I run a small handmade goods shop online, and I keep seeing 'just incorporate in Delaware' in every startup group I peek into. Why? I don't get it. My business is tiny, I sell soap and candles. Do I really need to file in a state I've never even visited? It feels like a meme at this point.
Incorporation
I don't understand why people recommend Delaware for every startup
It's mostly a venture capital / investor thing. If you're not raising money from big funds, Delaware is probably overkill. For a soap shop, your home state is almost certainly fine and cheaper.
The meme exists because the Delaware Court of Chancery handles business disputes fast and has a huge body of case law. Investors like predictability. But for a solo handmade seller? You'd be paying an extra annual franchise tax and a registered agent fee for basically no benefit.
I'm a freelancer, not a startup, and I looked into it once. The registered agent fee alone was like $100+ a year and I was like... for what? My LLC in my own state was way simpler.
Chiming in as someone who actually did incorporate in Delaware for a small consulting biz. Biggest waste of money and the franchise tax report was annoying. If I could go back I'd just do it locally.
Wait until you hear about Wyoming being the new Delaware. Every few years the internet discovers a new "best state to incorporate." It's a carousel.
Ha, true. Wyoming has no franchise tax and strong privacy, so it's popular for small LLCs. Delaware is really built for C-corps with VC money.
So basically the advice is: huge startup raising millions, Delaware. Little soap shop, stay home.
Pretty much. Though just to be pedantic, you *can* incorporate anywhere and do business anywhere. It's not illegal to be a Delaware corp selling soap in Ohio. It's just usually pointless.
Okay, this is actually reassuring. I was half-convinced I was committing some startup sinn by not having a Delaware entity.
You're fine. Spend that money on wax and fragrance oils instead.
Also, from a totally non-legal standpoint, the last thing you want is to get a registered agent notice from a state you've never been to. I ignored one for a client once and it was a mess ngl.