Moisan Legal P.C. Blog

Sunday, September 27, 2015

Three Reasons why Startups Incorporate in Delaware


Almost 1 million businesses are incorporated in Delaware . Additionally, more then half of all fortune 500 companies are incorporated in Delaware.  Since most founders have a plan for world domination, they tend to follow the path of other successful companies and form their corporations in Delaware, not really understanding why. At the request of many entrepreneurs, I wanted to quickly go over some of the main advantages of incorporating in Delaware. 

  •  If a corporate dispute arises and your corporation is formed in Delaware, the dispute will be subject to Delaware laws. Delaware has a specialized court for hearing corporate disputes. This means that it’s easy for disputes to resort to prior decisions that their specialized courts have already decided. 
  • Startups like to move fast. Delaware conforms to expectations for founders because they move quick as well. They have great customer service and they have a fast turn around time for approving filings compared to most states.The filing fee is very affordable as well, costing only $89.  
  • If you plan on raising money, Delaware should be considered. Venture capital firms and investors are familiar with Delaware corporation law so it makes things much easier for them. The vast amount of precedent reduces the risk of litigation and investors & founders want to avoid litigation at all costs. 

Many founders that plan to not take outside funding tend to form the entity in their home state. If you raise money from venture capitalists, you're likely going to need to incorporate in DE. Incorporating is a big first step, make sure you seek the advice of an attorney before you get the process started. 

 To learn more about incorporating in Delaware, be sure to check out their forms online as well as more detailed information on why businesses incorporate in Delaware

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