Why do most startups incorporate in Delaware?

September 23, 2020

Incorporating in Delaware is the gold standard for startups looking to attract outside investment from angels and venture capitalists. A majority of Fortune 500 companies are incorporated in Delaware. But why should you incorporate your startup in Delaware, even if you’ve never been there?

Delaware is known for being a business friendly state, their laws are flexible for founders and shareholders. There’s a body of law in DE where many court cases have already been tried, so businesses have more certainty about how different legal disputes will turn out. Venture capital firms and angel investors typically require companies to be structured as a Delaware corporation as a condition of funding the company.

Delaware is considered tax haven. There is no corporate income tax from Delaware if you do business outside of Delaware. Stock shares are not taxed by Delaware if their owners don’t reside in the state.

Delaware offers greater Privacy Protections than some other states. Delaware corporations don’t need to disclose officer or director names on the formation documents.

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