The Delaware Secretary of State has released its much-anticipated Delaware Annual Report for 2021, highlighting the Delaware Division of Corporations’ accomplishments and the State’s record-breaking statistics for the past year.
Certain statistics stood out. For example, new formations for 2021 shattered all prior records at 336,407 new entities formed, up more than 34% over 2020’s 249,427 new entities. Notably, 2020 was itself a record year for growth in formations, making 2021’s results even more significant.
The LLC’s dominance as the entity of choice, continued to outpace all other entity types with 247,003 new LLC’s in 2021, accounting for 73.4 % of new formations in the State. The number of LLCs formed was sharply higher in 2021, but the LLC’s percentage of overall new business formations remained substantially unchanged (73.4% in 2021 versus 72.3% in 2020). The LLC’s popularity is attributable to a number of factors, including:
(1) limited liability of management, as opposed to a limited partnership which must have at least one general partner who manages the partnership and incurs personal liability
(2) near-total flexibility to structure the governance, ownership, operation, and economics, to fit
the founders’ and investors’ needs and to waive or modify fiduciary duties among the parties and the company
(3) the lack of structural formalities, such as board resolutions and meetings, board minutes,
annual meetings of shareholders, and complex bylaw provisions, among other things
(4) default pass-through taxation with the ability to elect other tax treatment (i.e., corporate
taxation (entity and stockholder holder tax) or S-corporation taxation (very similar to partnership pass-through tax)
(5) the ability to create the “series LLC”, allowing division of the LLC into segregated, liability, and bankruptcy remote “series,” which may have their own individual management, terms, equity holders, and assets
Flexibility is the touchstone of the LLC form. Since the LLC eliminates many of the formalities applicable to corporations and allows freedom of contract in structuring the working of the company, the LLC can be used to operate everything from a simple, closely held small business to a complex operating structure of parent and subsidiary entities. The LLC’s adaptability makes it the go-to entity type for individuals and businesses from all over the world in a vast range of circumstances and for innumerable business purposes.
The corporate form is used by those who are looking to raise capital by selling shares of stock. The corporation accounted for almost 19% of the new formations in Delaware in 2021. Delaware’s continued to dominate the nation as the domicile of choice for publicly traded companies, with nearly 70% of all Fortune 500 companies in 2021.
Over 93% of all companies that held an Initial Public Offering (IPO) in 2021 were Delaware corporations. Robinhood Markets Inc and Rivian Automotive Inc. are just a few of the Delaware companies that engaged in notable Initial Public Offerings (IPO) during 2021.
The State of Delaware has diligently worked to keep its business and corporation entity laws on the cutting edge, embracing innovation and solutions so that Delaware remains a trailblazer among jurisdictions worldwide. Business entity formation and the resulting franchise tax
and filing revenues are an integral part of Delaware’s economy.
A staggering $1.38 billion of the state’s revenue in 2021 came from fees paid to form entities, annual franchise taxes, and filings made with the Secretary of State in connection with business entities. Delaware maintains its dominance in business formations by maintaining the depth and relative consistency of its common law, the sophistication of its judiciary and counsel (the Court of Chancery), and meticulously and prudently crafted statutes. Business founders, operating companies, and investors around the world select Delaware for its demonstrated excellence as an equitable but business-friendly domicile for companies. To view the full 2021 Delaware Annual Report report click here
For any questions about the 2021 Delaware Annual Report or forming Delaware business entities, feel free to reach out to us at 800 345 2677 or Skype at DelawareInc.