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I'm an attorney. Delaware is definitely not the cheapest or even in contention for the cheapest. Still, if you want to raise capital, the correct answer is DE

I'm an attorney. Delaware is definitely not the cheapest or even in contention for the cheapest. Still, if you want to raise capital, the correct answer is DE C Corp. If you're not looking for external funding, any state will do. If you care about anonymity, do Nevada or Wyoming. If you don't care about anonymity, Colorado is actually a very good choice. Very simple, intuitive online filing system that accepts filings instantaneously. Filing fees as cheap as anywhere in the country. No need for an attorney (or LegalZoom or some other random service) unless you just don't feel like dealing with it. Costs will likely be $50 to file, Registered Agent (as cheap as $30 per annum), and $10 periodic report fee annually every year you're in business. Colorado is even nice enough to send plenty of reminders on when to file that report if you give them an email address. Since you're a US citizen, my instinct would be LLC taxed as an S corp. But confirm with your accountant! Good luck!

blovescoffee 3y ago
Why is the correct answer a DE C Corp if you're looking to raise?
- KieranMac 3y ago
  It's just industry standard for capital raises. All corporate attorneys learn DE law when they go to law school and are expected to know it if they practice corporate law. A Colorado attorney doesn't know California law and a California attorney doesn't know New York law, but if they do corporate legal work, they're all expected to know how to deal with DE law. Nobody knows Nevada or Wyoming law. I don't even think Wyoming attorneys know Wyoming law. DE's court of chancery is also very sophisticated with respect to corporate legal issues. That makes it the venue of choice for investors, which means it has become the venue of choice for those seeking investment. But in terms of states and their processes for filings, DE is a total pain in the butt. You have to pay an expedited filing fee just so that they can process your filing in less than a week. Their system is counterintuitive and clunky. You better like elevator music if you ever want to talk to a human. Sometimes they reject filings and just don't bother to tell you. It's all opaque and antiquated.
  - throwaway20222 3y ago
    I would also add from a founders standpoint - the infrastructure Delaware has supporting their business incorporations division has been miles above any other state I have worked with. They pick up the phone when you call! The files and forms are (relatively) easy to find. Supporting firms like registration agents are plentiful and straightforward for Delaware.
  - EFreethought 3y ago
    Every time I read "court of chancery", for a second I think it says "court of chicanery".
- garrickvanburen 3y ago
  many VC's require it, cuz it keeps their admin standardized.
- deleted 3y ago
  [deleted]
- necubi 3y ago
  Not an attorney, but as someone with a startup incorporated in DE—it's just the default. Delaware has very good and well-understood corporate law and a judicial system that is able to handle complex corporate cases. If you're fundraising as a Delaware C Corp you will face no questions about that, but if you've done something else you will need to explain why to your potential investors (and they will probably push you to reincorporate).
- terminous 3y ago
  Delaware Court of Chancery also holds the doctrine of shareholder supremacy, where execs actually have an obligation to maximize shareholder interests. Other states don't recognize it or allow balancing other stakeholder priorities.
- jawns 3y ago
  I'm a longtime Delawarean and in my past life as a journalist I wrote about why the state is such a corporate haven. The short answer is that companies incorporate in Delaware to mitigate risk. The slightly longer answer is that the Delaware courts that deal with corporate legal matters are much more predictable than comparable states. There is voluminous settled case law, and so when you incorporate in Delaware, it is a safe option, a known quantity, relative to other states. That's why VCs and other investors want the company to be incorporated in Delaware. It's not just because everybody else is doing it; it's to mitigate legal risk. When we look at consumer products, we sometimes consider the total cost of ownership. Maybe a pair of sneakers is not the cheapest, but it lasts longer than a budget pair, so it has a lower cost of ownership over the lifetime of the product. Delaware might not be the cheapest state to incorporate in, but it has the legal equivalent of a low cost of ownership over the life of the business.
  - adastra22 3y ago
    I mean it is because everyone else is doing it. Because everyone else incorporated in Delaware, that's where the case law is well established, all existing contracts are written in terms of DE corporate case law, etc. etc. We all could have picked Road Island or New York instead. But for historical reasons it was Delaware.
    - jawns 3y ago
      Yes, that's correct. Companies originally flocked to Delaware because it was relatively easy to incorporate there, and then the volume of registrations begat the volume of case law, which begat more registrations because of the favorable legal environment. My point was that it's not just because it's trendy or a matter of conformity. It is a risk-management strategy.
      - deleted 3y ago
        [deleted]
    - wernercd 3y ago
      How is that any different than anything else? Everyone hates Facebook but everyone uses it. Why? That's where the people are. Same for Instagram, Reddit, etc. Everyone hates JavaScript. Buggy and counter intuitive. Mess in all the different browsers - historically. But everyone uses it because everyone uses it so it gets the community. Maybe Delaware is the best... or a victim of circumstance. Or being good enough and one of the early states to get that foot hold.
- throwawayapples 3y ago
  The Court of Chancery nearly always rules with the board (VCs) over shareholders (founders). VCs like that.
- codexb 3y ago
  There are limitations on the number of owners and the amounts and type of stock you can issue as other types of corporations. Delaware doesn't require you to disclose all owners and investors and they have a court of chancery that is business friendly.
actionfromafar 3y ago
Are you my attorney?
- KieranMac 3y ago
  Nope.
glimshe 3y ago
Would Nevada/Wyoming be a good deal if they lived in the US? Let's say, living in Texas.
- toast0 3y ago
  If your corporation will be deemed to operate in the state you live in, which it might, then it'll need to register there as well as its home state. The least hassle path is often to make the corporate home the same as your home, then you don't have to register in two different states, and you don't need to pay a registered agent, because you can do that, etc. It's certainly a different question if you're likely to get funding, but it's not hard for a skilled attorney to re-incorporate your business as a Delaware corp if that's a condition of financing, just takes a bit of time to do the work, and maybe not much more time than incorporating in Delaware to begin with, and delaying hassle that you might be able to avoid is better than paying it upfront.
  - KieranMac 3y ago
    I agree with the first paragraph and strongly disagree with the second. If you are a US citizen and live in the US, for any pass-through entity, you will likely be taxed and need to register as a foreign entity in your home state. Probably easiest to just incorporate where you reside, unless you're looking to raise capital, in which case you should just go straight to DE. Conversion costs and/or re-incorporation complexity varies considerably by state. Some states allow for simple statutory conversion; other states expressly prohibit it. It is not accurate to to say that reincorporating is just a bit of work. Sometimes it is, and sometimes it's a lot of work. If you're serious about raising capital, start as a DE C Corp from the gun. Especially if you have multiple founders.
    - TheNewsIsHere 3y ago
      Your commentary on the wide variety of challenges that can arise from reincorporating/re-domiciling matches my experience. In some cases, depending on the originating state and business structure, there may not even be a way to accomplish that without selling your old business to your new business. Even if that’s “just on paper”, it becomes an entirely different (and sometimes much more costly) beast.
fragmede 3y ago
How difficult is it to change, in practice? If I've got an LLC or a corp in a different state, can I form a DE C corp and arrange to have that buy my whatever?
- NotYourLawyer 3y ago
  It’s not a big deal. Startups do this all the time when they get bigger and want funding.
deleted 3y ago
[deleted]
ValentineC 3y ago
Piggybacking on this. If I'm a non-resident alien looking to incorporate the cheapest US-based company so that I can open a business bank account for credit card churning, would a Colorado LLC still be the the best choice for me?
- oldtownroad 3y ago
  You’ll need an SSN to open most credit cards, it’s very difficult to get a credit card without residency. The business banks that specifically cater to overseas founders (like Mercury) make banking easy but that doesn’t extend to churning credit cards. Edit: put simply, it’s very unlikely that opening an LLC will help you in obtaining credit cards as a non-resident.
  - deleted 3y ago
    [deleted]
  - throwaheyy 3y ago
    I assume ”non-resident” in this context means not a permanent resident, but still a SSN-holding resident otherwise. For example a TN or H1-B visa. These visas don’t authorize you to work for a company other than the one officially sponsoring the visa, but you are allowed to own your own business. Perhaps that is the motivation for wanting to open an LLC, but I’m not sure what an LLC gets you in this situation that simply declaring yourself a sole proprietor doesn’t.
    - Mystery-Machine 3y ago
      You're wrong. Non-resident alien means the person is at-best a tourist. Most likely the person is outside of the US and _maybe_ visits occasionally.
      - dividendpayee 3y ago
        No, you are totally wrong. You should not comment on things that you have no understanding of. A non-resident alien is any person in the US who is not a citizen, green card holder, or passes the substantial presence test. There are millions of non-resident aliens on visas in the US.
yieldcrv 3y ago
note: nevada lets you form entities with little information but demand the information 6 months later, which will be public the only shady thing about this part of nevada are all the promoters advertising anonymity
dataflow 3y ago
What happens if you move your home to a different state after incorporation? Do you potentially have to register the business in the new state as well as the old one it's already registered in?
- lannisterstark 3y ago
  You don't in theory, have to live in the state you incorporate in, depending on type of 'corporation' and/or depending on agency availability.
unixhero 3y ago
I was told that Delaware also has the best abonymity? Has Delaware been dethroned by Nevada and Wyoming in this aspect?
devoutsalsa 3y ago
Some states are better than others. For example, California has an annual LLC tax of $800. There's no reason to pick California for a use case like this.
- PopAlongKid 3y ago
  But if you are doing business in California, you are still liable for the annual $800 tax, even if your LLC is formed in another state.
simonebrunozzi 3y ago
When did the OP say that he's a US citizen? Not sure I saw that.

blovescoffee 3y ago

Why is the correct answer a DE C Corp if you're looking to raise?

KieranMac 3y ago
It's just industry standard for capital raises. All corporate attorneys learn DE law when they go to law school and are expected to know it if they practice corporate law. A Colorado attorney doesn't know California law and a California attorney doesn't know New York law, but if they do corporate legal work, they're all expected to know how to deal with DE law. Nobody knows Nevada or Wyoming law. I don't even think Wyoming attorneys know Wyoming law. DE's court of chancery is also very sophisticated with respect to corporate legal issues. That makes it the venue of choice for investors, which means it has become the venue of choice for those seeking investment. But in terms of states and their processes for filings, DE is a total pain in the butt. You have to pay an expedited filing fee just so that they can process your filing in less than a week. Their system is counterintuitive and clunky. You better like elevator music if you ever want to talk to a human. Sometimes they reject filings and just don't bother to tell you. It's all opaque and antiquated.
- throwaway20222 3y ago
  I would also add from a founders standpoint - the infrastructure Delaware has supporting their business incorporations division has been miles above any other state I have worked with. They pick up the phone when you call! The files and forms are (relatively) easy to find. Supporting firms like registration agents are plentiful and straightforward for Delaware.
- EFreethought 3y ago
  Every time I read "court of chancery", for a second I think it says "court of chicanery".
garrickvanburen 3y ago
many VC's require it, cuz it keeps their admin standardized.
deleted 3y ago
[deleted]
necubi 3y ago
Not an attorney, but as someone with a startup incorporated in DE—it's just the default. Delaware has very good and well-understood corporate law and a judicial system that is able to handle complex corporate cases. If you're fundraising as a Delaware C Corp you will face no questions about that, but if you've done something else you will need to explain why to your potential investors (and they will probably push you to reincorporate).
terminous 3y ago
Delaware Court of Chancery also holds the doctrine of shareholder supremacy, where execs actually have an obligation to maximize shareholder interests. Other states don't recognize it or allow balancing other stakeholder priorities.
jawns 3y ago
I'm a longtime Delawarean and in my past life as a journalist I wrote about why the state is such a corporate haven. The short answer is that companies incorporate in Delaware to mitigate risk. The slightly longer answer is that the Delaware courts that deal with corporate legal matters are much more predictable than comparable states. There is voluminous settled case law, and so when you incorporate in Delaware, it is a safe option, a known quantity, relative to other states. That's why VCs and other investors want the company to be incorporated in Delaware. It's not just because everybody else is doing it; it's to mitigate legal risk. When we look at consumer products, we sometimes consider the total cost of ownership. Maybe a pair of sneakers is not the cheapest, but it lasts longer than a budget pair, so it has a lower cost of ownership over the lifetime of the product. Delaware might not be the cheapest state to incorporate in, but it has the legal equivalent of a low cost of ownership over the life of the business.
- adastra22 3y ago
  I mean it is because everyone else is doing it. Because everyone else incorporated in Delaware, that's where the case law is well established, all existing contracts are written in terms of DE corporate case law, etc. etc. We all could have picked Road Island or New York instead. But for historical reasons it was Delaware.
  - jawns 3y ago
    Yes, that's correct. Companies originally flocked to Delaware because it was relatively easy to incorporate there, and then the volume of registrations begat the volume of case law, which begat more registrations because of the favorable legal environment. My point was that it's not just because it's trendy or a matter of conformity. It is a risk-management strategy.
    - deleted 3y ago
      [deleted]
  - wernercd 3y ago
    How is that any different than anything else? Everyone hates Facebook but everyone uses it. Why? That's where the people are. Same for Instagram, Reddit, etc. Everyone hates JavaScript. Buggy and counter intuitive. Mess in all the different browsers - historically. But everyone uses it because everyone uses it so it gets the community. Maybe Delaware is the best... or a victim of circumstance. Or being good enough and one of the early states to get that foot hold.
throwawayapples 3y ago
The Court of Chancery nearly always rules with the board (VCs) over shareholders (founders). VCs like that.
codexb 3y ago
There are limitations on the number of owners and the amounts and type of stock you can issue as other types of corporations. Delaware doesn't require you to disclose all owners and investors and they have a court of chancery that is business friendly.

actionfromafar 3y ago

Are you my attorney?

KieranMac 3y ago
Nope.

glimshe 3y ago

Would Nevada/Wyoming be a good deal if they lived in the US? Let's say, living in Texas.

toast0 3y ago
If your corporation will be deemed to operate in the state you live in, which it might, then it'll need to register there as well as its home state. The least hassle path is often to make the corporate home the same as your home, then you don't have to register in two different states, and you don't need to pay a registered agent, because you can do that, etc. It's certainly a different question if you're likely to get funding, but it's not hard for a skilled attorney to re-incorporate your business as a Delaware corp if that's a condition of financing, just takes a bit of time to do the work, and maybe not much more time than incorporating in Delaware to begin with, and delaying hassle that you might be able to avoid is better than paying it upfront.
- KieranMac 3y ago
  I agree with the first paragraph and strongly disagree with the second. If you are a US citizen and live in the US, for any pass-through entity, you will likely be taxed and need to register as a foreign entity in your home state. Probably easiest to just incorporate where you reside, unless you're looking to raise capital, in which case you should just go straight to DE. Conversion costs and/or re-incorporation complexity varies considerably by state. Some states allow for simple statutory conversion; other states expressly prohibit it. It is not accurate to to say that reincorporating is just a bit of work. Sometimes it is, and sometimes it's a lot of work. If you're serious about raising capital, start as a DE C Corp from the gun. Especially if you have multiple founders.
  - TheNewsIsHere 3y ago
    Your commentary on the wide variety of challenges that can arise from reincorporating/re-domiciling matches my experience. In some cases, depending on the originating state and business structure, there may not even be a way to accomplish that without selling your old business to your new business. Even if that’s “just on paper”, it becomes an entirely different (and sometimes much more costly) beast.

fragmede 3y ago

How difficult is it to change, in practice? If I've got an LLC or a corp in a different state, can I form a DE C corp and arrange to have that buy my whatever?

NotYourLawyer 3y ago
It’s not a big deal. Startups do this all the time when they get bigger and want funding.

deleted 3y ago

[deleted]

ValentineC 3y ago

Piggybacking on this. If I'm a non-resident alien looking to incorporate the cheapest US-based company so that I can open a business bank account for credit card churning, would a Colorado LLC still be the the best choice for me?

oldtownroad 3y ago
You’ll need an SSN to open most credit cards, it’s very difficult to get a credit card without residency. The business banks that specifically cater to overseas founders (like Mercury) make banking easy but that doesn’t extend to churning credit cards. Edit: put simply, it’s very unlikely that opening an LLC will help you in obtaining credit cards as a non-resident.
- deleted 3y ago
  [deleted]
- throwaheyy 3y ago
  I assume ”non-resident” in this context means not a permanent resident, but still a SSN-holding resident otherwise. For example a TN or H1-B visa. These visas don’t authorize you to work for a company other than the one officially sponsoring the visa, but you are allowed to own your own business. Perhaps that is the motivation for wanting to open an LLC, but I’m not sure what an LLC gets you in this situation that simply declaring yourself a sole proprietor doesn’t.
  - Mystery-Machine 3y ago
    You're wrong. Non-resident alien means the person is at-best a tourist. Most likely the person is outside of the US and _maybe_ visits occasionally.
    - dividendpayee 3y ago
      No, you are totally wrong. You should not comment on things that you have no understanding of. A non-resident alien is any person in the US who is not a citizen, green card holder, or passes the substantial presence test. There are millions of non-resident aliens on visas in the US.

yieldcrv 3y ago

note: nevada lets you form entities with little information but demand the information 6 months later, which will be public the only shady thing about this part of nevada are all the promoters advertising anonymity

dataflow 3y ago

What happens if you move your home to a different state after incorporation? Do you potentially have to register the business in the new state as well as the old one it's already registered in?

lannisterstark 3y ago
You don't in theory, have to live in the state you incorporate in, depending on type of 'corporation' and/or depending on agency availability.

unixhero 3y ago

I was told that Delaware also has the best abonymity? Has Delaware been dethroned by Nevada and Wyoming in this aspect?

devoutsalsa 3y ago

Some states are better than others. For example, California has an annual LLC tax of $800. There's no reason to pick California for a use case like this.

PopAlongKid 3y ago
But if you are doing business in California, you are still liable for the annual $800 tax, even if your LLC is formed in another state.

simonebrunozzi 3y ago

When did the OP say that he's a US citizen? Not sure I saw that.