Why Startups Incorporate in Delaware

Authored by Bryan Springmeyer Bryan Springmeyer is a California corporate attorney who represents startup companies. The information on this page should not be construed as legal advice.

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The primary reason that the tech startups I work with incorporate in Delaware is finance. Venture capital firms typically require companies to be structured as a Delaware corporation as a condition of funding the company. The VC firms are familiar with Delaware corporate law, which matters both for their obligations as directors on the portfolio companies’ boards they serve on, as well as familiarity with the legal treatment of various transactions. Likewise, VC and startup attorneys are typically well versed in Delaware law applying to corporate transactions.

There are scenarios where a Delaware corporation is not the ideal entity type for a startup. For instance, if a startup is not planning on pursuing venture capital funds, there is limited overall benefit to operating as a Delaware corporation. Similarly, if there will be a long runway to VC, it could be worth considering operating as a different entity type at the outset.

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Starting a New Business - Choosing an Entity
Why Startups Incorporate versus LLC Formation
Delaware Versus California Incorporation
Starting/Registering a Delaware Corporation in California
Delaware Reincorporation