Delaware: Do You Really Need It?

Delaware is a small state with a big impact: more than 60% of all publicly traded US corporations are incorporated there, along with around 1 million other companies. Here is why:

• Specialized business court (Court of Chancery): disputes between shareholders or with investors are decided by experienced judges: fast, predictable, no jury
• Modern corporate law: Delaware's corporate law has evolved over decades, with clear precedents
• Business-friendly climate: low disclosure requirements, minimal reporting obligations, no corporate income tax on income earned outside Delaware
• Popular with investors: many venture capital firms explicitly require a Delaware C Corporation because they know the structure well

If you are building a startup with US investors, planning to go public, or regularly working with other US companies in complex ownership structures, then Delaware can make perfect sense.

But for many of our clients, reality looks different:

• They run smaller businesses, service firms, agencies or e-commerce operations

• The company will operate in one specific US state, such as Florida, Texas or California

• The goal is not fundraising but market entry, presence and revenue

And in these cases, Delaware is often not the best solution.

If you form in Delaware but run your business in, say, Texas, you have to foreign qualify your company there, meaning register it as a foreign (non-Texas) entity.

That means double the work:

• Two registrations: one in Delaware, one in Texas
• Two sets of annual fees: franchise tax in both states (depending on the structure)
• Two compliance systems: annual reports, Registered Agents, address upkeep and more

For large corporations, that hardly matters. For smaller businesses on a limited budget, it is needless red tape and extra cost.

A typical case from our practice:

• The client runs a profitable online agency in Switzerland

• He now wants to build a US team in Austin, Texas

• No VC money, no outside investors, just day-to-day operations

Many US firms reflexively recommend: Delaware C Corp or LLC + foreign qualification in Texas

Our recommendation: form directly in Texas. Why?

• The company only operates there anyway
• Texas has solid corporate law without unnecessary baggage
• No double compliance
• Lower costs and simpler tax work

1. No tax advantage

True, Delaware levies no corporate income tax on income earned outside the state. But if you operate in, say, California, you owe corporate tax there anyway. So Delaware does not "hide" any profits.

What is more:

• The famous Delaware LLC is taxed like any other US LLC: it is either "disregarded" or a partnership, and taxation happens at the member level
• There is no tax advantage over, say, a Florida or Texas LLC as long as you actually operate there

2. No extra protection from liability or disclosure

Many people believe Delaware offers better privacy or shields you from personal liability. That is wrong. The Corporate Transparency Act (CTA) makes no distinction between states: FinCEN rules apply the same everywhere. (Since FinCEN's interim final rule of March 2025, companies formed in the US are exempt from beneficial ownership reporting anyway, and that too applies equally in every state.)

3. No practical advantage without investors or IPO plans

If you have no US investors on board, no plans to go public and no need for complex ownership structures, Delaware does little for you. Texas, Florida or Wyoming give you the same for less.

Delaware is not "bad", it is just often unnecessary. There are, however, clear situations where Delaware can be the right choice:

✔ You want to build a VC-funded startup

Investors often require a Delaware C Corp because they know what they are getting: familiar bylaws, preferred share classes, proven processes.

✔ You are planning an IPO or a merger

Delaware is the standard for M&A and IPOs, and for good reason.

✔ You want to set up a complex ownership model

Holding companies, employee equity, investor pools: all of this works best in Delaware.

✔ Business partners insist on Delaware

Some B2B customers require a Delaware entity for compliance reasons.

In all of these cases, we are happy to help you with forming in Delaware, including foreign qualification in your target state. But we will not sell it to you as a cure-all.

At Mount Bonnell Advisors, we have spent years helping European entrepreneurs take the step into the USA. And we have learned one thing:

There is no one-size-fits-all solution.

Anyone who recommends Delaware across the board, without looking at the specific business purpose, location and tax status, is acting not in the client's interest but out of convenience.

We look at your specific case:

• Where will you operate?
• Which entity type fits your model?
• What tax obligations will arise?
• Do you need a US bank account, e-commerce integration, staff?

Then we propose the structure that fits. Sometimes that is Delaware. Often it is not.

Yes, Delaware has its advantages, but not for everyone. Smaller European businesses that actually operate in one particular state in particular are better off forming directly in that state.

Mount Bonnell Advisors can offer you any structure, including Delaware plus foreign qualification. But we believe in real advice, not off-the-shelf solutions.

Planning to expand into the USA? Talk to us.
We'll show you your options, explain the pros and cons and guide you through the actual setup.

For a structured start on choosing your legal form, try our quick check for the best US legal form. And if you want to run a US LLC tax-free with no US permanent establishment, our sister site zerotax.llc specializes in exactly that setup. You'll find more articles on entering the US market under News.

Want to know which US structure really fits your business model? Whether Delaware makes sense for you, or a Texas LLC would be cheaper and simpler?

👉 Book your personal initial consultation with Mount Bonnell Advisors now.
Flat fee: $600, directly with one of our experts, in English.
You get a well-founded assessment, no sales pressure and a clear outcome.

Consultation & implementation

If you'd like to find out what this means for your own situation, the best step is to book a consultation.