Delaware. A U.S. state you think about so little that you’re probably thinking right now, “Dela-where?” Delaware is the second smallest U.S. state, located in the north-east bordering Maryland, Pennsylvania and New Jersey. Many U.S. corporations register in Delaware as it is one of the most business-friendly jurisdictions throughout the country. Over 50% of U.S. publicly listed corporations, and 60% of the Fortune 500 companies are incorporated in Delaware. The State of Delaware also provides more flexible investment laws than other states. But what does this mean for Australian startups and businesses?
Incorporating in Delaware
If you are interested in incorporating overseas, particularly in the United States, you should be aware of the legal obligations and regulations that you must adhere to. In the U.S., each state has different laws. Fortunately, Delaware law for businesses is much more developed and streamlined compared to other states. For example, Delaware has specialised courts that exclusively deal with corporate disputes and consequently, is seen to be more business-friendly.
Moreover, the cost and process of registering a corporation, business or startup in Delaware is relatively easy and affordable. For non-US residents, incorporating in Delaware is one, if not the easiest, of the states to form a corporation. You want to form a Delaware corporation, and not an LLC or partnership.
Have Australian startups incorporated in Delaware?
Yes. In fact, Australian seed funds have promoted Delaware as a destination for incorporation. In 2012, Australian seed fund Startmate advised a batch of startups to incorporate in Delaware due to its payments infrastructure. This allowed the startups to operate and accept payments from around the world, yet still operate in Australia.
You should be aware that if you do incorporate overseas, you may need to transfer your assets such as your intellectual property from your Australian company to your U.S. company. This may result in tax implications such as stamp duty.
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Relocating an Australian startup to the USA
In addition to arranging work visas and registering online for a Delaware “C-corp”, there are a number of important considerations before relocating, or incorporating for the first time in the States. Employment law in the United States is very different compared to Australian employment law. For example in the U.S., there is only one week of annual leave, compared to the four weeks in Australia.
Works visas are complicated in the United States. Most require the prospective employer, agent or sponsor to file a petition with the United States Citizenship and Immigration Service (also known as USCIS). The Visa Waiver Program may also apply. If you are planning to fly to the U.S. for preliminary meetings, you can obtain a temporary work permit. However, if you plan to work there long-term, you must locate an employer or sponsor.
Conclusion
Incorporating in Delaware, or relocating a startup to the United States involves a lot of planning and research. For its freedom, ease and convenience, and investor-friendly system, it’s no surprise many successful companies have been formed out of Delaware.
We work with a number of startups and businesses that have relocated overseas, including the United States. If you need capital raising advice or setting up a startup for the first time, we can assist.
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