Question 1

Why are so many businesses incorporated in Delaware?

Accepted Answer

Delaware has become the corporate capital of America for several reasons: (1) The Delaware Court of Chancery is a specialized business court with expert judges and no juries, providing fast, predictable dispute resolution. (2) The Delaware LLC Act and DGCL provide maximum freedom of contract, allowing businesses to customize their governance structures. (3) Over 65% of Fortune 500 companies and the majority of IPOs choose Delaware. (4) A deep body of case law provides predictability that no other state matches.

Question 2

Can fiduciary duties be eliminated in a Delaware LLC agreement?

Accepted Answer

Yes, under 6 Del. C. § 18-1101(c)-(e), fiduciary duties can be modified, restricted, or even eliminated in a Delaware LLC operating agreement. However, the implied contractual covenant of good faith and fair dealing CANNOT be eliminated. This flexibility is one of Delaware's key advantages for sophisticated business arrangements.

Question 3

What is the Delaware Court of Chancery?

Accepted Answer

The Court of Chancery is a non-jury court with specialized judges (Vice Chancellors) who are experts in business law. It handles equitable matters including corporate disputes, LLC internal affairs, contract-specific performance, and injunctive relief. It's widely considered the most sophisticated business court in the world, and many contracts specifically designate it as the exclusive forum for disputes.

Question 4

Are non-competes enforceable in Delaware?

Accepted Answer

Yes. Delaware courts enforce non-competes that pass a balancing test: (1) reasonable in scope and duration, (2) protecting a legitimate business interest, and (3) equitable in its impact. Garden leave provisions (paying the employee during the restricted period) are common in Delaware and strengthen enforceability. The Court of Chancery can grant expedited injunctive relief.

Question 5

What's the difference between Delaware and Texas for business contracts?

Accepted Answer

Key differences: (1) Delaware's LLC Act provides maximum freedom of contract and permits elimination of fiduciary duties; Texas is more restrictive. (2) Delaware has the Court of Chancery — the gold standard for business disputes; Texas uses general courts. (3) Delaware has a state income tax; Texas does not. (4) Texas is a community property state; Delaware uses equitable distribution. (5) Texas requires non-competes to be ancillary to an enforceable agreement; Delaware does not. Both are excellent for business, but Delaware's legal infrastructure is unmatched for entity governance.

Question 6

Do I need a registered agent in Delaware?

Accepted Answer

Yes. All Delaware business entities (LLCs, corporations, LPs, etc.) must maintain a registered agent with a physical address in Delaware (6 Del. C. § 18-104 for LLCs). The registered agent receives legal documents and official correspondence on behalf of the entity. Many companies use professional registered agent services.

Question 7

What is DRULPA and when should I use it?

Accepted Answer

DRULPA (Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101 et seq.) governs limited partnerships in Delaware. It's widely used for private equity funds, venture capital funds, real estate investment structures, and family investment vehicles. Like the LLC Act, it provides maximum freedom of contract in partnership agreements.

Delaware Contract Templates — America's Business Formation Capital

Built for Delaware law

Available contract types

Non-Disclosure Agreement

Freelance Contract

Lease Agreement

Service Agreement

Employment Agreement

Independent Contractor Agreement

Consulting Agreement

Partnership Agreement

Non-Compete/Non-Disclosure Agreement

Licensing Agreement

Compliance at a glance

Frequently asked questions

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