I get asked this constantly, usually in the same breath as "does it even matter?" It does, and the answer isn't always Delaware, no matter what every startup blog on the internet tells you.
The default advice, and why it exists
If you've read anything about startup formation, you've seen it a hundred times: incorporate in Delaware. It's repeated so often it's become one of those things people say without really knowing why. So here's why, actually.
Delaware has a separate court — the Court of Chancery — that only hears business disputes, decided by judges instead of juries, with over a century of case law behind it. That means when a dispute comes up (and eventually, something always does), there's an enormous body of precedent to predict how it'll go. Investors like predictability. Their lawyers already know Delaware corporate law cold, so diligence goes faster and cheaper. That's really the whole case in a nutshell: predictability and familiarity, at scale, across basically every VC and every VC's law firm in the country.
When that advice is actually right for you
If you're planning to raise venture capital, full stop, incorporate in Delaware. Don't overthink it. Nearly every institutional investor either strongly prefers or outright requires it, and you don't want to be negotiating your entity's home state in the middle of a term sheet conversation. I've seen founders try to save a few hundred dollars by incorporating in their home state first and converting later, and it almost always ends up costing more in legal fees than just doing it right the first time.
When it's genuinely not
Here's the part nobody selling incorporation services wants to tell you: if you're not raising outside money, or you're building something you plan to bootstrap and keep small and profitable, incorporating in Delaware might just be an extra expense with no real payoff.
If you incorporate in Delaware but actually operate your business somewhere else — meaning you have an office, employees, or you're regularly doing business there — you generally have to "foreign qualify" in your home state anyway. That's a second registration, a second registered agent, and often a second set of annual fees and franchise taxes. You end up paying to maintain two states' paperwork for a company that never leaves your home state.
For a lot of small, bootstrapped businesses, that's just money out the door for a prestige factor nobody's checking.
What I actually tell people
Ask yourself honestly: am I planning to raise real outside capital in the next year or two? If yes, Delaware, and don't second-guess it. If you genuinely don't know, or the honest answer is "probably not, I just want to build something profitable," your home state is usually simpler and cheaper, and you can always convert to Delaware later if a real fundraise shows up on the horizon. It's more work to convert later than to start there — but it's real work you can do when you actually need to, not work you're doing on the off chance you might.
I incorporate people in both, and I'm not going to talk you into Delaware if it doesn't fit what you're actually building.
Ready to figure out which one is right for you?
Tell us what you're building and I'll give you a straight answer on which state makes sense — before you pay to incorporate anywhere.
This post is general information, not legal advice, and reading it doesn't create an attorney-client relationship. Where to incorporate depends on your specific facts — talk to a lawyer about yours.
