Web host resellers can increase their margins by employing intelligent
business tactics that lower their overall taxes. Many Web hosts drastically
decrease their tax burden by incorporating their businesses in a low tax
jurisdiction such as Delaware. By incorporating in Delaware, resellers can
avoid state sales taxes, personal property taxes, incomes taxes and
intangible property taxes, since the state does not apply these levies to
state registered corporations.
All Delaware corporations are only obligated to pay an annual franchise tax.
The tax is calculated based on authorized shares issued by the corporation.
The minimum annual franchise tax for a corporation with up to 3,000 shares
of no par or $.01 par common stock is $30, plus a filing fee of $20. The
minimum franchise tax hence totals only $50 per year. The maximum franchise
tax a corporation could pay is $150,000, which would only apply to the
largest of corporation. Note, if the corporation does not conduct business
in Delaware, than the franchise tax is the only tax paid to Delaware. For
this reason, more than 308,000 companies are incorporated in Delaware,
including 60 per cent of the Fortune 500 and 50 per cent of the companies
listed on the New York Stock Exchange.
Delaware as a legal jurisdiction is also highly respected, backed by
well-established legal precedents. The state is also quite a popular place
to incorporate because it does not require corporate directors to reside in
Delaware. Further, the owners and operators of a Delaware corporation, or
limited liability company, do not have to be identified in the public state
records.
State law only requires every corporation to have and maintain a registered
agent in the state who may be either an individual resident, a domestic
corporation, or a foreign corporation authorized to transact business in the
state whose business office is identical with the corporation's registered
office. One person can be the sole director and officer of a corporation or
sole member and manager of a limited liability company. Officers and
directors can be indemnified, limiting their personal liability.
Delaware incorporation is also advantageous because shareholders and
directors can make decisions by unanimous written consent in place of formal
meetings. Directors are also given the power to make and alter corporate
by-laws and a Delaware corporation is given the option of fix the quorum of
board members.
Delaware is also popular among many businesses because the state permits the
conversion of corporate entities; limited liability companies (LLCs) can
convert into corporations and corporations can convert into LLCs.
While Delaware's corporate law is innovative, the state also maintains
traditional approaches to the use of the corporate veil. Corporations may
hold stocks, bonds or securities of other corporations, real and personal
property, within or outside the state, with no limitation as to amount. The
corporation can also be used as a conglomerate, allowing directors to
operate different kinds of business in combination.
Many businesses, especially Web host resellers or e-commerce entities, like
doing business with the state because of its reputation as being fast and
efficient. Unlike other state bureaucracies, Delaware is noted for its
quick response, being able to form corporations in mere minutes and
documents being made available within 24 to 48 hours.
For these reasons, Delaware is a tangible choice for many Web reseller
operations. By incorporating their business in the state, resellers can
obtain huge tax saving by lowering their state tax burden. In doing so, Web
host resellers can drastically increase their revenue after tax, since the
only considerable taxes will be incurred at the federal level. Utilizing a
low tax jurisdiction to incorporate is one of the best ways to lower your
continuing operating costs.
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