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Comment by throwpoaster | Hacker News Reader

We optimized tax structures in a way that was very technical and awesome — until one of our founders lost the plot, accused everyone of fraud, went to our investors, and blew up the company.

After the fallout cleared it turned out we, the other founders, had done nothing wrong. Not even non-standard, just advanced. But now the lawyers had all the money and the company failed.

Perhaps it would have been more efficient to not optimize taxes and instead optimize founder alignment.

Keep the parts of the business that are not directly on the critical path to success completely normal and standard.

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A bit of a shame, though, because the status quo has lots wrong with it, and it can be impractically expensive to change things around eg equity structure later.

You can also optimize your company structure to be more resilient to founder disagreements. Unfortunately, the legal system and the cost of attorneys can be a hard thing to optimize against.

Tell us more about the structure. Maybe can help someone reading.

Thanks for the offer. I’m legally bound from talking about this.

Except, it’s time to normalize not doing a Delaware corporation to raise capital. Plenty of other choices and many are better suited for the modern world than Delaware.

Such as?

Best I could tell Delaware is still best state to incorporate. I’m extremely interested in contrary opinions and their basis.

Best for who?

There are at least 54 other jurisdictions within the US alone that have incorporation statutes. Those legislatures and courts haven’t all sat still for the last 30 years, they compete directly with Delaware, other countries and each other.

Delaware’s Court of Chancery, a business court, is replicated is some other states, Wyoming has one. Whether a jurisdiction has that or not, a huuuge benefit is that outside of Delaware you can relitigate cases and argue for the exact opposite outcome as to whatever case law Delaware judges are bound by.

Back to the “for who” question, some things benefit your investors more than you.

Its all a reading comprehension problem.

Currently I like South Dakota for Trusts, Wyoming for LLCs, I still like Delaware for C-Corps, and Delaware for non-profit corporations

I form LLCs the most

I live in Wyoming. If you want outside capital or sell your company, do a Delaware. There are economies of scale at every step that make it the vastly smarter choice. If you’re doing a small business, sure, do a local entity.

I wrote

> I still like Delaware for C-Corps

I’m thinking the readership of this thread doesn’t realize that using Delaware for capital means using a C-Corp

I’ve seen lots of lazy/broke/small entrepreneurs go with LLCs anywhere, but LLC anywhere isn’t using Delaware for what Delaware offers

Most funds are LLCs or LPs. They’re almost always in Delaware. Non-Delaware U.S. funds trade at a discount. (International are B.V.I. or Cayman. For Europe, Luxembourg.)

I was referring to entrepreneurs trying to take capital from the funds, they would form a c-corp

> There are at least 54 other jurisdictions within the US alone that have incorporation statutes. Those legislatures and courts haven’t all sat still for the last 30 years, they compete directly with Delaware, other countries and each other.

No other jurisdiction really competes with Delaware. It's got a robust body of case law and everyone knows what to expect.

best for who still stands, and my entire post covered the aspect of its court and case law. there is an objective way to look at it

> a huuuge benefit is that outside of Delaware you can relitigate cases and argue for the exact opposite outcome as to whatever case law Delaware judges are bound by.

How come this is a benefit? Unless you know ahead of time what conflict you are going to be in court about this seems 50/50 whether it will benefit you or the person suing you/being sued by you.

Plan it out, much of case law is happenstance that has little to do with modern realities, in a court system less bound to another court system they’ll take a fresh look

Your ability to plan it out most likely it won’t be on your first venture

> Except, it’s time to normalize not doing a Delaware corporation to raise capital.

Is that really common for people to do in EMEA? I thought that was a US thingy they teach you at startup schools/incubators. AFAIK, EMEA founders setup their company in their respective countries.

One lesson YC taught founders back in 2012: innovate within your product. Don’t innovate with things like HR, legal, corporate structures, etc. Focus your innovative energy where it matters: your product.

Startups don’t fail because they chose to not innovate when setting up their corporate structure. They fail when they can’t build a product worth money to other people.

Having an innovative or non-standard corporate structure (basically anything other than Delaware c-corp) will cause headaches and even once you’re successful, will make a lot of things more difficult. Harder (more expensive) to find lawyers, harder (more expensive) to find accountants, and it will be an issue if you are getting acquired or raising money.

I don’t disagree there might be viable alternatives. But most founders shouldn’t be trailblazing a new path with an innovative corporate set up. Just do what everyone else does and put your focus where it matters.

I’m curious why anyone wouldn’t default to Delaware c-corp for the typical startup raising capital. What’s the gain?

curious roughly what was your structure?

Can’t answer for legal reasons.

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