Ask HN: Is it too bad to incorporate a startup in California vs Delaware?

https://news.ycombinator.com/item?id=2448346

by shail • 15 years ago

1 2 15 years ago

news.ycombinator.com

gs8• 15 years ago

If you are based in California, you still have to incorporate as a foreign corporation even if you are incorporated in Delaware.

If you are starting out and based in California just incorporate in California and save yourself a lot of money. Once you grow or are about to be funded you can always merge/sell/dissolve a corporation into a foreign corporation.

This applies to all states where you do business, have employees (not contractors) or locations. You must always incorporate as a foreign corporation in that state, for most bootstrapped startups (based in USA) it is a bad idea to incorporate in Delaware. Not only are the initial costs higher but you have additional legal requirements (docs/filings/records) which you must maintain. You can always merge/dissolve/sell a corporation into another when you need to just consult a tax expert when you need to do that to prevent unnecessary tax burden.

The reason a Delaware corporation is preferred is because Delaware is more business first-consumer second laws whereas California (most states except Delaware/Nevada/South Dakota[for financial institutes]) is/are consumer first-business second laws so if your business might be affected by that then you should incorporate in Delaware first, for 99% of startups this isn't a problem.

shail• 15 years ago

Thats cool to know. I recently made a choice of incorporating in California. I loved your response. It cleared up all the possible confusions in my mind. Great to know that I can merge it into another corporation if the need be later on.

Thanks

Ask HN: Is it too bad to incorporate a startup in California vs Delaware?

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