There are certain addresses that just about everyone knows because of the wealth or power associated with them. Addresses such as 1600 Pennsylvania Avenue or 10 Downing Street are connected in our culture with more than real estate; they represent the power and authority of those who reside there.
In a world where money is power, shouldn’t 1209 North Orange Street, Wilmington, Delaware rank among the best-known addresses in the world? It is, after all, the home to some of the biggest businesses in the world. All told, more than 285,000 companies claim the unimpressive, two-story building at 1209 North Orange Street as their home address.
How did such an unlikely address become the locus of so many companies, whose combined worth is valued in the trillions of dollars? As they said in the 1976 movie, All the President’s Men, the answer can be found when we “follow the money.”
The state of Delaware may not have a lot in terms of people, real estate, or major metropolitan centers. What it does have, however, is the most corporate-friendly income tax law in the United States. Under what is known as the “Delaware loophole,” companies within the state are not taxed on intangible assets.
To take advantage of the Delaware loophole, a company sets up a subsidiary in Delaware and transfers its intellectual property, such as trademarks, copyrights, or patents. The other locations then pay money to the Delaware subsidiary as a licensing fee for use of the intellectual property. Since intangible assets are not taxed in Delaware, the subsidiary in that state doesn’t have to pay taxes on the licensing fees it receives. The other locations can typically deduct the licensing fees they pay to the Delaware subsidiary, thus avoiding a large share of the state income taxes it would have otherwise owed.
To say this tax arrangement is attractive is a gross understatement. Although Delaware is home to only 0.3% percent of the U.S. population, 65% of Fortune 500 companies and 80% of publicly traded U.S. companies are incorporated there. The Delaware loophole saves an estimated $9.5 billion in taxes for the companies that take advantage of it.
One requirement of Delaware law is that each corporation must have an address within the state where legal documents can be delivered. This is where the nondescript building at 1209 North Orange Street comes into play. Although the city of Wilmington has just a little more than 70,000 people, this one building is the official address for over 285,000 companies.
Among those businesses who claim 1209 North Orange Street as home are Walmart, Google, American Airlines, Apple Inc., General Motors, The Coca-Cola Company, Yum! Brands, Verizon, and JP Morgan Chase. In fact, over 15% of all public corporations in the United States use the building as their address.
One of the businesses at 1209 North Orange Street is the Corporation Trust Center. It is the actual owner of the building and the company that makes it possible for the other 285,000 companies to claim the building as home. Corporation Trust Center (also known as CT Corporation), is a subsidiary of the Dutch multinational services firm Wolters Kluwer. The company provides “registered agent services.” For about $250-$300 per year, a business can have CT Corporation receive service of process and forward official correspondence to the appropriate individuals. At $250 per company, this brings in the princely sum of $71.25 million per year.
For more information about how you can create a corporation that can cozy up with 285,000 other bigs names in business, visit CT Corporation’s parent company Wolters Kluwer’s website.
Categories: Government, Laws and Lawyers, Money
Reblogged this on History of Sorts.
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Thanks for the reblog!