the state where your company is actually physically located now of course if your company is physically located in Delaware then that's fantastic register in Delaware reap all the benefits the Delaware gives you because you're there and you don't have to deal with any other states unless you're operating in another state as well but if you're solely located in Delaware then you get all those benefits without any of the drawbacks that a not Delaware company would have if you guys have any questions about that feel free to comment them if you're in Colorado and you're starting a business and wondering should I form in Delaware feel free to contact me I am happy to help my phone number and email are right there right there I hope that helped any of you who were wondering why does everybody incorporate in Delaware thank you all so much for watching I'm Aiden Kramer and I'll see you next time