Delaware vs your home state: when does it actually matter?

"Should I form in Delaware?" is the most common question we get. The honest answer: probably not.

Why Delaware got its reputation

Delaware has a specialized Court of Chancery that hears business disputes, ~200 years of case law that makes outcomes predictable, and corporate-friendly statutes. VCs and public-market lawyers know Delaware inside out.

When Delaware makes sense

**You're raising VC.** Every institutional investor will want you to be a Delaware C-Corp. Form there from the start to avoid a costly "Delaware flip" later.

**You expect to go public.** Same reason.

**You want IP holding in a separate entity.** Delaware LLCs are common for this because of privacy and low franchise tax.

**You're doing complex M&A.** Chancery Court is worth it.

When Delaware makes NO sense

**You're operating in your home state.** You'll have to register as a "foreign entity" in your home state — that's another $50-$300/year plus another registered agent to pay. You gain nothing.

**You're a solo consultant or small e-commerce operation.** Your home state is fine. Save the ~$300-$500/year Delaware overhead.

**You want low fees.** Wyoming ($60 annual report) and Nevada ($0 state income tax) are cheaper than Delaware.

The "foreign registration" trap

If you form in Delaware but operate in California, California considers you a "foreign entity doing business in CA" and requires you to register. That's the $800/year California franchise tax on top of Delaware's ~$300/year franchise tax + registered agent + annual report. Now you're paying two states for one entity.

Our default recommendation

Form in your home state unless:

1. You're raising priced-round VC money, or

2. You have a specific reason we can defend on paper.

If you're not sure, book a 30-minute call and we'll walk through your situation.