If you only read one sentence of this article, make it this one: If you’re a founder raising U.S. venture capital investment, incorporate in Delaware.
I’ll save the discussion on different types of entities (LLCs vs. C-Corps) and international alternatives (Cayman Sandwich and others) for a different time. In this article, I discuss why some companies are leaving Delaware and why it remains the go-to option for LatAm startups raising U.S. VC money.
The Delaware Exodus: What’s Going On?
Some marquee companies have made headlines for ditching Delaware, or announcing shareholder proposals to try to. Tesla moved to Texas after Delaware’s Court of Chancery voided Elon Musk’s $55 billion compensation package, calling it unfair to shareholders. Dropbox announced a move to Nevada, pointing to lower franchise taxes and a desire to reduce exposure to Delaware’s increasingly aggressive fiduciary duty rulings. Mercado Libre, Latin America’s largest tech company, is seeking shareholder approval to re-incorporate in Texas, citing savings on franchise taxes and more flexibility in strategic corporate actions.
So is the tide turning against the worldwide leader in corporate formations?
Not So Fast: The Data Tells a Different Story
Despite the headlines, the actual numbers tell a different story. Only eight publicly traded companies proposed leaving Delaware in 2024. Meanwhile, Delaware gained 85 new public companies, and 80% of newly public companies that year were incorporated in Delaware.
And that’s just the public market. Zoom out to private companies—startups, scale-ups, and VC-backed businesses—and Delaware’s dominance is even more obvious. Over 275,000 new entities registered in Delaware in 2024 alone.
Bottom line: Delaware isn’t in decline. It’s growing—and still the default for any founder looking to raise serious capital.
Why Delaware Still Reigns Supreme
So why do most startups still pick Delaware? Because U.S. VCs overwhelmingly prefer (and often require) their portfolio companies incorporate in Delaware. This is for a handful of reasons:
1. Speed Kills (in a Good Way)
Delaware’s Secretary of State is a machine. You can file a certificate and receive evidence of the filing back within an hour. That can mean the difference between closing your round today versus next week—especially when millions (or billions) are ready to be wired.
2. A Legal System Built for Business
Delaware has arguably the most established corporate legal framework in the world, with a separate court system which exclusively handles business disputes. It is fast and sophisticated. No juries, just expert judges. This provides comfort to a VC (and a Founder) who knows that it’s always possible that an investment or acquisition leads to litigation. And although some executives are citing recent judicial decisions as areas for concern, Delaware’s General Corporation Law, and its decades of established legal precedent on the most complex business issues continue to provide more certainty than any other jurisdiction.
3. Privacy for Founders and Investors
Delaware doesn’t require disclosure of shareholders, directors, or officers in filings, and the public can’t access this information in any state database. That’s a perk if you want to keep leadership and shareholder information out of public view.
4. Tax Planning Opportunities
Delaware has no state income tax for revenue earned outside the state. Plus, IP holding companies can avoid corporate income tax on revenue from things like trademarks and patents—assuming you structure things right (talk to your tax lawyer).
What About the Alternatives?
Yes, some states are getting more founder-friendly. But none quite match Delaware’s full package. Texas, Nevada, and Wyoming (especially for crypto companies) are each pushing to attract corporations leaving Delaware. But none provide the combination of benefits that still make Delaware the clear-cut choice. And while Delaware’s annual franchise taxes are typically the highest nationwide, it is a worthwhile price to pay for stability, speed, and the least friction path to building your business.
Final Thoughts
For early-stage companies, Delaware isn’t perfect—but it’s still the gold standard. The annual costs are higher, but they buy you speed, predictability, and one less diligence issue for VCs writing your checks.
Unless you have a very specific strategic reason to pick another state (and a legal team to back it up), stick with Delaware.
This article is for informational purposes only and does not constitute legal advice. If you’re raising capital, talk to a lawyer who understands startup financing. No attorney-client relationship is formed by reading or relying on this content. The authors and publishers disclaim any liability for actions taken based on the information contained herein.
