Delaware has favorable corporate laws, government policies that favor corporations, and it has the Court of Chancery. The Court of Chancery, special to Delaware has developed extensive case law in the field of corporate law, enabling Delaware to have some of the most comprehensive interpretations and applications of corporate law. The comprehensiveness of the case law reduces uncertainty and enables businesses to plan better for the future.

From Why Corporations Choose Delaware in the Delaware Dvision of Corporations website:

Why do corporations incorporate in Delaware? There is not one answer but many. They include a modern and nationally recognized corporation statute and a well-developed case law that facilitates business planning; the respected Court of Chancery to deal with corporation law issues should they arise; an efficient and user-friendly Secretary of State’s Office; and a legislature that puts a high priority on corporation law matters and is committed to keeping Delaware’s business laws current.

Certainly, some of the parts of the package that encourage companies to incorporate in Delaware can be imitated, even duplicated. But most of them cannot. In any case, the total package, and the synergies that its various parts lend to one another, make Delaware the premier home for corporations today.

The chief benefit of a Delaware LLC is that the state has no sales tax, corporate income tax, or personal or intangible property taxes for companies that do not do business in the state. There is a flat annual franchise fee instead of annual tax report filing, and the franchise fee is scaled to the size of the company.

The state also does not require that LLC owners reside within Delaware. This means that out-of-state and foreign businesses can reap the benefits of Delaware's business-centric laws, making LLC's excellent for holding and protecting real estate and stock assets because (a) taxes cannot be imposed on assets, capital shares or stock transfers; (b) there is no state inheritance tax on non-Delaware residents; (c) assets cannot be seized as a result of company liabilities; and (d) privacy protection hinders attorneys' ability to track assets.

Privacy protection features of a Delaware LLC include:

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- Company ownership need not be disclosed to the State of Delaware.
- Company ownership transfers need not be reported to the State of Delaware.
- Delaware does not maintain a publicly available database of companies' management.
- The reporting and disclosure obligations imposed by the State of Delaware are minimal.
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Additional benefits of a Delaware LLC include:

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- Company records do not need to be physically located in the State of Delaware.
- Delaware does not impose a minimum capital investment requirement for LLCs and corporations.
- Delaware corporations can easily be converted into LLCs and vice versa.
- Delaware LLCs and corporations can be formed without coming to Delaware using an online incorporator like The Delaware Company.
- A Delaware LLC is capable of continuing indefinitely. Existence is not affected by the death of
member(s)/manager(s), shareholder(s), director(s), or officer(s).
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For full documentation of Delaware's corporate law codes, see http://delcode.delaware.gov/title8/c001/index.shtml#P-1_0.

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In October of 1992, Delaware law recognized Limited Liability Companies (LLC) - and the rush was on. As the name implies, forming a Limited Liability Company offers members limited liability protection and certain tax benefits. And Fortune 500 companies tend to agree - over half of the Fortune 500 companies choose to incorporate in Delaware.

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Advantages and Benefits of Forming a Delaware LLC:

* Asset Protection from Liability. Delaware LLC members enjoy Limited Liability, which means they are mostly personally protected from any liability of the LLC and successful judgments, as well as from the LLC itself. Couple that with the Business Court’s reputation for efficiency and fairness with their experience in corporate law, and the benefit becomes quite clear.
* Business and Corporation knowledgeable court systems.
* Banking-friendly Usury laws.
* Tax Advantages. Delaware charges no corporate income tax on companies not operating within the state, though all Delaware corporations must pay an annual corporate franchise tax.
* A Delaware LLC allows for “multi-tiered” ownership wherein an S or C corporation can be a member--this can allow for substantial tax benefits, and increased liability protection.
* Delaware allows for “single member” LLCs.
* The LLC allows for the "special allocation" of profits--the disproportionate splitting of Member profits and losses (in different percentages than their respective percentages of ownership). This means that Members can enjoy the benefits of receiving profits (and writing off losses) in excess of their individual ownership percentage, so long as it is clearly delineated in the Operating Agreement.
* Managing Members' share of net profit is considered earned income because the Managing Member is considered to be an active owner--therefore qualifying the Managing Member for special "fringe benefit" treatment.
* The Members' share of the bottom-line (“net”) profit of an LLC is not considered earned income, and therefore is not subject to self-employment tax.
* Members are compensated using either distributions of profit or guaranteed payments. A distribution of profit allows each member to pay themselves by merely writing checks--whenever they need the money (provided the business has the available cash). Guaranteed payments represent earned income to the members, thereby qualifying them to enjoy the benefits of tax-favored “fringe benefits.”
* The Managing Member of an LLC can deduct 100% of the health insurance premiums he or she pays, up to the extent of their pro-rata share of the LLC's net profit, because the profit is considered earned income. Note: If a member has earned income, he or she will also qualify.
* A Corporation can be a member of an LLC. This allows you to create an additional level of ownership, which is designed to create an entity that can offer such traditional “fringe benefits” as retirement plans and an additional level of protection from liability.
* As a Member, you can contribute capital or other assets to the LLC, or loan the LLC money to put dollars or value into the business. You can take dollars out by taking a repayment of your loan (plus interest), a distribution of profit or a guaranteed payment. If any of the members die, the LLC can continue to exist--subject to the unanimous positive vote on the part of all remaining members or a proviso in the Operating Agreement.
* Tax Advantages. Delaware allows for pass through taxation of LLCs and partnerships, and does not collect personal, corporate, inventory, franchise, gift, business occupation or stock transfer taxes. And with the federal “check box” method of taxation, the Delaware LLC can choose to be taxed via the partnership model with “pass through” taxation. This can amount to a substantial savings to a business.
* The Delaware LLC has a perpetual life and membership is easily transferable. It is advisable to enter into a Members' Agreement if alternative conditions are required.

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The following site explains how a Delaware LLC provides the most protection at the lowest cost:
http://www.incnow.com/nevada/delawarevsnevada.shtml

Basically: lower incorporating fees, lower corporate taxes, ownership is kept private; and you can do business anywhere in the U.S.

The Benefit of opening a corporation is Delaware is that the laws pertaining to the state favor the corporation. It is very protective to its entity due to the fact the it is the only state that has the most fortune 500 companies registered. because of that it offers discounted rates in registering.

The only state that comes close to the laws is Nevada.