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Delaware Predicting Record Number of Incorporations

July 20, 1992

DOVER, Del. (AP) _ Tiny Delaware is expecting a record number of businesses to incorporate this year, a trend that includes laid-off middle managers turned entrepreneurs opening their own businesses.

Delaware’s pro-business climate and business-law precedent setting Chancery Court has long been a draw for businesses, many of which have their operations and headquarters elsewhere, to incorporate here.

Delaware had a record 31,486 new incorporations in 1988 during the heyday of merger mania and economic growth, then fell to 29,861 in 1990. Through June of this year, there were 17,144 new incorporations, up 15 percent over the same period in 1991.

″We’re on a pace now where we could hit 34,000″ new incorporations by the end of the year, said Jeffrey D. Lewis, assistant secretary of state. ″Since December, new businesses have come pouring in here.″

The firms that handle the paperwork for companies incorporating in Delaware are also seeing an increase in clients.

William H. Freeborn Jr., an executive with Corporation Service Co. in Wilmington, said the increased incorporations include ″mom and pop″ ventures he attributes to layoffs across the nation.

″People are looking for new ways and opportunities and starting their own businesses,″ Freeborn said. ″The first thing they do is research what businesses are out there, then they form their incorporation.

″We’re seeing a huge increase in that type of incorporation. ... We think it’s directly related to changes in business structures - (former) middle managers having disposable dollars.″

Others see the increase in incorporations as a sign of economic growth.

″Companies are predicting an economic turnaround and positioning themselves by restructuring and starting up subsidiaries,″ said Geoffrey Miller, business law professor at the University of Chicago Law School.

Larry P. Scriggins, chairman of the business law section of the American Bar Association, there is a sense of renewed business activity despite the uncertainty in the economy.

″It may well be that the expectation of a larger number of incorporations is an indicator that those senses are correct,″ he said.

But Merton Miller, a professor at the University of Chicago School of Business, wasn’t impressed by the Delaware numbers.

″The numbers don’t really look to me like much of a noteworthy increase. ... It doesn’t seem to be all that out of the ordinary,″ he said.

Secretary of State Michael Ratchford also attributed the increase to an aggressive marketing effort that included advertisements in business-related publications.

Delaware has the fifth highest number of incorporations behind first-ranked Florida, New York, California and Texas.

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