When you incorporate in Delaware, where is your principal place of business? When should you list your registered agent’s address as your office address? Since most businesses filed in Delaware operate outside the state, this is a common question.
The short answer is never. The only need for a Delaware address (a registered agent’s office) is to have a legal foothold for jurisdictional purposes if your company were to be sued. When service of process of a summons and complaint or other legal documents are made upon your company at the registered office in Delaware, that is “good service” upon your company as of the time it is received in Delaware.
What is a Principal Place of Business?
The principal place of business is the headquarters where business decisions are made. This is also called the “nerve center” where the executives are. Contrast this with the “muscle center” where activities like production take place. However, modern civil procedure deems your principal place of business to be based on the “Total Activities Test”.
Your Principal Place of Business Does Not Need to Be in Delaware
If you do not run the business from Delaware, your principal place of business will be elsewhere in the United States or another part of the world. For example, if a business is incorporated in Delaware but it is operated out of a California office, the principal place of business would typically be that California office address.
Although your principal place of business may not be in Delaware, if you incorporate in Delaware, you “opt into” Delaware laws. Delaware courts will govern the “internal affairs” of your corporation or LLC. You do not need to feel compelled to have additional contacts with Delaware to create an impression that your business is operating out of Delaware. If you desire a mail forwarding service in Delaware or virtual office services, we can provide a referral to another reputable company located in our office building.
In law school, one required class is Civil Procedure. This class usually starts with a discussion of “personal jurisdiction.” Human beings only have one home state where they can be sued for anything under the sun. This is known as “general subject matter jurisdiction.” In other states, humans can only be sued if they had certain “minimum contacts” with that foreign state for acts that occurred there and can be haled into a courtroom in another state under a “long-arm statute.”
In contrast, corporations and LLCs have two home states where they are subject to general subject matter jurisdiction and in which both states have personal jurisdiction over that company. One is the principal place of jurisdiction, where the headquarters is located. The second is the “paper” home of the corporation or LLC, the state in which it filed its Certificate of Incorporation. Very often this paper home is Delaware, and the office in Delaware is what is listed as the Registered Agent’s office.
The registered agent is not a virtual office that forwards business mail and other correspondence. A registered agents forwards only mail from the Delaware Secretary of State and lawsuits. Most agents return “business mail” to the sender. Mail forwarding services cost about one thousand dollars per year. They are not part of registered agent or registered office services.
On the corporate Annual Report, Delaware asks where your principal place of business is. What it is really asking is, “Where is your headquarters?” Delaware is your home away from home.