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Americans love small businesses. According to a recent survey by the PEW Foundation, 71% of us hold a better opinion of small businesses than any other institutions, including religious organizations.
As Delaware formation specialists, we often point out the many benefits of utilizing a Delaware corporation. Business startups need to be aware of ways to ensure their ventures are successful, so a recent article describing a new National Bureau of Economic Research working paper from researchers at the prestigious Massachusetts Institute of Technoloy caught our attention.
The researchers found that the odds of success for a Delaware corporation with intellectual property compared to a Massachusetts LLC without intellectual property are 3,097:1.
The authors of this working paper have created a way to predict the growth of a new business. Although it would seem like a very complicated task to find data to predict success, they were able to identify a few surprisingly simple concepts:
* Merely registering a company in the business-friendly state of Delaware is indicative of a 40% greater chance of success
* The company name makes a difference. Keeping the name short, three words or less, is associated with success. Companies named after the founder have only a 5% rate of success compared to companies not named for the founder.
* An early mention in a newspaper, in this case The Boston Globe business section, gives a business a 30% better chance at success
* There is a 60-times greater chance for success if a business files for a patent within a year of start-up
* Companies registering as a corporation as opposed to an LLC have a 5 times greater success rate
In addition to these factors, the research predictably indicated that the timing of a start-up has a significant impact on success. Entrepreneurs who were able to start during a growth market had an easier time, since they benefitted from the boom.
There is a large amount of research indicating the advantages of incorporating both small and large businesses in Delaware. Perhaps that is why more companies are incorporating in Delaware than any other state, including half of all U.S. publicly-traded companies and 60% of Fortune 500 companies.
For assistance with the formation of your next Delaware Corporation, please call Harvard Business Services, Inc. at 800-345-2677 Ext 6131 or visit www.delawareinc.com/order/
Guzman, Jorge, and Scott Stern. NOWCASTING AND PLACECASTING ENTREPRENEURIAL QUALITY AND PERFORMANCE. Working paper. Cambridge: NATIONAL BUREAU OF ECONOMIC RESEARCH, 2015. Print.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.