Delaware Sets Records for Business Formation in 2014

For over a century, Delaware has been a popular domicile for business entities of all types. I discussed a number of reasons for this popularity in my interview last year with Family BusinessCast entitled "Advantages of Starting a Business in Delaware", including:

  • The procedural ease behind forming or incorporating a business entity in Delaware.
  • The sophistication of the Delaware General Corporation Law, Delaware Limited Liability Company Act, and related statutes.
  • The unique expertise of Delaware courts (particularly the Court of Chancery) in resolving intra-company disputes.
  • Limitation of liability.
  • Charging order as a creditor of an LLC member's exclusive remedy.
  • Fears of Delaware law being taken advantage of by criminal enterprises.
  • The tax benefits of Delaware holding companies.

We also explored this issue in some detail in our guide to "Third-Party Delaware Opinions for Structured Finance and Other Commercial Transactions."

Statistics from Delaware’s Division of Corporations show that 2014 was a banner year in Delaware's storied history as a center for corporate and business entity formation:

Approximately 169,000 Delaware entities were formed in 2014, marking a four percent increase over the previous record of 162,000 set in 2007. In October alone, 15,474 businesses were formed, setting a new record for best overall month of entity formation.

The State attributes the record-breaking activity to the continued economic recovery and to Delaware’s growing dominance as jurisdiction of choice for entity formation.

“The improving health of the national economy is driving the need for new entities, and Delaware is the natural choice,” says Rick Geisenberger, Delaware’s Director of the Division of Corporations. “We offer the country’s preeminent business courts for fast and fair dispute resolution, an unmatched body of corporate law, and a service-driven business model at the Division of Corporations that our corporate citizens recognize and value.”

Geisenberger notes that the Division of Corporations has seen improved formation activity in 56 of the last 62 months, and that activity in 2014 was up 10 percent over the previous year.

As of April 2014, 65.6 percent of all Fortune 500 companies were incorporated in Delaware, up from 58 percent in 2000, according to data from the Division of Corporations. In addition, 85 percent of all initial public offerings during the last decade involved a Delaware company, compared to 65 percent during the entire 1990s.