

Ask HN: Is it too bad to incorporate a startup in California vs Delaware? - shail


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gs8
If you are based in California, you still have to incorporate as a foreign
corporation even if you are incorporated in Delaware.

If you are starting out and based in California just incorporate in California
and save yourself a lot of money. Once you grow or are about to be funded you
can always merge/sell/dissolve a corporation into a foreign corporation.

This applies to all states where you do business, have employees (not
contractors) or locations. You must always incorporate as a foreign
corporation in that state, for most bootstrapped startups (based in USA) it is
a bad idea to incorporate in Delaware. Not only are the initial costs higher
but you have additional legal requirements (docs/filings/records) which you
must maintain. You can always merge/dissolve/sell a corporation into another
when you need to just consult a tax expert when you need to do that to prevent
unnecessary tax burden.

The reason a Delaware corporation is preferred is because Delaware is more
business first-consumer second laws whereas California (most states except
Delaware/Nevada/South Dakota[for financial institutes]) is/are consumer first-
business second laws so if your business might be affected by that then you
should incorporate in Delaware first, for 99% of startups this isn't a
problem.

~~~
shail
Thats cool to know. I recently made a choice of incorporating in California. I
loved your response. It cleared up all the possible confusions in my mind.
Great to know that I can merge it into another corporation if the need be
later on.

Thanks

