Most corporations in the US are incorporated in Delaware. Whenever the question of incorporation arises, the answers is always in Delaware as a C-corp. PG's comment was a nod to that.
> Whenever the question of incorporation arises, the answers is always in Delaware as a C corp.
Yes, if you raise venture money, you will need a Delaware C-corp. But the percentage of companies that are successful in raising venture capital is extremely low. How low? Probably lower than Y Combinator's acceptance rate.
For entrepreneurs serious about building a real business, entity selection should be based on what's best for the business and the founders, not what's going to be required by investors they don't yet have and may never have. Generally speaking, young companies have no legitimate incentive to pay Delaware for the privilege of being incorporated in Delaware.
So what about companies that are successful in raising money? For early stage startups with little to no revenue and assets (read: most startups), it is quite straightforward to revisit entity selection if necessary with minimal complexity and cost, and with few if any tax consequences. Delaware has a statutory conversion that makes it super simple and inexpensive to convert a Delaware LLC to a Delaware corporation. Even conversion of a non-Delaware entity to a Delaware C corporation is a simple task and will not come close to being the most expensive item when you pay your law firm for its work associated with your financing.
Of course, if your company has no assets, you could just dissolve if need be. Which, ironically, is what happens to a lot of those Delaware corporations.
Yes, if you raise venture money, you will need a Delaware C-corp. But the percentage of companies that are successful in raising venture capital is extremely low. How low? Probably lower than Y Combinator's acceptance rate.
For entrepreneurs serious about building a real business, entity selection should be based on what's best for the business and the founders, not what's going to be required by investors they don't yet have and may never have. Generally speaking, young companies have no legitimate incentive to pay Delaware for the privilege of being incorporated in Delaware.
So what about companies that are successful in raising money? For early stage startups with little to no revenue and assets (read: most startups), it is quite straightforward to revisit entity selection if necessary with minimal complexity and cost, and with few if any tax consequences. Delaware has a statutory conversion that makes it super simple and inexpensive to convert a Delaware LLC to a Delaware corporation. Even conversion of a non-Delaware entity to a Delaware C corporation is a simple task and will not come close to being the most expensive item when you pay your law firm for its work associated with your financing.
Of course, if your company has no assets, you could just dissolve if need be. Which, ironically, is what happens to a lot of those Delaware corporations.