Business

Delaware may be a small state but it is prosperous: the gross state product of Delaware in 2003 was $49 billion, with the per capita personal income being $34,199, which ranks as 9th in the United States.

Corporate Haven

The state’s prosperity is largely due to its business-friendly legislation and taxation, which has made it well-known as a corporate haven. Most major Fortune 500 corporations are chartered in Delaware because the state charges no corporate income tax on companies not operating within the state — although all Delaware corporations must pay an annual corporate franchise tax.

Delaware’s laws, particularly the Delaware General Corporation Law, are designed to allow maximum flexibility to corporate operations. Under state law, a corporation need not have a physical presence in Delaware, save for a registered agent to accept service of legal process and pay the corporation’s annual franchise taxes, and officers and directors do not have to reside in the state or be U.S. citizens or permanent residents.

Despite having their corporate headquarters in the Silicon Valley, many Californian companies are actually incorporated in the State of Delaware, providing them with better protection against hostile takeover. For example, Google was incorporated in California in 1998, but it reincorporated in Delaware before its IPO:

“We were incorporated in California in September 1998. In August 2003, we reincorporated in Delaware. Our principal executive offices are located at 1600 Amphitheatre Parkway, Mountain View, California.”

Taxation

Delaware’s liberal taxation policy has proven eminently sensible for such a small state: merely the corporate Franchise Taxes, levied annually from its over 600.000 registered corporations, make up over 20% of the state’s income.

Incorporated Companies

The following are all examples of companies which are incorporated in Delaware but in practice headquartered elsewhere in another state (except for DuPont, which actually does have physical headquarters in Wilmington):

• American Express
• Chrysler Corporation
• Coca-Cola Company
• E.I. DuPont De Nemours & Co.
• General Motors
• Google
• McDonald’s Corporation
• Time Warner
• Walt Disney Company

Sales Tax

Delaware is one of only five U.S. states that have no sales tax; the other four are Alaska, Montana, New Hampshire and Oregon.