Delaware Incorporation: Is It Worth the Hype or Just Marketing?
Delaware is the corporate capital of the world. More than 67% of Fortune 500 companies are incorporated there. But does a two-person startup really need to follow in Apple's footsteps?
Why Delaware is popular: the Court of Chancery specializes in business law (no juries, just expert judges), the legal precedent is deep and predictable, privacy is strong (officers and directors aren't listed publicly), and the state is business-friendly with no corporate income tax for companies that don't operate there.
Why VCs love Delaware: they know Delaware law. Their documents are written for Delaware entities. Their lawyers specialize in Delaware. It reduces legal costs and uncertainty for everyone involved in a fundraise.
When Delaware makes sense: you're building a startup that will raise venture capital, you want to issue stock options (Delaware's stock laws are well-established), you're creating a holding company, or you have investors who specifically require it.
When Delaware doesn't make sense: you're a single-member LLC running a local business, you don't plan to raise institutional money, or you live and operate entirely in one state. In those cases, incorporate in your home state — it's simpler and cheaper.
The hidden costs: you'll need a registered agent in Delaware ($50-300/year), a franchise tax ($400+ annually), and potentially need to register as a foreign entity in your home state if you operate there. That's double the paperwork and double the fees.
Delaware LLC vs Delaware C-Corp: if you're raising VC, go C-Corp (required by most investors). If you're bootstrapping, an LLC gives you flexibility and pass-through taxation.
The bottom line: Delaware is the gold standard for venture-backed startups. For everyone else, it's an unnecessary complication. Form where you live, and re-incorporate in Delaware later if investors require it.