Which state should I incorporate in?
Takeaway: While incorporating in your home state may seem convenient, Delaware’s unmatched legal infrastructure, judicial expertise, and universal investor preference make it the clear choice for any venture-backed startup.
Once you decide to form a C-Corporation, the next question is which state’s laws should govern it. Many first-time founders assume they should incorporate where the company is physically located—California, New York, or another tech or biotech hub. While this might seem logical, for a high-growth, venture-backed startup, the answer is almost always Delaware.
Delaware is not just popular—it’s the default choice across the venture ecosystem. Venture capital funds, accelerators, and top law firms all operate on the assumption that a startup is a Delaware corporation. Choosing another state often adds friction to fundraising and can require a costly re-incorporation later.
The Delaware Advantage: Why It’s the Preferred Standard
Delaware’s status comes from a century of intentionally cultivating the most reliable corporate governance environment in the U.S.
Extensive Corporate Case Law: Delaware has the most developed body of corporate law in the world. For almost any governance issue—founder disputes, M&A transactions, shareholder litigation—there is well-established precedent. Predictability reduces legal risk and is highly valued by investors.
Specialized Court of Chancery: Business disputes are handled by judges (Chancellors) who focus exclusively on corporate matters. There are no juries, which means cases are resolved faster and with more consistent, expert reasoning.
Universal Familiarity: Every venture investor and startup lawyer in the U.S. understands Delaware law. This shared baseline speeds negotiations, reduces transaction costs, and minimizes unexpected legal complications.
Efficient Administration: Delaware’s Division of Corporations is responsive and professional, making incorporations, charter amendments, and ongoing filings straightforward.
The “Home State” Misconception
Incorporating in your home state might appear cheaper or simpler, but it often creates avoidable costs later. If you incorporate in, say, California, and later seek institutional funding, your investors will almost certainly require conversion to a Delaware C-Corp before closing. This process—called re-incorporation—can be expensive, time-consuming, and distracting.
Even as a Delaware corporation, you must still register to do business in your home state as a “foreign corporation” if you have a physical presence there. This means you will have some filings and fees regardless. The modest cost of Delaware’s annual franchise tax is minimal compared to the long-term legal and financial advantages.
Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.