Startup founders — especially first timers — inevitably face the initial question of where to incorporate their business. This decision can impact a company’s structure, governance, fundraising, and even exit opportunities as the company scales.

In this guide, you will learn about the most common states where founders choose to incorporate, the key differences between them, why each is popular, and what trends we’re seeing in 2025.

The Usual Suspect: Delaware

Delaware remains the most common place of incorporation for startups — and has long represented the gold standard for tech companies planning to raise venture capital. The state has earned this reputation for several reasons:

  • Established legal precedent: Delaware has an extensive, century-old body of case law covering almost every type of corporate issue imaginable — from those involving fiduciary duties to shareholder rights to mergers gone sideways. This gives founders confidence that if a dispute arises, they have clear rules and reliable outcomes instead of legal uncertainty.
  • Business-friendly laws: The Delaware General Corporation Law (the state’s governing corporate statute) provides founders with clear and modern guidelines in structuring their business and its governance, and is updated regularly to address new business realities.
  • Court of Chancery: Delaware has a dedicated business court with judges who specialize in corporate disputes. This creates fairly predictable, well-understood outcomes that investors and founders alike value.
  • Standardized documents and structures: Because of the vast number of startups that are incorporated in Delaware, virtually all major investors, law firms, and venture capitalists are deeply familiar with Delaware corporate structures. Documents like stock option plans, preferred stock terms, and board governance are standardized and well-understood under Delaware law. This makes deal negotiations faster and less expensive.
  • VC and investor requirements: For all the above reasons, institutional investors — from angels to major VC funds — overwhelmingly require companies to be Delaware C-corporations before they will invest. Delaware’s system aligns with preferred investment structures (e.g., issuing preferred stock or convertible securities) that make venture financing work smoothly.
  • Privacy and speed: Delaware offers straightforward and efficient filing processes and relatively affordable franchise taxes for early-stage companies (if structured properly).

A few downsides:

  • Delaware can be more expensive than some alternatives when it comes to annual franchise taxes and filing fees, especially if you do not structure your share count and par value carefully. In addition, if a business is physically operating in another state (e.g., California), founders may still be required to qualify as a “foreign corporation” in that state, and likely pay local taxes and fees there as well.
  • Some recent actions by the Delaware Court of Chancery have caused some companies to reconsider Delaware as the optimal place to incorporate, which has thrown Delaware’s long-held status as the go-to jurisdiction into question.

Despite some downsides, Delaware continues to hold its place as the first choice for founders when deciding where to incorporate their businesses. Delaware is not just popular because “everyone else does it.” It is popular because its system has proven to be stable, predictable, and efficient over decades, and venture investors will almost certainly expect your company to be a Delaware corporation, at least for the time being.

Rising Contenders: Wyoming, Nevada, Texas & Others

While Delaware still dominates, there is a growing interest in incorporating in other states in recent years, especially for small businesses and crypto/web3 startups. Here’s why:

Wyoming

  • Crypto-friendly: Wyoming has emerged as a leader in creating a crypto-friendly environment for blockchain-focused companies. The state has enacted several crypto-friendly laws, including the creation of decentralized unincorporated nonprofit associations (“DUNAs”) that allow for Decentralized Autonomous Organizations (“DAOs”) to be recognized as legal entities.
  • Low costs: Wyoming has no corporate income tax.
  • Privacy protections: Wyoming has low fees and strong privacy protections for founders.
  • Also good for small LLCs: Many solo founders and small partnerships form Wyoming LLCs for simplicity and privacy.

Nevada

  • Delaware of the West: Nevada markets itself as the “Delaware of the West,” and it is gaining popularity among startups.
  • Low costs: Nevada has no corporate income tax.
  • Privacy protections: Nevada has strong privacy protections and favorable business courts.
  • Caveat: Most venture investors still prefer to see startups set up as a Delaware corporation, which may cause NV-based startups to sometimes face more questions when raising institutional capital.

Texas

  • Why founders look here: Texas is booming as a startup hub, especially in Austin. Some founders are looking to incorporate in Texas to take advantage of local tax advantages and to be closer to local investors who are open to non-Delaware entities.
  • Low Costs: Texas has no state income tax.
  • Caveat: For companies planning to raise venture financing, many still ultimately end up reincorporating in Delaware.

California

  • Why founders don’t usually incorporate here: Many California-based startups that operate in California nevertheless opt to form as Delaware corporations because of investor preference.
  • Expensive: California’s taxes and regulatory framework are more burdensome than those in Delaware; however, if a startup operates out of California, it must be registered as a “foreign corporation” and pay California taxes.

Emerging Trends (2025)

  • Web3/DAO startups: Wyoming is emerging as a top contender for crypto projects wanting legal recognition and protections.
  • Privacy-conscious founders: Wyoming and Nevada are attracting founders who want to shield ownership details from public disclosure.
  • Cost-conscious small businesses: Some bootstrapped founders are selecting Wyoming or Nevada LLCs to keep costs low, but once they scale, these startups often convert to Delaware C-corporations before raising serious funding.
  • Regional pride: Texas and Florida are seeing more startups choosing to incorporate locally, especially with the rise of startup ecosystems in Austin, Miami, and Dallas.

Final Thoughts

There’s no one-size-fits-all answer. The right state for your startup depends on:

  • How you plan to grow,
  • Whether you’ll seek outside investment,
  • Your tax strategy,
  • Your privacy needs, and
  • The type of business you’re building.

That being said, and despite the new trends outlined above, Delaware continues to dominate as an incorporation hub for startups and venture-backed companies. If you plan to raise venture financing and eventually exit via acquisition or an IPO, Delaware C-corporations continue to hold the top spot as the most desired place to incorporate in the United States.

At Bowery Legal, we specialize in guiding startup founders through all aspects of a startup’s lifespan, including day-one strategy and the incorporation process. If you need any assistance, whether in terms of determining your new startups state of formation or otherwise, don’t hesitate to reach out to our team for help.