I’ve noticed many elite companies are organized in Delaware. Should I form my entity in Delaware even though I operate out of California?
It depends. If you’re going to be seeking venture capital, it is probably a good idea to form your entity in Delaware (as well as form your entity as a corporation). This is because venture capitalists are familiar with and prefer Delaware law over California law and corporation law over limited liability company law. That said, if you operate out of California, you will need to register as a foreign corporation in California and comply with the California rules for foreign corporations including paying the annual franchise tax. Absent venture capitalist concerns, it is not recommended that you form your entity in Delaware because you would just have double the registration and annual franchise tax burden.