Frequently Asked Questions
Protections Under Delaware Law
The primary reason to incorporate in Delaware is the many protections Delaware’s laws and courts offer. Delaware’s strong and well-proven asset protection shield protects the personal assets of company owners.
The Delaware asset protection shield protects both Delaware corporations and Delaware LLCs. Additionally, if incorporated in Delaware, a business manager is protected from business owner lawsuits. This is true even if a particular business decision results in a loss to the company. This is known as the “Business Judgment Rule”. It encourages risk-taking on the part of managers who may operate freely, without concerns of personal recourse liability. This gives business managers the freedom to pursue opportunities for higher rates of return and increased growth without judges or juries second guessing their decisions with the advantage of hindsight.
Delaware courts have a balanced approach to promoting shareholder value while protecting managers.