The Tiny Building Where 285,000 Businesses are Based

The Tiny Building Where 285,000 Businesses are Based


This video was made possible by Skillshare. Learn from more than 25,000 classes for free
for two months by signing up at skl.sh/hai26. There are a few things that everybody hates. Bug bites, going to the dentist, watching
videos that aren’t made by HAI and other Wendover Productions associated entities,
hand dryers, running out of things to put in a list, and of course, paying taxes. Of course there are a lot of different opinions
on taxes overall, but most seem to agree that they don’t like paying taxes themselves,
and nobody hates taxes more than corporations. That’s why often, corporations store their
money in tax havens—places with loose, generous tax laws that charge either very little, or
no taxes. Tax havens are like buy-one-get-one-free ice
creams, except instead of buying an ice cream, you put all your money in an overseas bank
account, and instead of getting a free ice cream, you don’t pay any taxes on your overseas
money. So actually, I guess it’s not like buy-one-get-one-free
ice cream at all and I should work on my metaphors. When you think of tax havens, you probably
think of places like the Cayman Islands, which doesn’t tax corporate or personal income,
or Bermuda, which also doesn’t tax corporate or personal income, but not many people think
of Delaware—a small, mid-Atlantic state with a population of 967,000 that’s home
to plenty of old historical artifacts like the New Castle Courthouse or former Vice President
Joe Biden. In fact, most people don’t really think
of Delaware much at all—it’s only home to 0.3% of the US population. Sorry Delaware-eites….um… Delawarriors…Delawalruses….people from
Delaware. Yet, Delaware is the legal home to over 65%
of all Fortune 500 companies, and 80% of publicly traded US companies. In fact, Delaware is home to more companies
than people. Now, this could either be because of the state’s
very respectable 1 to 138,000 IHOP to resident ratio or because of Delaware’s extremely
lax tax laws. First of all, in Delaware, companies don’t
have to pay corporate income tax on money that’s made outside of the state, and income
from interest and other investment isn’t taxed either, but mainly, Delaware is so advantageous
financially because of what’s called the, “Delaware Loophole,” which takes advantage
of the fact that Delaware doesn’t tax what are called “intangible assets.” Intangible assets are things that exist and
have value, but aren’t physical objects, like trademarks, copyrights, or my sense of
humor—there may not be much physical evidence of these things, but I promise you they have
value. So let’s say, as a hypothetical, I start
a corporation called, “Giraffe as Interesting.” We sell giraffes, this is our logo, and our
motto is, “our expert staff will get you a giraffe super fast.” Let’s say that we have giraffe stores all
across the country—in California, Pennsylvania, North Dakota, South Dakota, East Dakota, West
Dakota, Northwest Dakota, North-northwest Dakota, East-northwest Dakota, and of course,
Florida. Now, let’s say that my giraffe store in
Pennsylvania is raking in money—normally, all that money that store makes would be subject
to Pennsylvania taxes, but instead, I create a subsidiary of Giraffe as Interesting that’s
located in Delaware, and I transfer some “intangible assets” to that subsidiary. So I give the ownership of the name Giraffe
as Interesting, our logo, and our motto, to the Delaware subsidiary. Now, my store in Pennsylvania will pay my
Delaware subsidiary a trademark fee to use the name and logo and slogan. So let’s say that my Pennsylvania store
sold $100,000 worth of giraffes, but they also paid $95,000 to my Delaware subsidiary
for the rights to use the name Giraffe as Interesting and this awesome logo and that
great motto. My Pennsylvania store can deduct the money
they paid to my Delaware subsidiary from their income, so now they only have to pay Pennsylvania
taxes on $5,000, not $100,000, and that $95,000 they paid to my Delaware subsidiary doesn’t
get taxed at all, because, again, in Delaware, they don’t tax what’s considered, “intangible
property.” Every year, the government loses out on about
$9.5 billion because of the Delaware loophole. That’s enough money to buy 392,000 giraffes
or a few dozen US senators. So that’s the Delaware loophole and that
is what brings us to what you’ve all been waiting for—the two-story building that’s
home to 15% of all US companies. Now, there are a lot of important addresses
in the world: 1600 Pennsylvania Avenue, 10 Downing Street, 4 Privet Drive, 42 Wallaby
Way, but perhaps the most exciting of them all is 1209 Orange Street, Wilmington, Delaware. Believe it or not, this shabby building is
the legal address of over 285,000 companies. Why are they all in the same building? Because you have to have an address in the
state for, “service of process”—in other words, a place to get mail and legal documents
if you’re legally based there, but that law doesn’t say that you have to have staff
there. So a company, the CT Corporation, bought this
building at 1209 Orange Street and said, “hey companies, if you want, you can list this
as your address and get your mail here and we’ll deal with it so you don’t have to.” Therefore, 285,000 companies said, “yep,
cheerio, that sounds great,” which is how we ended up with Apple, Google, Walmart, American
Airlines, and Coca-Cola, all in the same two-story office space that looks like the headquarters
for an imaginary superhero called “boring-man,” whose superpower is coloring things beige. Now, let’s say you want to pay fewer taxes. You could a—declare your body a temple thereby
qualifying it for the religious institution tax exemption or b—learn how to properly
identify business expenses. For option b you could a—spend a captivating
afternoon reading through the IRS’ fantastic archive of documents or b—spend an actually
captivating 40 minutes taking this Skillshare course teaching you to do exactly that. It could end up being the most profitable
40 minutes of your life. If you really want to round out your afternoon,
I’d also recommend taking Thomas Frank’s productivity masterclass which can help make
everything you do more efficient. If you want to learn new skills and better
yourself, Skillshare is the place for you especially given their enormous library of
over 25,000 classes. If you sign up at skl.sh/hai26, you will get
two months of Skillshare for free and then, after that, their annual pricing works out
to less than $10 a month.

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About the Author: Oren Garnes

100 Comments

  1. Want to evade some taxes? Well, guess what, if you’re given a free HAI t-shirt, which has (a very limited amount) of value, it qualifies as a gift and therefore you don’t have to pay taxes on it! Then you can just go sell it and then bam, free money. (My lawyer asked me to include a message saying that this is not legal advice, is not true, and that you should never take advice, legal or otherwise, from me.)

    How do you get a free HAI t-shirt? Glad you asked. Just submit a topic suggestion for HAI here and then, if we use it, you’ll get that free t-shirt shipped to wherever you are: https://docs.google.com/forms/d/e/1FAIpQLSfUdlvw6YgU44J8AnM2U_ZvRMyvh_CUM51LYSqF5nYJB9d1-w/viewform?usp=sf_link

  2. 1:22 why do these coordinates point to a random house in the middle of nowhere? Is that where Sams sense of humor is held hostage for the past year?

  3. Coloring things beige is teh OP superpowa my duder. Everything beige now so you can't find ur get away car you dastardly bank robba, Boring Man save teh day once again!

  4. I honestly think bill wurtz and HAI would make an excellent collaboration. It might seem peculiar but I’d love to see it.

  5. Delaware isn’t just great for corporations! Gas is cheaper cigarettes are cheaper and living is cheap as well! Great state with great small beach towns. Slaughter beach is great

  6. "generous" tax laws and the government "losing out" on tax income are very funny ways of saying that individuals and corporations get to keep more of their own money.

  7. Thank you for your channel and videos, I learn a lot of things I normally wouldn't thanks to you. However, I have to admit that the increasing number of "jokes" in your videos is getting irritating

  8. The videos on this channel would be a lot better if you would simply upload them to Wendover Productuons and stopped trying so hard to come off as funny to differentiate this channel from the other

  9. This should result in a modern strike. Quit submitting to what the government tells you is an average job. The real average income per person is about 90,000 a year before any earning from assets or investments. It's only based on "earned wages" which means the real average income in America is about 1 million per person. If you have assets, which mean stock market holdings, real estate holding, anything that your employer doesn't report as working income are NOT considered as income. Quit being fooled by government provided fake numbers and you will realize 90 percent of Americans are the new modern slaves. The unemployment rate is not what you are being led to believe. Our economy is a few years if not months from a complete collapse. The more YOU know the better off we will be

  10. That is actually incredibly sinister and shouldn't be legal. This is legal tax evasion that deprives the American people of money just so these already extremely rich companies can get even more rich. In fact, corporations pay a disproportionately low amount of taxes compared to the average person, when it should be the opposite way around.

  11. I enjoyed the little bit of content that came with this ad for Skillshare, but the DELAWARE STATE government loses that $9.5B to be clear, not the US government. These are state corporate income taxes, not federal. The federal government doesn’t care in what state you’re incorporated and they happily tax your intangible assets. Also, the CT Corp address isn’t just about mail, CT staffs the office because process services must be able to be served in person (you’re an idiot if you serve them by mail). CT has offices in every state.

  12. Taxhavens are basically just loopholes size of the city. Only reason taxhavens work because there is so few of them, otherwise those places would do really bad from lack of funds. If business avoids taxes, it just means people working will be paying more. It's just hugely unethical and just another way to make rich richer.

  13. 0:19 But I do like hand dryers, to dry off my hands which I used to eat french fries at a McDonalds in a mall in NCR in a third-world country in South-East Asia in Asia on Earth and so on

    What I don't like is Algebra, random video recommendations which are unrelated to this channel and others that I watch, which are the vids with clickbaity thumbnails, cartoon videos for kids, songs I haven't heard of. And lastly, Netflix and video game ads on YT

    – The end of a rant

    Sincerely yours, Lettow Von Vorbeck

  14. "Thats enough to buy a few dozen senators"

    That quote just flew over every Americans head cause their fucking stupid for letting this loophole exist for so long…

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