Where to Incorporate
The frequently asked question is whether to incorporate in Delaware or Massachusetts (since I practice in Massachusetts) but it could be Delaware versus any other jurisdiction.
The main reason to incorporate in Delaware is that most VCs will insist on it before making an investment. The reason VCs like Delaware is that many many many companies are incorporated there, it has a very well developed and cutting edge corporate law, and the Delaware Court of Chancery is one of the most active (the most active?) forum for the resolution of disputes relating to corporate law. As a result, there is a high degree of certainty around what the rules of corporate governance are and how disputes will be resolved. Also, most (all?) firms that regularly represent VCs, consider themselves experts in Delaware corporate law. The cost of incorporating in Delaware is not materially different than incorporating in other states – so, the cost of incorporation is not a factor. As a result of all these factors, Delaware has become the jurisdiction of choice for venture financed (and other) companies.
However, if you incorporate in Delaware and you are in fact headquartered in Massachusetts (or some other jurisdiction), you will have to qualify to do business in Massachusetts (of the other jurisdiction). This qualification is an additional annual cost of several hundred dollars. So, if it is just you, and you don’t plan to get professional investment money, go public or have other special reasons to worry about corporate law, you can save yourself some money by incorporating where you are conducting business.
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