Increasing Your Margins

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.

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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.