Why do Y-Combinator startups incorporate in Delaware rather than California?

Re:Why do Y-Combinator startups incorporate in Delaware rath... by waleedka on Wednesday April 04, 2007 @03:03AM (#8734)

Thanks. Quote from the wikipedia article: "Delaware's formation and annual fees are substantially higher than most other jurisdictions." "Franchise taxes in Delaware are actually far higher than in most other states"

And, on top of that, these startups must pay California taxes and other fees because they're operating in CA (for the SF ones). Not to mention having to do paperwork for two states, and then lose some of the incentives CA gives to local corporations. For example, the minimum $800 franchise tax is waived for the first year for CA corporations, but not for foreign ones operating in CA, ASAIK.

So, with all that, there must be a compelling reason to incorporate in Delaware!!! Anyone knows what that might be?

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Re:Why do Y-Combinator startups incorporate in Delaware rath... by zaidf on Wednesday April 04, 2007 @03:24AM (#8738)

I think the corporation-friendly court system is one of the biggest pluses.

-Zaid

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Re:Why do Y-Combinator startups incorporate in Delaware rath... by dpapathanasiou on Wednesday April 04, 2007 @08:36AM (#8762)

According to my lawyer, the large body of prior precedent in Delaware is the reason: i.e. if you ever wind up in a legal dispute, your attorneys will have a good sense of how your case would be ruled, based on similar case precedent(s).

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