When the choice is between establishing a New York corporation or establishing a Delaware corporation headquartered or doing business in New York, the considerations are complex. As with a Delaware LLC, there was a time when Delaware rules and Delaware courts were viewed as most favorable to corporations founded in Delaware, but that is no longer clear.
- In general, if the business is headquartered or doing substantial business in New York, establishing a New Yok corporation may be cheaper because the Delaware corporation will need to be registered as a foreign corporation in New York, and make filings, pay a maintenance fee, and pay taxes to the extent it is doing business in New York.
- But other considerations may apply, such as privacy, liability, flexibility and future fundraising.
Below is a table comparing certain matters between forming a corporation in New York and Delaware. This note is not legal advice or intended to be definitive, and you should contact a lawyer before making this decision.
Certain Comparisons of New York and Delaware Rules Regarding Corporations
|Incorporation Fee||$125 plus authorized minimum share fee of $10.00 for 200 shares (higher if more shares). $225 filing fee for Delaware corporation doing business in New York, $50 for a Delaware certificate of good standing plus a license fee based on the number of shares that it has.||$89 (minimum; higher if more shares).|
|Reporting||Biennial; $9 reporting fee.||Annual; $50 reporting fee.|
|Franchise and Other Taxes||The higher of a percentage of business income, capital and a fixed fee depending on receipts; plus a New York City surcharge if applicable. See https://www.tax.ny.gov/bus/ct/ctidx.htm. A foreign corporation doing business in New York (and not otherwise exempt) must pay a maintenance fee of $300 (or in certain circumstances, less) and taxes on New York revenue.||$75 minimum franchise tax (5,000 or fewer shares) up to $180,000; plus a small fee based on the number of pages submitted. No corporate tax on corporations that do not do business in Delaware. No tax on income earned from intangible assets such as royalty payments, trademarks and leases.||The tax comparison for any individual entity is complex, will depend on several factors and should be discussed with a tax or legal professional.|
|Registered Agent||Secretary of State; private agent not required.||Yes, for corporations doing business in other jurisdictions. About $100.||Delaware corporations doing business or headquartered in New York must appoint a Delaware registered agent.|
|Shareholders||Natural persons or entities.||Natural persons or entities.|
|Shareholder Vote||Majority of the votes of shares entitled to vote (except certain super-majority requirements for things such as amendments to the certificate of incorporation and certain mergers/consolidations), subject to quorum requirements. Directors elected by plurality.||Majority of the votes of shares entitled to vote (except certain super-majority requirements for things such as amendments to the certificate of incorporation, sale of all or substantially all assets and certain mergers/consolidations), subject to quorum requirements. Directors elected by plurality.|
|Board of Directors||Required; three or more, or if less than three shareholders then equal to the number of shareholders.||Required; one or more.|
|Officers||Optional; but can be same person.||Effectively, CEO/President and Secretary.||Most corporations have at least a CEO/President, a Secretary and a Chief Financial Officer. This ensures leadership, signature powers, operation and recordkeeping, and financial affairs.|
|Privacy||Name of incorporator must be provided, but can be a registered agent or lawyer. Shareholders, directors and officers, and addresses, need not be disclosed on public register. But the biennial report, if filed, names CEO, principal business office street address and address to which Secretary of State can send process.||Name of incorporator must be provided, but can be registered agent or lawyer. Shareholders, directors and officers, and addresses, need not be disclosed on public incorporation register. But the annual franchise tax filing, which can be obtained by anyone requesting and paying a small amount, must include the name and address of one officer and all directors.|
|C-Corp v. S-Corp||Federal tax designation. All corporations start as C-Corps (taxed as entity but maximum flexibility); can choose to designate (for federal and state purposes) as S-Corp (pass-through for tax purposes but more restricted). New York City does not recognize S-Corp.||Federal tax designation. All corporations start as C-Corps (taxed as entity but maximum flexibility); can choose to designate (for federal and state purposes) as S-Corp (pass-through for tax purposes but more restricted).|
|Liability||Largest 10 shareholders liable for certain amounts due to employees, laborers and servants but not certain contractors.||Suit against officer, director and stockholder only in certain cases if unsatisfied judgment against corporation.|