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That awkward moment when the only law that the startup will be tested by will be labor contracts in the state they operate in, and EEOC law at the federal level

That awkward moment when the only law that the startup will be tested by will be labor contracts in the state they operate in, and EEOC law at the federal level, and other federal laws Making their jurisdiction of incorporation completely irrelevant as the VCs push for settlement quickly.

harryjo 10y ago
Sure but why add EXTRA legal risk by incorporating in an X-factor state?
- cloudjacker 10y ago
  It isn't extra legal risk. You simply have legal teams copying and pasting incorporation structures and contracts, now they're about to get all their company's financials leaked. Delaware's Court of Chancery isn't even a perk for 99.9% of businesses. Delaware's "body of case law" can be leaned on by courts in ANY state if there is a conflict that state has never seen before.
  - MOARDONGZPLZ 10y ago
    > Delaware's "body of case law" can be leaned on by courts in ANY state if there is a conflict that state has never seen before. That's kind of how it works, but not to the effect you hope. Delaware law isn't binding outside of DE, so if another court looked at it, they would only use it as guidance. Versus if a DE court looked at it, they would use it as binding precedent. Which is the benefit of incorporating in DE. That law is out there and binding due to the large number of incorporations there and large body of case law that has developed. So answers to random questions are really known and agreed upon. Whereas with another state's court, if you can even get them to consider DE law, you're praying that they side with DE law, which isn't always the case. There's more risk. There is an advantage to incorporating in DE, whether you believe that or not. Even if the advantage is, like using Ruby or Node or something, that everyone knows the law and it's well settled and boilerplate. You don't have to reinvent the wheel.
    - cloudjacker 10y ago
      what you say is true, it is just not applicable to 99.9% of businesses. When you have a dispute over capital structure and disclosure to investors, then Delaware will be useful. And you can incorporate closer to when you get to that point. Reincorporation, foreign incorporation, and continuation corporations are valid ways to switch jurisdictions when you need it. Just reading Nolo.com and incorporating in DE for limited liability of your pet project, even your pet project that may get employees, isn't necessary.

harryjo 10y ago

Sure but why add EXTRA legal risk by incorporating in an X-factor state?

cloudjacker 10y ago
It isn't extra legal risk. You simply have legal teams copying and pasting incorporation structures and contracts, now they're about to get all their company's financials leaked. Delaware's Court of Chancery isn't even a perk for 99.9% of businesses. Delaware's "body of case law" can be leaned on by courts in ANY state if there is a conflict that state has never seen before.
- MOARDONGZPLZ 10y ago
  > Delaware's "body of case law" can be leaned on by courts in ANY state if there is a conflict that state has never seen before. That's kind of how it works, but not to the effect you hope. Delaware law isn't binding outside of DE, so if another court looked at it, they would only use it as guidance. Versus if a DE court looked at it, they would use it as binding precedent. Which is the benefit of incorporating in DE. That law is out there and binding due to the large number of incorporations there and large body of case law that has developed. So answers to random questions are really known and agreed upon. Whereas with another state's court, if you can even get them to consider DE law, you're praying that they side with DE law, which isn't always the case. There's more risk. There is an advantage to incorporating in DE, whether you believe that or not. Even if the advantage is, like using Ruby or Node or something, that everyone knows the law and it's well settled and boilerplate. You don't have to reinvent the wheel.
  - cloudjacker 10y ago
    what you say is true, it is just not applicable to 99.9% of businesses. When you have a dispute over capital structure and disclosure to investors, then Delaware will be useful. And you can incorporate closer to when you get to that point. Reincorporation, foreign incorporation, and continuation corporations are valid ways to switch jurisdictions when you need it. Just reading Nolo.com and incorporating in DE for limited liability of your pet project, even your pet project that may get employees, isn't necessary.