You’re an entrepreneur with a business idea and you have secured funding for your idea. Now that you’re ready to launch your startup, what do you do? One logical step is to form a company for your startup. Okay, great, now what?

Generally in the US, laws relating to corporations and corporate governance are reserved for individual states. In other words, you must incorporate your company with a state. The question now becomes in which state should I incorporate my startup?

All things being equal, attorneys generally advocate for incorporating companies in Delaware. Why? Delaware offers many advantages for startups:

One, Delaware does not have a corporate income tax for corporations that do not do business in the state. For example, if you incorporate your startup in Delaware but run your day-to-day operations in California, you do not need to pay corporate income tax for Delaware if your startup makes money.

Two, Delaware has robust corporate law. Compared with other states, Delaware has a well-developed and favorable corporate law that provides corporations with a great deal of flexibility and protection for startups. For example, Delaware law allows corporations to have a single shareholder and a board of directors that is not required to be elected by the shareholders.

Three, Delaware has a specialized court system (the Court of Chancery) specifically to handle corporate law disputes. The Court of Chancery is known for its expertise in corporate law and its ability to resolve disputes quickly and efficiently.

Four, Delaware offers privacy. Delaware law does not require corporations to disclose names of shareholders or directors. This can be important for corporations that want to keep their ownership and management confidential.

These are just some considerations when incorporating a startup. There may be unique circumstances where you may not want to incorporate your startup in Delaware. Please consult an attorney for your specific situation.

Tags: #corporation, #corp_formation