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Comment by jeffwass | Hacker News Reader

Many American companies (including most or all YC startups) do the same, incorporating in the low-tax state of Delaware for favourable tax treatment even though the company's offices and bulk of revenue-generation are elsewhere.

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I don't think this is correct. It is more about case-law and the legal support system for companies in delaware. I do not believe the companies are taxed based on which state they are incorporated in. The exception is the franchise tax fee, which is a nominal amount even to a company with only six figures of revenue.

http://www.bendlawoffice.com/2011/08/01/reasons-to-incorpora...

If you have headquarters in California you pay tax here as well as a bit in Delaware

The reason to register in Delaware is because of business friendly courts there. I don't believe there is a tax advantage

The federal corporate tax can be up to 35%, which is the highest in the world outside of some literally banana republics.

Delaware has a corporate tax rate of 8.7%, California has 8.84.

So yes no one is incorporating in Delaware becuase of taxes, WA, TX, NV and a few others have zero corporate tax.

WA has business & occupation tax which functions like a corporate income tax but it is levied on revenue rather than profit.

Which is frequently much, much worse for companies than a higher tax on profits. Low margin businesses more than high margin businesses like software.

Isn't this a misrepresentation of the global state? I think the corporate tax rate in France is 33% of profits, which isn't far from 35%

Not sure how state tax rates interact with the federal one though

Keep in mind we're the last effectively communist country in the world, I'm not surprised in the least to see corporate taxes up there with the "banana republics" gp was talking about. "Social" money has to come from somewhere!

I don't believe I've ever heard France described as a communist country before

We have extremely influential labor unions, the public sector is a leading job provider (even a majority employer in some areas), healthcare and a lot of infrastructure is nationalised, huge welfare programs, free public education for all...

But most importantly to the (joke) argument that we're the last communist country there's a massive popular adhesion to the points listed above and for some reason a deep seated mistrust of the wealthy.

I mean, you only have to look at pretty much every wealthy person to see why they would have a mistrust of them. Even guys who are doing good things now, like Bill Gates, didn't get wealthy by acting like nice people.

As for the communist thing, ah I didn't realize it was a joke argument, thought it was a serious one

Yes but iirc France has a system of tax credits that reduce the liability for large companies especially. You can deduct 7% from those 33% from the payroll tax credit alone as long as you pay your workers more than the minimum wage.

Delaware doesn't have unusually friendly for business courts. It mostly just has a lot of established case law. It's cheaper for businesses when they know where the lines are on most laws because of previous cases and rulings. Ambiguity is more expensive than the level of bias in most legal situations.

California corporate law is much worse than that of Delaware. Corporations are taxed by every state where they have to register to do business. For every corporation with a California HQ, that certainly includes the Golden State.

Corporations, such as Microsoft, which are headquartered in states with nicer bodies of corporate law frequently choose to incorporate in their home state, such as Washington.

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