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Setting up DE corporation for CA business

Asked by: Paul McLaskey - 6 January, 2011
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/default.png-f1597c1da25f30f8c1a941405e8391c8 Here's possibly a tricky question:
Many people I know espouse first setting up S corp. in DE., although they operate a business based in CA.
Since under that scenario, it would be necessary to set up CA. foreign entity, where might the advantage be?
Secondly, if "inc." or "corp." is required, that CA. foreign entity would HAVE to be another S corp., would it not, rather than an LLC? (Since CA. entity would be required to use "LLC").
Answered by: Alec Green - 6 January, 2011
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Paul,

There are at least two advantages to setting up S-Corporation in Delaware. First, California takes months to register new companies, whereas in Delaware a new company can be registered and start doing business within a week, if not a couple of days. Second, there are many advantages that are due to favorable Delaware corporate law. You can read more about these advantages here: Incorporating in Delaware

As for the California foreign entity, that would not be a separate company, it is simply a registration for your Delaware company in California. Therefore, if you DE company is an s-corp, you will be registering that same s-corp as a foreign entity in CA.

As a side note: besides Delaware there are two more states famous for their protective laws and other benefits: Wyoming and Nevada. Good luck!

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