Adapted from What’s the Matter with Delaware: How the First State Has Favored the Rich, Powerful, and Criminal—and How It Costs Us All, published by Princeton University Press and reprinted here by permission.
Rehoboth Beach is a typical American seaside town. Located on the Atlantic Coast in southern Delaware, the drive down Route 1 from Wilmington, the state’s biggest city, is about 100 miles. As you approach Rehoboth, lighthouses on malls and street signs prepare you for the curiosity shops that pepper the town’s main street, offering a variety of shells and assorted maritime tchatchkes.
The 1,400 or so permanent residents of Rehoboth Beach are a somewhat mixed bunch. Not racially—the town is overwhelmingly white—but they do include retired Midwesterners, assorted beach bums and hippies, middle-aged gay couples, and Tom Larson, imperial wizard of a Ku Klux Klan affiliate organization, the East Coast Knights of the True Invisible Empire.
But some 80 percent of Rehoboth Beach’s property owners don’t live there, including President Joe Biden and First Lady Jill Biden, who bought a $2.7 million, six-bedroom oceanfront house there in 2017, after visiting the town for decades. Rehoboth has always been particularly popular with Capitol Hill politicians, their staff, and the lobbyists who work on Capitol Hill, roughly two hours away if you don’t get stuck in a weekend traffic jam. One traditional wheeze is for residents of the District of Columbia to avoid the District’s 6 percent sales tax by buying cars in Delaware (which has no sales taxes) and registering them in the First State, using their beach houses as their home addresses.
The same year that the Bidens bought their home, Rehoboth Beach’s political leaders came up with an innovative proposal: to allow Limited Liability Companies to vote in elections. The idea demonstrated how mainstream LLCs (a corporate structure of choice for out-of-town property owners) have become in day to-day life in Delaware—not just in business, but in how decisions get made on the ground.
Delaware, the US’s second smallest state, has more registered businesses than residents—about 1.6 million companies in a state with a population of less than a million. Some 250,000 businesses register for the first time in Delaware each year—an average of 683 a day. Most of them are LLCs whose owners are not required to identify themselves in any way, meaning towns like Rehoboth Beach can have no idea who owns their real estate, or where on earth they actually live.
Under the US Constitution, companies are considered people, at least when it comes to spending money in elections and refusing to observe federal mandates due to conscience. “Corporations are people, my friend,” the US senator and failed 2012 presidential candidate Mitt Romney famously told a heckler in Iowa who was haranguing him about corporate tax policy. Rehoboth Beach was the first town in the United States to try to extend that concept into political voting.
Delaware is already one of the few states to allow non–US citizens the right to vote in local races. The state has become an expert in drawing business registrations from out of state, and it is also at pains to attract nonresident property owners. An unusual law empowers cities and towns to give these out-of-staters—including those outside the United States—the opportunity to vote in local races. In Newark, Delaware’s third-biggest city, a similar rule allowed one property manager to vote 31 times in a local referendum in 2018, one for each of the LLCs their company owned. Although the circumstances were unusual—such referendums are rare, and the city does not allow LLCs to vote in regular elections—it prompted a backlash from residents.
Rehoboth Beach was proposing to take the principle further, allowing LLCs to vote not just in referendums but also in regular elections. That idea didn’t originate in Rehoboth. Several other tiny nearby beachfront communities had already implemented similar measures. But Rehoboth Beach was the first significantly sized town to try it out.
The mayor of Rehoboth Beach at the time, Paul Kuhns, explained the origin of the idea to me as we sat in his office in 2018. Kuhns, a tall, rugged, earnest man with neat gray hair, was decked out in the unofficial uniform of the mayor of a seaside resort: pink t-shirt and shorts. Decades before, Kuhns recalled, the town had given nonresident property owners the right to vote, and in 2008 had extended that right to trusts, a measure that added about 100 new voters to the rolls. Meanwhile, many nonresident owners had bought their properties using LLCs in order to limit their liability from tenants, and they had asked to have a say in local elections, so he thought it made sense to extend the voting right to LLCs also.
But the town’s residents threw a wrench in the plan. Jan Konesey, one of the objectors, told me that LLCs are designed precisely to hide the identity of their owners. “A corporation or an LLC is not a person. It’s a business entity. And business entities don’t vote,” she said. “If you look in [the documents filed with] the secretary of state’s office, all you have for an LLC is a contact person. Well, that contact person could be the registered agent. It could be the owner of the LLC. It could be their next-door neighbor. It could be anybody.” In the face of such objections, Kuhns withdrew the proposal.
For much of the 20th century, Delaware was periodically referred to as “the company state,” a moniker that highlighted the outsized role in the state’s affairs played by DuPont, the chemicals giant. The corporation and the controlling du Pont family gave their names to the state’s fanciest hotel, theatres and banks. They owned the state’s two largest newspapers. The governor was a former DuPont executive. Delaware’s member of Congress was Pierre Samuel du Pont IV. The conglomerate was so influential that it was referred to locally as simply “the Company” or, more tenderly, “Uncle Dupie.” “General Motors could buy Delaware,” Ralph Nader observed, “if DuPont were willing to sell it.”
But in the 21st century, Delaware solidified its role as what Joe Biden has termed “the corporate state,” the legal home of corporations in general. Two-thirds of the companies included in the Fortune 500—the biggest companies listed on America’s stock market—are registered in the First State, attracted by its business-friendly reputation. About 95 percent of US companies that incorporate somewhere other than their home state choose Delaware. And the collective political influence of these outsiders is no less strong than DuPont’s had traditionally been.
The extent of the phenomenon was illustrated when the COVID pandemic hit the United States in 2020, prompting the federal government’s $669 billion Paycheck Protection Program. A string of companies registered in Delaware received stimulus funds ostensibly to support workers employed in the state, even though they did not actually employ anyone there, according to an investigation by Delaware’s News Journal.
Like the dustup in Rehoboth Beach, this highlighted the outsized role that nonresidents and nonresident companies play in Delaware and its economy. In many cases, what exists in Delaware is nothing more than a shell. The corporate lights are on, but no one’s home.