Where Should You Form Your Company?

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For small to mid-size entertainment companies that are just starting out the most convenient and least expensive option is the state where you are doing business in. So if you are based in New York and all your clients are in New York then New York is your best option. However many entrepreneurs ask about forming in Delaware so let’s talk about all your options and understand why companies are formed in other states.

Delaware

Delaware is the state of choice for large Fortune 500 corporations, foreign corporations and many fast-growing or high-potential companies. The reason for this is that Delaware’s body of law is more business-friendly and they have a large and advanced business court system to handle complex legal litigation. For example, state filing fees are relatively inexpensive, there is no state corporate income tax (if you don’t transact business in Delaware), corporate formalities can be maintained easily and specific laws exist to protect Directors from personal liability related to actions by other Board members.

Your Home State

While registering your business in Delaware will give you access to friendly business laws and tax incentives the reality is that almost every state requires businesses to register as a “foreign business” in the state where they are located. This means that if you are based in New York and register in Delaware you are still required to register as a foreign business in New York and pay New York state taxes.

The bottom line is that while the protection of friendly business laws, an advanced business court system and low business taxes are great incentives for large corporations; small businesses will be paying their state taxes and will have the added expense of paying annual filing fees in Delaware and their home state.

Its nice to have options so the smart thing for you to do is to learn about all your options and make the best decision for your business.

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About Author:

Mo Chanmugham, Esq

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Bio:
Mo Chanmugham, Esq. is a business attorney who specializes in working with entrepreneurs in the entertainment industry. After working for major record labels like Island Def Jam and Sony BMG he founded The Legal Studio to combine his passion for entertainment, personal development and entrepreneurship. His mission is to help artists and entrepreneurs reach their potential by designing businesses that align their personal and professional values to achieve lasting success. When he is not playing lawyer he is working on his own start up projects and dj’ing around NYC.

Connect with him here:

Website » www.thelegalstudio.com
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2 Comments

  1. Amelia

    July 4, 2015 at 5:10 pm

    I lirteally jumped out of my chair and danced after reading this!

  2. That’s an ingenious way of thinking about it.

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