Comment: You're close, but not quite there ...

(See in situ)

You're close, but not quite there ...

Yes, most big companies incorporate in Delaware because it is the best state that is geographically close to New York, Boston, and Washington. It has good statutes and a very long (maybe the longest) court case history favoring management. In fact, Delaware is one of the few states that has a completely separate court system just for adjudicating business issues.

The main thing about Delaware is that it allows for the MANAGERS (directors and executives) to gain control of the corporation over the shareholders when the company is publicly owned.

In addition, companies like JPM and BP get their privileges not from where they are incorporated but because they are POLITICALLY CONNECTED PEOPLE -- it has nothing to do with the corporation itself.

A couple of years ago, John Corzine outright STOLE millions of dollars from investors who had futures trading accounts with the company of which he was the CEO. He broke every law, rule, regulation in the book. But he is a former governor and US senator, and so he has faced no charges, much less jail time.

JPM got bailed out and got to buy Bear Stearns assets for pennies on the dollar -- because THE EXECUTIVES ARE POLITICALLY-CONNNECTED PEOPLE. Has nothing to do with where they are incorporated.

BP had that huge oil spill and the executives suffered no prison time BECAUSE THEY ARE POLITICALLY-CONNECTED PEOPLE.

Delaware is not the best state for small guys to incorporate, but it is the best for big business because it is close to the eastern business community and because the laws allow management to run roughshod over investors -- but that ONLY happens because the Securities and Exchange Commission (SEC) allows it. After all, the SEC is run by the old boys' club, too.

Plus, there is what is called "interlocking directorates," which means that I am CEO of ABC Corp and I sit on the Board of Directors Compensation Committee for XYZ Corp, where you are the CEO. Then, you sit on the Compensation Committee for ABC Corp. Do you think we are likely to vote each other a nice, juicy pay raise and compensation package?

It is the OLD BOYS CLUB that runs the SEC, big business, big banking, big charity, and most of all ... BIG GOVERNMENT, which is the key to the whole thing.

A free market would get rid of all this cronyism.

By the way, on a side note, I once looked up some Delaware statutes related to all of this, and I noticed that there were some special clauses inserted into their statutes that had special provisions. It was something like if you create a certain entity (a Delaware Business Trust) on a SPECIFIC DATE, then you did not have to EVER file forms with the state, or have to pay normal filing fees, or whatever. But you had to file on THAT DAY ONLY. The day before or the day after did not count.

Remember, Delaware being such a small state, it is much easier to control their legislature, governorship, courts, etc. Big business and politically-connected people get special laws passed all the time that benefit them, and then those laws disappear off the books (they could still be found within the Statutes at Large, but nobody checks that). Once removed from the normal legal reference books, it has magically disappeared, though it is still law for those who knew about it and took advantage. Theoretically, all of us could take advantage, but we never learn in time to do it.

How many people know that a special section of the Internal Revenue Code was passed with OBAMA'S signature that allows for millions of dollars to be made TAX-FREE by people who set up corporations the right way? Very few.

It was a temporary provision in 26 USC 1202 that applied to forming corporations in 2010 and 2011.

I took advantage of it, but very few people found out in time.

It is this type of crap that goes on that is the problem -- and it can ONLY happen when we allow big GOVERNMENT to pass these types of rules that only benefit a few (usually connected) people.

Another angle -- a few years ago, the IRS paid a company to do some research. It cost several million dollars. The company that got paid was owned by a company that was owned by the Carlyle Group, which was owned in part by George Bush (both Sr & Jr) when Jr was president.

It is all about CRONYISM, not capitalism or corporations, per se.