What are downsides of a tech startup incorporating in Delaware?

There are downsides for closely-held companies. Unless you’re forming a high tech startup or some lucrative company that you plan to take public, then consider the type of business you’re in and whether the state where you’ll be conducting business will better serve your financial needs; it often is.

Delaware requires you to maintain a registered agent with a physical address in Delaware, which can be an unnecessary expense. Additionally, all Delaware corporations are required to pay annual franchise taxes; these taxes are based on the company’s share value and range from $75 to $180k — plus a $50 filing fee. Delaware also has mandatory annual reporting requirements, which you’ll need to file in addition to those in your home state or states where you are doing business. You’ll also want to keep in mind that if you incorporate in Delaware but will be conducting your business in another state (or states), you’ll need to also file a certificate with the state/s you’re doing business in to qualify as a foreign corporation.

It’s probably a good idea to speak with a lawyer about your decision on where to form your company. LawTrades can help you with that. Our legal platform makes it super easy for bootstrapped startups to seek quick and accurate legal guidance from skilled business attorneys.

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