Why Delaware is the sexiest place in America to incorporate a company



Let’s say you run a tennis ball company in California that rakes in $100m/year in net income.

In California, you’ll pay a state income tax (8.84% of net income) — and possibly an alternative minimum tax (6.65%) — in addition to the federal corporate tax rate of 21%.

By incorporating in Delaware, though, you can likely save millions in taxes with something called the “Delaware loophole.”

In Delaware, intangible assets — think trademarks, copyrights, and leases — are free from taxation. Companies will often transfer these assets to a Delaware subsidiary and pay their own subsidiary for the rights to use said assets.

Author(s): Zachary Crockett

Publication Date: 10 April 2021

Publication Site: The Hustle