The Delaware Secretary of State has finally released its much-anticipated Annual Report for 2019, highlighting the accomplishments of the Delaware Division of Corporations and the State’s record-breaking entity formation statistics for the past year.
The Report illustrates Delaware’s continued status as the preeminent jurisdiction for business formation and domicile, as well as the continued and growing popularity of the limited liability company (LLC).
Once again, certain statistics stood out, including a record breaking total of 226,000 new formations, up almost 5% over last year’s 216,000.
As of the end of 2019, almost 1.5 million entities are currently incorporated in Delaware and in Good Standing, far surpassing the State’s population of less than one million persons.
The LLC’s popularity continued to outpace all other entity types, representing 73% of new formations in the State. The LLC’s popularity comes in large part from the combination of:
Since the LLC eliminates many of these formalities applicable to corporations and allows freedom of contract in structuring the governance of the company, the LLC can be used to operate everything from a simple closely-held business to a complex operating company or investment fund. This makes the Delaware LLC the new entity of choice for a majority of use cases.
The corporation form, on the other hand, is still used by many Venture Capital and entrepreneurial clients looking to raise capital by selling shares of stock or ultimately going public or seeking to be acquired. Corporations accounted for only 20% of the new formations in Delaware in 2019.
The Annual Report reflects Delaware’s continued dominance as the domicile of choice for publicly traded companies, accounting for 67.8% of Fortune 500 companies in 2019. While initial public offerings have grown increasingly rare over the last decade, companies looking to go public overwhelmingly choose Delaware as a domicile. In fact, over 89% of all companies that held an IPO in 2019 were Delaware corporations.
Uber Technologies, Inc., Lyft, Inc., Pinterest, Inc. and Slack Technologies, Inc. are just a few of the Delaware companies that engaged in high-profile IPOs during 2019.
The State of Delaware strives to keep its corporate and business entity laws on the cutting edge, embracing innovation and fintech solutions to keep Delaware a leader and trailblazer among jurisdictions worldwide. Business entity formation and the resulting franchise tax and filing revenues are an integral part of Delaware’s public economy. Amazingly, $1,376,400,000 of the State’s revenue in 2019 came from fees paid to form entities, annual franchise taxes, and filings made with the Secretary of State in connection with business entities (e.g., amendments, corrections, domestications, mergers and related filings).
Additionally, the private revenue coming to Delaware from legal battles, mergers and acquisitions, registered agent fees and all the down-line revenue from these sources is not included in the above and is responsible for many high-level jobs in the State.
As a resident of the State of Delaware, I feel it is extremely important for Delaware legislators to focus on keeping Delaware the “Incorporation Capital.” The benefits of Delaware’s predominant place in the corporate world make Delaware what it is today. Currently, Delaware is one of the few states without a sales tax, mainly because of the income generated by the synergies between a strong legal and judicial system, innovative lawmaking and experimentation in business entity law and regulation, and the desire of business founders and investors to select an equitable but simultaneously business-friendly domicile for their companies.
For any questions about forming Delaware business entities, feel free to reach out to me at 800 345 2677 ext. 6131, or by email at email@example.com.
To view the complete Annual Report from Delaware click here.
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