Thursday, March 14, 2013
This Article, consistent with previous literature and with the support of additional informal interview results, presents the default norm of U.S. incorporation, in particular Delaware incorporation, for U.S.-based startups. The Delaware incorporation structure dominates despite the fact that it exposes firms to possible future disadvantages under U.S. tax law, including possible future tax law changes. However, there are exceptions to the general rule, for example in the insurance and marine transportation industries and in isolated cases where current investors or future acquirors appear to prefer a non-U.S. incorporation structure. Factors that drive the decision to incorporate outside the U.S. include tax advantages, non-tax legal advantages, business links to the incorporation jurisdiction and investor preferences. These factors have different levels of importance in different situations.