The State of Delaware, wedged on a strip of the Delaware Bay in the Mid-Atlantic, is known for being the First State in the Union.
It's also a massive corporate tax haven for U.S.-based corporations.
THE DELAWARE LOOPHOLE
Put simply, the Delaware loophole refers to the Delaware General Corporation Law which governs corporate tax structures in the First State. Per this structure, corporations registered in Delaware follow this order of operations:
Corporations registered in Delaware pay no income tax for corporate operations outside of Delaware
Income tax for holdings by corporations registered in Delaware is taxed at 8.7%
As a result, corporations outside of Delaware routinely register business entities in Delaware despite conducting no business there. Corporations outside of Delaware make use of so-called registered agents, which serve as Delaware addresses for outside corporations to register as their base of operations. There is literally no other reason why a corporation would be registered at one of these addresses except for the purposes of "lowering tax liability", AKA dodging taxes. For more information on shell companies and their role in enabling large corporations to hide their assets, you can read Aaron Glantz's article, "Unmasking the secret landlords buying up America".
The "Delaware loophole" thus allows corporations with no affiliation to Delaware to register their subsidiaries there and only pay Delaware's rate of corporate income tax, which is usually substantially lower than that of the state(s) in which they primarily conduct business. Typically, this is done by a parent corporation setting up a "shell corporation" that has its primary office in Delaware, which is generally at one of these registered agents. This shell corporation is completely subject to the whims of the larger corporation, but its tax liability on earnings and holdings is lower than it would be if the business was being directly conducted by the parent corporation.
For more information on tax havens, please refer to this video by TLDR News:
1209 N Orange St, Wilmington, De
The most famous of these registered agents is the Corporation Trust Center, located at 1209 N Orange St in Wilmington. This registered agent is so famous, in fact, that is has its own Wikipedia page. The Corporation Trust Center is a single-story office building which serves as the registered agent for corporations across the United States. In 2012, no fewer than 285,000 corporations were registered at this address.
See all of the corporations conducting business in Boston who have shell corporations at 1209 N Orange St below.