Corporations are Delaware's Golden Goose

BY ANDREW SHARP

They may applaud or criticize, but everyone recognizes Delaware’s dominance as the home for a huge proportion of top companies, complemented by a business law system that’s a national leader.

Thanks to the predictability, efficiency, and fairness Delaware offers, more than 60% of all Fortune 500 companies are incorporated here, according to the 2023 annual report from the Secretary of State. Additionally, 80% of all initial public offerings in 2023 were registered here.

Delaware residents may forget, or never realize at all, just how much those statistics affect their daily lives.

In fiscal year 2023, incorporation fees and franchise taxes brought in more than $2 billion, according to the Department of State. In the latest state budget, more than 33% of 2024 revenue was projected to come from corporate and bank franchise taxes and fees. You read that right: A third of Delaware’s income. Budget officials in other states dream of that kind of inflow.

It’s not just the state’s coffers that benefit, though. Taxes are lower for everyone. And with Delaware’s Chancery Court setting national precedent through key decisions on high profile business cases, the economy here benefits.

“Thousands of corporate jobs in the legal, administrative, financial, and service industry fields are supported every year,” says Kristopher Knight, deputy secretary of state and director of the Delaware Division of Corporations.

That creates an economic ripple effect when those workers live and spend their money here.

Rebecca Byrd, partner and general counsel for ByrdGomes, is a lobbyist who keeps a very close eye on Delaware’s business environment. She points out that Delaware’s finances are set up with corporate taxes going in the same general fund with everything else, meaning that money is financing everything the government does, from schools to medical care and services for people with disabilities. Without that money, Byrd notes, the state would have to take measures like increasing taxes on businesses, instituting a statewide property tax, or adjusting the personal income tax.

Another option—one that would likely not go over well at all—would be to add a sales tax.

“That’s an anathema to most of us in Delaware,” Byrd says. Residents love their tax-free shopping, and so do the many people who cross over state lines to shop here.

Many New Jersey residents flee their state’s notoriously high property taxes to enjoy Delaware’s more affordable living. It’s ironic, because the state they’re leaving was once a leading spot for incorporation, until Delaware created similar laws, lower costs, and a friendlier regulatory environment.

Delaware as a destination gathered momentum, with corporation density and the judiciary growing together and relying on each other to create a unique business climate.

For example, with its concentration of financial services, Delaware then draws banks, investment funds, and insurance companies, bringing even more revenue, Knight notes. That money, he says, also helps the Division of Corporations focus on providing good service to the state’s more than two million registered business entities.

Byrd is one of many here hoping that Delaware can avoid New Jersey’s mistakes and keep its systems running strong and smoothly. She sees multiple keys to that, including the legal and legislative communities pulling together toward a common goal.

Another key Byrd emphasizes is productive communication. Disagreements are normal, and keeping Delaware in its place of prominence will require diplomatic resolution of those issues.

“That ability to have conversations, to come to agreements, is what got us to this position,” Byrd says.