| This is a really bad idea from a tax and legal perspective. As a CPA, I don't deal with silicon valley startups. However, I do deal with people who want to start small businesses fairly frequently as well as their needs for legal advice (which varies). For most of America, a Delaware C-Corp is a horrible idea for any person starting a business. Paying Delaware state fees (which are likely not necessary) at best are just another administrative and cost burden to a new startup and at worse, are just another function you have to hire out to an advisor, which will then cost you even more money. Fun story, I had a client starting a new business (whom I had partially advised) take a few extra steps we had not discussed. One being going down to a bank to open a checking account. The client was attempting to do step 5 before step 2 (proverbially speaking) The client did not have an EIN yet and the bank of course, could not open the business a checking account without an EIN. The BANK applied for the client's EIN at the branch and effectively advised the client on entity structure by choosing their entity type for them during the EIN selection process. I'm sure the bank has some sort of BS policy where they can disclaim liability in that they made the client chose the entity type. I can tell you with 100% certainty, this client did not have any idea what the entity type was. And to top it all off, after the bank account was setup. The bank provided no documents letting the client know what entity choice "the client" (ha!) had chosen. Business is complex, I understand people are hesitant to pay (what seem to be) exorbitant fees to start a business. However, I've found that (nearly) 100% of the time when you start a business and ask the wrong questions you will always get the wrong answer, which is always more expensive to fix at a later date (if its possibly without severe tax or legal issues). |
The guide doesn't seem to push Delaware C-corp status on its readers, but the specificity might give them that impression anyhow. Personally, I'd split that section into two: C corps in general, and Delaware in particular. I'd also add a paragraph or two that discuss why people might choose not to incorporate Delaware in favor of another state. That way, it would avoid unconsciously guiding readers towards a choice that may not be much benefit to them. Reincorporating elsewhere might be more difficult later on, but it could help you avoid immediately incurring some additional costs in the interim: additional reporting requirements, franchise taxes, registered agent, etc.