Why Texas Startups incorporate in Delaware

America has 50 states, and therefore 50 state laws. Without getting into the political pros and cons of this, there is one very big con that is relevant here: no serious company wants to have to learn 50 sets of laws.

So over time the sophisticated (national and international) business community coalesced around Delaware as the “english language” of American corporate law. Virtually every serious American startup is incorporated in Delaware. This “standard” produces “network effects” of investors who understand Delaware law, executives who understand it, and armies of lawyers who understand it. The uniformity produces efficiencies that reduce friction in business deals.

If you’re a coffee shop or small local business in Texas, you may incorporate in Texas. If you’re a startup with any plans to raise funding and scale nationally, you should go with Delaware. The cost difference will be under $1,000, which you’ll quickly make up in saved headaches and legal fees because most template forms that startup law firms use are designed for Delaware companies.

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