When it comes to incorporating a business, choosing where to incorporate can be just as important as how. In a recent video discussion, Alexa La Barbiera and Jonathan Rhone, Associates in the Corporate Practice Group at Mandelbaum Barrett PC, shared their insights on why Delaware continues to be the leading state for business formation in the United States.
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Delaware’s Legal System: A Foundation Businesses Can Rely On
Delaware has earned a national—and international—reputation for its sophisticated and business-friendly corporate laws. At the heart of this is the Delaware Court of Chancery, a specialized court focused exclusively on business law. Unlike general trial courts in other states, the Chancery Court does not use juries, which allows for faster resolutions and decisions rooted in well-developed corporate precedent.
With over a century of case law, Delaware provides a high degree of predictability, consistency, and clarity—qualities that business owners and boards of directors prioritize when forming and operating a company. These features make Delaware a preferred jurisdiction for resolving complex disputes, including those involving corporate governance, fiduciary duties, and shareholder rights.
Why Venture Capital Favors Delaware C Corporations
Delaware’s appeal isn’t limited to large corporations—it’s also the gold standard for venture-backed startups. Most venture capital firms require the companies they invest in to be formed as Delaware C corporations. This structure is considered optimal for issuing equity, granting stock options, and scaling efficiently.
For entrepreneurs, this means incorporating in Delaware from the beginning can save time, money, and legal hurdles later on. Converting a business to a Delaware C Corp after the fact can be complex and expensive starting with the right structure allows founders to stay focused on what matters most: building and growing their business.
Comparing Delaware to Other Business-Friendly States
While states like Nevada and Texas have introduced reforms and incentives to compete with Delaware, none have yet been able to replicate the depth and reliability of Delaware’s legal infrastructure. The Chancery Court and its body of case law offer a level of confidence to corporate attorneys and executives that remains unmatched.
