What State Should I Incorporate My Startup In?

Part of our Corporate & Startup series.

Most venture-track startups incorporate in Delaware regardless of where they're actually based, but that's not automatically the right answer for every company.

The basics

Delaware is the default for venture-backed startups because of its well-established corporate law, court system built specifically for business disputes, and familiarity to investors and their lawyers. If you already know you'll raise institutional money, incorporating in Delaware from the start avoids a conversion process later.

That said, incorporating in Delaware doesn't mean you only deal with Delaware. If you operate, have employees, or have a physical presence in another state, you'll typically also need to "foreign qualify" there, which means an additional filing and, in many states, additional annual fees.

Some founders instead incorporate directly in their home state, which can mean lower ongoing costs and simpler compliance, at the tradeoff of being less familiar to certain investors.

What actually changes the answer

The right state depends on factors specific to your business:

• Whether you plan to raise venture capital, and how soon
• Where you and your team actually live and operate
• Your tolerance for the extra cost and paperwork of dual-state compliance (incorporation state plus operating state)
• Industry-specific considerations that make certain states more or less favorable

A bootstrapped, single-state services business has very different incentives than a startup planning a seed round within the year.

Next step

This is one of the more consequential early decisions, and the right answer really does depend on your specific plans. Book a quick call and we'll help you decide before you file, not after.