Where Should You Incorporate Your Startup? Delaware!

Delaware is a Corporate Oasis for Startup Entrepreneurs, Angels, Venture Capital and Private Equity Investors

Delaware has created a haven in which entrepreneurs may establish corporations in an environment that is also friendly to investors and business in general.

As a result, by many measures, more major corporations incorporate in Delaware than all other states combined. Investment bankers, private equity and venture capital firms strongly prefer the companies they engage and invest in be incorporated in Delaware. Here’s proof:

  • more than 50% of the startups pitching for mezzanine financing are incorporated in the state;
  • more than 50% of the firms listed on the New York Stock Exchange are incorporated in Delaware;
  • like the NYSE, more than 50% of the NASDAQ listed companies are incorporated there; and finally,
  • more than 50% of new IPOs in recent years have chosen Delaware as their state of incorporation.

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Delaware’s legislature has established general corporation and LLC acts which provide entrepreneurs and investors significant flexibility in establishing their structure and the relationships between the parties. In addition, under Delaware law, the Court of Chancery, a separate court system established for corporations, was created more than two centuries ago. Under this system:

  • an extensive body of case law relating to corporations has been established
  • a high quality slate of judges has been developed; no juries are involved
  • the code has been well maintained and is consistently updated
  • corporate attorneys from throughout the country have become familiar with the Delaware code

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The result is a modern code which is clear, concise, well established and respected. It’s also a code that has resulted in lower levels of litigation. Additionally, Delaware’s operational infrastructure and systems, which are also maintained with the current “state of the art” technologies, result in timely filings and supporting services. Finally, you don’t need to be a Delaware Resident to incorporate in Delaware, non-residents don’t pay Delaware corporate taxes and incorporating in Delaware is relatively inexpensive, being in the lowest quartile from a cost standpoint.

So, where should you incorporate your venture? Delaware!

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NOTE: This article may discuss issues for which legal advice should be considered prior to a decision or agreement with a third party.  It should be noted that the author is not an attorney, and FundingSage is not a law firm.  FundingSage’s employees and affiliates do not provide legal advice.  We recommend you seek the services of an attorney if legal advice is required.

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Tony Lettich

Tony Lettich has previous corporate venture capital experience and currently serves as Managing Director of The Angel Roundtable. He is a co-founder of FundingSage, which provides valuable information, tools and resources to entrepreneurs seeking to start, grow and fund a business.