• July 2018
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When setting up your company is it best to incorporate in Delaware?

As others have pointed out, many businesses automatically assume that Delaware is the best state to incorporate in when that’s often not the case. It could be depending on the nature of your company, but it often isn’t the best option.

If you are a tech startup expecting rapid growth, Delaware is probably the right choice. C-Corps in Delaware offer the greatest flexibility in terms of structuring boards of directors, stock issuance and preference, and voting rights. It also provides the broadest privacy protections. For instance, it doesn’t require director or officer names to be revealed on formation documents. For these reasons, many investors prefer and, in some cases require, companies that are incorporated as a C-Corp in Delaware.

On the other hand, you’ll be required to file periodic reports in Delaware, in addition to the state where you do business. Moreover, Delaware requires that you regularly submit franchise taxes, even if you’re paying those taxes to the state/s in which you are already doing business. Also, many companies don’t require C-Corp status; in fact, incorporating as a C-Corp for some companies could be detrimental to their overall financial interests. Filing as an LLC with subchapter S selection or some other type of entity that’s not a C-Corp – especially when there’s no expectation of going public – is often best done in the state where the company is conducting business.

In you need further assistance incorporating your startup and evaluating in which state would be the best fit, please feel free to check out LawTrades. Hope this helped! You may also message me directly as I’d be happy to answer any further questions you have regarding your company’s formation.

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