Ask HN: Why Delaware and Not Dubai?

Human rights?

umm.... there may be some cultural and social differences?

Cargo cult?

I think you need to add a lot more context to your question. (IE, edit your submission.)

As an American, who's been involved with both Silicon Valley and Boston startups, I find it rather absurd that anyone here would ever incorporate outside of the US. Likewise, I find it absurd that anyone running a startup outside of the US would ever incorporate in Delaware.

> "especially Indian startups"

Do you mean startups in India, or do you mean startups run by Indian immigrants inside of the US?

Maybe there's something that I don't know?

Either way, you're asking a specific question to a very wide audience. You need a lot more context if you want helpful answers and a coherent discussion.

So, if you're reading this, scroll up and push the "edit" button. Spend a minute or two adding some good context; don't assume that the wide Hacker News audience has any clue what you're talking about.

It’s as simple as: The people you are asking for money from prefer Delaware C Corps

Why? Case law and legal infrastructure that reliably protects investors more than anywhere else for the best price.

For one, Singapore requires a resident director. AFAIK, Delaware has no such requirements. The cost difference might actually be meaningful for a bootstrapped Indian startup. Larger operations, especially ones with foreign investors use Singapore and Mauritius based holding companies all the time.

The Center?

> Have you ever wondered why so many companies incorporate Delaware?

> [...] decreased liability and litigation.

> [...] incomparable tax savings. There is no state income tax for Delaware corporations that conduct business out of state; no inheritance tax on stock held by non-Delaware residents; no state sales tax on intangible personal property (such as royalty payments); and shares of stock owned by non-resident aliens are not subject to Delaware taxes.

> In addition, Delaware corporations not operating in the state of Delaware do not need to acquire a business license in Delaware.

> [...] The State of Delaware allows you to file your company without listing the names of the owners

And other reasons detailed at the same link: https://www.delawareinc.com/before-forming-your-company/bene...

Seems like the closest US onshore location to actual offshore.

Delaware is relatively business friendly and has a huge amount of established historical precedent in its case law.

It’s important for companies, lawyers, investors, and executives to minimize unknowns in outcomes. They generally know how any normal—and many many atypical—legal disputes will end up.

This extends to tax and reporting requirements involved. There’s a well worn path from founding through IPO as a Delaware C Corp.

If you’re going to change from that, you certainly can, but the question is: why?

It's because of VCs and investors.

The Indian VC industry has seen massive growth, but is still dependent on American and Israeli FDI. Compared to the UAE or Singapore, Delaware is easier to manage from the risk perspective and a regulatory perspective as an American investor.

Also, Dubai is a new entry in the Indian tech business incorporation segment. Traditionally, Tech Founders used the Singapore backdoor and Tech Investors the Mauritius backdoor.

India and the UAE only signed a FTA 3-4 years ago, and Dubai's business law is still being honed compared to SG.

IANAL but If I were an Indian founder today, I'd incorporate and build an Indian subsidiary under CECA in Singapore, live and operate it from Dubai, and have operations run from within India.

Edit: thinking further, if I was starting a Tech B2B or B2C, I wouldn't even consider UAE to live in. If I created a Singaporean corporation, I'd have the ability to live in Singapore itself, and I would be able to expand my business into ASEAN where Indian startups and VCs have found similar operating conditions to India, while the UAE doesn't really open myself up to any markets outside of Africa, MENA, Central Asia, and South Asia. Great if I was a trader or import-export (ever ate rice in Gujarat? A portion of it came from Sindh via UAE. Pakistani Hindus run the rice import-export business in Sindh), but not if I was a tech startup.

For Indians in India it is also about visa, then taxes, regulations etc. If an Indian startup registers in Dubai, it is relatively easier with the paperwork. Plus visa, office space etc. is much easier. I would imagine that doing the same in USA would be much harder comparatively.

https://www.visitdubai.com/en/invest-in-dubai/live-and-work/... (the rules are simple and clearly laid out).

Finally a question about my area of expertise!!

I’m the CTO of commenda.io. We help Indian startups get set up with RBI-compliant, venture-ready Delaware c-corps.

There are 2 reasons why Indian corporations like to incorporate in the US:

1: VC. American VCs love investing in Indian startups, but they hate investing in Indian corporations. YC invests only in corporations set up in the US, Canada, Singapore, or Cayman Islands. Other VCs have different requirements, but they all accept US.

2: Sales. If you’re selling to US customers (which most Indian SAAS startups want to do), a US entity will help you build trust and a US bank account will make it easier for your customers to pay you.

Recently, Clerky did a nice Handbook on incorporation. It goes very wide but is a good read for any Startup founder. Go start with your pick from the topics and keep it bookmarked for reference.

Clerky's Incorporation Handbook https://handbooks.clerky.com/startup-incorporation

Chapter on Where to Incorporate (Delaware) is at https://handbooks.clerky.com/startup-incorporation/where

> "especially Indian startups"

What do you mean by "Indian startups"? I.e. why would an Indian startup want to incorporate in Delaware?

Or is this about Indian startups that want to enter the US market / are looking for US investors? If that's the case, I guess this also partly answers the question.

Its really just familiarity of US investors and access to US banking system

Everyone is giving you information about Delaware that is almost irrelevant to why those companies chose it and what they get out of it

Only Delaware has the Delaware Chancery Court, the best legal venue in the world for business disputes.

Well, we incorporated in India and continue here. Our seed fund was led by an American entity, with Indian funds participating. So, I think investments is a red herring. There's enough capital here irrespective of where you go.

Considering that all three destinations are similar in their tax structure, I think the most useful explanation is what lots of others are saying - a stable environment. Indian laws can be quite fickle as you probably know, and I mean, Dubai _is_ a monarchy at the end of the day, so it depends on one man / one family. Singapore seems like it should work, so I don't know why more startups aren't incorporated there.

The second reason of having mostly US clientele is also reasonable. Definitely tax implications that way too.

But another, possible THE biggest one, is just that the perception of the US and especially Delaware as THE startup destination. Incorporating in the US might be a subtle status symbol for many...