[jawns]

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]

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]

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.

[wernercd]

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.

[flopriore]

Could you share the article you wrote about why Delaware is a corporate haven?