Are Businesses Rethinking Incorporation in Delaware?

Delaware has long had a reputation for being the go-to state for business incorporation. Ask
almost any entrepreneur or investor where to form a company, and “Delaware” is often the first
answer. The state is known for business-friendly laws, specialized court systems, and developed
corporate case law. However, more companies recently are questioning whether Delaware is the
right choice while factoring in their company’s size, costs, and ties to the local markets.

Why Delaware Became the Default
Delaware earned its status by offering predictability. Its laws, including the well-known
“business judgment rule,” shield directors and officers from liability so long as they act in good
faith and with due care. The state’s specialized Court of Chancery focuses on business disputes
and operates without juries, giving companies confidence that judges understand the
complexities of corporate law. Over time, Delaware’s long history in this area has built an
extensive body of case law, giving businesses and investors the clarity they need to make
decisions with confidence.

Emerging Doubts
Incorporating in Delaware has its own drawbacks that people often have to factor in making the
decision about where to form a business. Incorporating in Delaware requires maintaining a
registered agent, paying annual franchise taxes, and often hiring out-of-state counsel for
litigation. Those costs can be substantial for certain businesses. For businesses that do not need
Delaware’s specialized courts or are not seeking national investors, these expenses may outweigh
the benefits.

Why Incorporating Locally Makes Sense
For many entrepreneurs, incorporating where they actually do business makes practical and
financial sense. Indiana, for example, offers a straightforward and affordable corporate filing
process, low annual fees, and a regulatory environment that supports both startups and
established companies.

Indiana’s business statutes are modeled on modern corporate law principles, providing clear
protections for owners, directors, and shareholders. The state also offers strong judicial
predictability, an efficient Secretary of State filing system, and tax advantages that favor growth
and reinvestment. Lenders, partners, and customers often prefer to work with businesses
registered in the same state, especially when those businesses are visibly contributing to the local
economy.

Conclusion
In certain situations, incorporation in Delaware may remain the right choice for companies
pursuing national investment. But for many Indiana-based entrepreneurs, the practical
advantages of incorporating locally are too compelling to ignore. At the end of the day,
incorporation is not just about tradition, it’s about strategy. The best choice is the one that aligns
with a company’s goals, size, and market realities.

If you have any questions or need help forming your business, please contact McNeelyLaw LLP
by calling (317) 825-5110

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific
facts or circumstances. The contents are intended for general informational purposes only, and you are
urged to consult your own lawyer on any specific legal questions you may have concerning your
situation.