Institute for Legal Reform Ranks Delaware’s Legal Climate Number 1 in the Country for Fairness

Steven D. Goldberg, Esq.
Wilmington, DE
Contact me if you need assistance in forming/organizing a Delaware business entity or any matter of Delaware law.

The Institute for Legal Reform, an arm of the U.S Chamber of Commerce, has again ranked the legal environment in Delaware number 1 in the nation.  The survey has been conducted by the Institute since 2002 and in each year Delaware has been ranked number 1. In the ten categories Delaware ranked number 1 in 8 of the categories.

The report is based upon interview with 1,482 general counsel and senior management of companies with revenue of at least $100 million. The report states that two-thirds, or 67%, of the 1,482 corporate lawyers contacted for the survey say a state’s lawsuit environment is likely to impact important business decisions at their company, such as where to locate or expand their business—up 10% from just three years ago.

Other states ranking near the top were #2 North Dakota, #3 Nebraska, #4 Indiana, and #5 Iowa. States often selected by large companies for business formations Colorado was #8, New York was #23, Nevada was #28, New Jersey was #32, Florida was #42, California was #46 and bringing up the bottom was West Virginia at #50.

The decision as to where to form a LLC or a corporation will be based upon many factors. In a recent article titled Jurisdictional Competition for Limited Liability Companies written by Professors Bruce H. Kobayashi and Larry E. Ribstein In the Illinois Law and Economic Research Papers Series, research Paper No. LE09-017, they state on page 1, “…we find evidence that large LLC’s, like large corporations, tend to form in Delaware, and that they do so for many of the same reasons–that is, for the quality of Delaware’s legal system.”

Companies do not intend to be sued when they are considering a state in which to form, however as pointed out in the Illinois article, companies consider the legal environment in a state as an important factor in case they are sued. It is interesting to note that when a company is formed by a large law firm, the firms will generally select Delaware while small firms select their own jurisdiction.

If a company is to be formed in a state other than the local jurisdiction, it makes no sense to form in a state which ranks 23 or below for fairness in its legal climate.

I have an active Delaware business practice as well as a practice in Delaware’s State and Federal courts. If you or your client have a business matter or a matter which you wish to litigate in Delaware or have a matter pending in Delaware, we would appreciate the opportunity to consult with you regarding our representation. Please remember that we do not accept representation without a written engagement letter.

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