Many people choose to form businesses in Delaware. Here's a Q&A about what the State offers from Delaware's Division of Incorporation.

We know: All About Delaware Incorporation

Why do so many companies incorporate in Delaware?

Quote from the Delaware Court: "Businesses chose Delaware not for one single reason, but because we provide a complete package of incorporations services. The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation.

The Delaware Court of Chancery is a unique 210 year old business court that has written most of the modern U.S. corporation case law. Delaware's State Government is business-friendly and accessible. Our Division of Corporation is a model state-of-the-art efficiency and our staff provides prompt, friendly and professional service to clients, attorneys, registered agents and others.

These factors have all contributed to making Delaware a premier legal home to companies around the world."

Do I have to live in Delaware to have a Delaware corporation?

No. Delaware law requires every corporation to have and maintain a Registered Agent in the State who may be either an individual resident, a domestic corporation, or a foreign corporation authorized to transact business in Delaware whose business office is identical with the corporation's registered office

Must I use an Attorney to incorporate?

No, but you should contact an attorney concerning legal matters. The Delaware Division of Corporations acts solely in an administrative capacity and does not provide legal advice

If I am incorporated in another state or jurisdiction, do I need to a qualify to do business in the State of Delaware?

Yes, Delaware law requires every corporation that is doing business in this state but is formed in another state or jurisdiction to submit a completed "Foreign Qualification" form with the Division of Corporations along with a Certificate of Existence issued by that state or jurisdiction.

Here's a summary of the differences between corporations, partnerships and sole proprietorships from the Small Business Administration

CORPORATION

A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.

PARTNERSHIPS

In a Partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners. The Partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed;. Yes, its hard to think about a "break-up" when the business is just getting started, but many partnerships split up at crisis times and unless there is a defined process, there will be even greater problems. They also must decide up front how much time and capital each will contribute, etc.

Types of Partnerships that should be considered:

General Partnership
Partners divide responsibility for management and liability, as well as the shares of profit or loss according to their internal agreement. Equal shares are assumed unless there is a written agreement that states differently.
Limited Partnership and Partnership with limited liability
"Limited" means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions, which generally encourages investors for short term projects, or for investing in capital assets. This form of ownership is not often used for operating retail or service businesses. Forming a limited partnership is more complex and formal than that of a general partnership.
Joint Venture
Acts like a general partnership, but is clearly for a limited period of time or a single project. If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such, and distribute accumulated partnership assets upon dissolution of the entity.

SOLE PROPRIETORSHIPS

The vast majority of small businesses start out as sole proprietorships. These firms are owned by one person, usually the individual who has day-to-day responsibility for running the business. Sole proprietors own all the assets of the business and the profits generated by it. They also assume complete responsibility for any of its liabilities or debts. In the eyes of the law and the public, you are one in the same with the business.

LIMITED LIABILITY COMPANY (LLC)

The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.