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Sep 03

Hughes Media Law Group

Incorporate in Delaware or Washington?

Posted by Hughes Media Law Group

Selecting a state of incorporation is one of the most basic yet important company formation issues. The law of the state of incorporation will govern any matter related to the internal affairs (officer, director, shareholder matters) of the corporations.

Most corporation organizers face the same issue: Should we incorporate in Delaware or in our home state?

Why Delaware?

  • Positives
    • Dedicated to be a leader in corporate law.
    • Strong judiciary competent in corporate matters with a large library of corporate precedent providing predictability.
    • Efficient legal bureaucracy.
    • Keeps its corporation laws liberal resulting in favorable laws to management and directors.
    • Because of the above, all sophisticated, professional, and institutional investors expect a company to be incorporated in Del. before they will fund it. If you 100% expect to raise professional funding then Del. is your choice.
  • Negatives
    • Hassle and Fees – If you incorporate in Del. you will need to register as a foreign corporation in each state you want to do business. In Wa., the fee for this is $180. In other states, it is pricier. You will also need to maintain a registered agent in Del. This runs around ~$100 a year. Finally, the company will be subject to franchise taxes (or B&O tax in Wa.) in Del. and any other state it is doing business. 

Hope this helps! 

These blog posts are made available by HMLG for educational purposes only and to give you a general understanding of the law. The information provided should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.