While it may seem unusual for some, many startups incorporate their businesses in Delaware. But why do you need to incorporate your tech startup in Delaware? There are many good reasons for this. With that said, in this article, you’ll discover the primary reasons Delaware attracts so many startups, as well as why it’s a good idea to incorporate your own tech startup here.
Choosing a State for Incorporating Your Business
Choosing a state for your business’s incorporation can undeniably be tricky, especially when you have numerous options. In this case, here are some factors to keep in mind while choosing a state to incorporate your business.
- Strong Pro-Business Laws
It would be better for you to incorporate your startup in a state with strong laws protecting business owners. This allows you to enjoy more flexibility when conducting your operations.
- Business-Savvy Legal System
Likewise, you also need to choose a state where the attorneys and judges are attuned to the business world. This ensures that they can make better judgments when it comes to business-related cases.
Lastly, it would be best to make sure you choose a state that attracts many corporations. A state with numerous corporations can be a good indication of its thriving business environment, increasing your chances for success.
Why Choose Delaware for Your Tech Startup
In this case, Delaware ticks all three boxes. It has strong laws that protect the interests of business owners. It also has a special Court of Chancery that has learned and respected business attorneys and judges.
Aside from this, it is also a popular destination for corporations. To give you a small insight: Twitter, Google, Facebook, and Yelp are all incorporated in Delaware.
It would also be best to note that many big corporations are incorporated in Delaware. In fact, about two-thirds of Fortune 500 companies are incorporated in the state. Likewise, over 80% of initial public offerings select Delaware for incorporation.
With these numbers, it can be a good idea to incorporate your own startup in Delaware. Here’s why:
- Delaware Has the Best Legal Protection for Businesses
One of the biggest reasons for startups incorporating in Delaware is that the state has robust laws protecting owners’ assets from being taken over by investors. In fact, this protective shield is one of the biggest reasons you should consider incorporating your startup in Delaware.
Additionally, businesses incorporated in Delaware are protected from lawsuits against business owners, even if the company faces business losses due to a particular business decision.
Called the “Business Judgement Rule,” it encourages business owners to take risks without fear of being troubled by lawsuits.
- Delaware Has Courts Designed Exclusively for Corporate Cases
Aside from that, here is another reason you should incorporate your startup in Delaware: they have courts that only handle corporate cases.
This is notable because it means that you will get judges that specialize in corporate law. In addition, the Delaware courts are well respected internationally as well. This itself is reason enough to incorporate in the state.
Moreover, Delaware courts have a very balanced view: they promote shareholder value as well as protect owners from lawsuits. This allows for a thriving business climate in the state.
- Investors Prefer Corporations Incorporated in Delaware
Another thing you should note is that if you are keen to attract investors, you should incorporate your startup in Delaware.
For the two reasons cited above, investors are keen and eager to invest in corporations that have been incorporated in Delaware.
- Delaware Offers More Privacy
The state also protects companies by making it more challenging for shareholders to ask for the books and records of companies incorporated in Delaware.
So, if someone wants to inspect the books and records of a company, they will have to get legal help and move the courts in Delaware.
As a result, this can discourage shareholders from taking further action in many cases. Therefore, corporations feel more protected in the state.
- Delaware Laws Are Focused on Business
The state of Delaware also has its hand on the business pulse and keeps its laws and regulations. These are updated and amended from time to time to ensure that corporations continuously feel satisfied and protected.
In fact, compared to other states, Delaware is more business-savvy, which attracts businesses to incorporate in the state.
- Incorporating in Delaware Can Be Done in Hours
The process of incorporating a company in most states takes a few working days. In contrast, this turnaround time is much shorter in Delaware.
In fact, for an additional fee, you can even complete the incorporation process in a few hours, making it an attractive state for startups who are keen on getting started.
Though, you should also note that incorporating in Delaware does attract a few additional expenses. Besides the initial filing expenses, a Delaware corporation needs to pay annual fees, registered agent fees, and franchise taxes.
However, the other benefits of incorporating in Delaware are considered more valuable than these additional fees. In fact, to incorporate in the state, you need not have an office or entity in the state. You don’t even need to have a bank account in Delaware.
All you need is a Registered Agent in the state, and they can represent your corporation and handle the paperwork for you.
- Outstanding Customer Service
One of the best things about doing business in Delaware is that their Division of Corporations office provides excellent service.
You no longer have to experience the frustration of dealing with slow or tardy government service. In fact, they have options to expedite document approval and filing in as little as 30 seconds.
Aside from that, the office also runs in two shifts, so they are always open, even well past regular business hours. This is an excellent reason so many companies incorporate in the state.
Without a doubt, Delaware should be your state of choice to incorporate your tech startup. In Delaware, you will be in the company of many industry stalwarts who have made the state their choice for incorporation. After all, the state makes it very easy for businesses to start up besides providing a solid legal shield. Add to this the fact that Delaware is very business-friendly, and the decision is considered a no-brainer.
With that said, if you are deciding on where to incorporate your tech startup, Delaware can be the best state for you.