4 ms·

What are the reasons to avoid Delaware?

slavboj 2y ago
Based on their current behavior, if you become a politically targeted person, your company will be de facto removed from your control.
CLiED 2y ago
A judge might take your $50 billion options package if you incorporate there, a real risk to most of us.
- refulgentis 2y ago
  Well, they might take it if you don't have an independent board of directors, that you browbeat into it, and some shareholders sue, and are able to substantiate that to a judge via a long legal case. In that case, you might be upset, but your investors won't be. EDIT: Some facts are too dangerous to share, because of how they make people feel.
- new_user_final 2y ago
  It's over $100 billion now (due to Tesla stock price increase)
- toomuchtodo 2y ago
  It is highly unlikely anyone here will ever have to worry about this problem, the odds are worse than winning the lottery [1] [2]. ~90% of startups end up in failure [3], for example. [1] https://medium.com/@13032765d/the-chance-of-becoming-a-billionaire-is-higher-with-lottery-than-starting-a-startup-2eebeea56f29 https://medium.com/@13032765d/the-chance-of-becoming-a-billi... | https://archive.today/CwENd https://archive.today/CwENd [2] https://medium.com/@RisingUnicorns/reality-of-95-startup-failures-y-combinators-biggest-flops-dd7954a2c377 https://medium.com/@RisingUnicorns/reality-of-95-startup-fai... | https://archive.today/NCzaX https://archive.today/NCzaX [3] https://www.ycombinator.com/library/D0-startups-for-students https://www.ycombinator.com/library/D0-startups-for-students
singleshot_ 2y ago
Being Elon Musk, more or less.
modeless 2y ago
Delaware's large amount of court precedent is seen as an advantage because it reduces uncertainty in litigation. But lately some of that precedent seems to be pretty restrictive on companies. In particular the recent decision to overrule the clear expressed preferences of Telsa shareholders and award $345 million (over $17,000 per hour) to lawyers representing one shareholder with nine shares has people questioning whether Delaware's court precedent is really an advantage.
- refulgentis 2y ago
  That stays general until it suddenly sharpens, which obfuscates that it's just the Tesla decision driving this idea. It was interesting to me that it was considered a bedrock of corporate jurisprudence until then. When faced with that contradiction, I first checked my premises...
- D13Fd 2y ago
  It sounds like you are basing this on a single decision by a single judge facing a pretty unique situation. Delaware still has the most certainty, by far. You are much better off there the vast majority of the time. Delaware has a court (the court of Chancery) that is specifically geared for rapid and thorough resolution of corporate disputes, with some of the absolute best and judges (the chancellor and vice chancellors) in the country. If you want to screw around, try incorporating in another state (maybe even one with elected, political judges!) and see how that goes when a real dispute arises.
mmooss 2y ago
It's Elon Musk throwing around his power, this time trying to destroy Delaware courts because they ruled against him. The message is: If you challenge me, I'll attack you, no matter who you are. To the degree it works is because for some reason, people follow him. Is the OP worried they won't get their $40 billion payday?
Beijinger 2y ago
If you live in the US and not in Delaware, you likely have to register in your state as a foreign entity. So you double the work and fees. I am not a lawyer or accountant.

Based on their current behavior, if you become a politically targeted person, your company will be de facto removed from your control.

CLiED 2y ago

A judge might take your $50 billion options package if you incorporate there, a real risk to most of us.

refulgentis 2y ago
Well, they might take it if you don't have an independent board of directors, that you browbeat into it, and some shareholders sue, and are able to substantiate that to a judge via a long legal case. In that case, you might be upset, but your investors won't be. EDIT: Some facts are too dangerous to share, because of how they make people feel.
new_user_final 2y ago
It's over $100 billion now (due to Tesla stock price increase)
toomuchtodo 2y ago
It is highly unlikely anyone here will ever have to worry about this problem, the odds are worse than winning the lottery [1] [2]. ~90% of startups end up in failure [3], for example. [1] https://medium.com/@13032765d/the-chance-of-becoming-a-billionaire-is-higher-with-lottery-than-starting-a-startup-2eebeea56f29 https://medium.com/@13032765d/the-chance-of-becoming-a-billi... | https://archive.today/CwENd https://archive.today/CwENd [2] https://medium.com/@RisingUnicorns/reality-of-95-startup-failures-y-combinators-biggest-flops-dd7954a2c377 https://medium.com/@RisingUnicorns/reality-of-95-startup-fai... | https://archive.today/NCzaX https://archive.today/NCzaX [3] https://www.ycombinator.com/library/D0-startups-for-students https://www.ycombinator.com/library/D0-startups-for-students

singleshot_ 2y ago

Being Elon Musk, more or less.

modeless 2y ago

Delaware's large amount of court precedent is seen as an advantage because it reduces uncertainty in litigation. But lately some of that precedent seems to be pretty restrictive on companies. In particular the recent decision to overrule the clear expressed preferences of Telsa shareholders and award $345 million (over $17,000 per hour) to lawyers representing one shareholder with nine shares has people questioning whether Delaware's court precedent is really an advantage.

refulgentis 2y ago
That stays general until it suddenly sharpens, which obfuscates that it's just the Tesla decision driving this idea. It was interesting to me that it was considered a bedrock of corporate jurisprudence until then. When faced with that contradiction, I first checked my premises...
D13Fd 2y ago
It sounds like you are basing this on a single decision by a single judge facing a pretty unique situation. Delaware still has the most certainty, by far. You are much better off there the vast majority of the time. Delaware has a court (the court of Chancery) that is specifically geared for rapid and thorough resolution of corporate disputes, with some of the absolute best and judges (the chancellor and vice chancellors) in the country. If you want to screw around, try incorporating in another state (maybe even one with elected, political judges!) and see how that goes when a real dispute arises.

mmooss 2y ago

It's Elon Musk throwing around his power, this time trying to destroy Delaware courts because they ruled against him. The message is: If you challenge me, I'll attack you, no matter who you are. To the degree it works is because for some reason, people follow him. Is the OP worried they won't get their $40 billion payday?

Beijinger 2y ago

If you live in the US and not in Delaware, you likely have to register in your state as a foreign entity. So you double the work and fees. I am not a lawyer or accountant.