Getting ready to incorporate my B2B SaaS. I'm based in Colorado, no plans to raise VC (bootstrapping), probably 1-3 employees eventually.
Everyone says "just do Delaware" but I keep seeing Wyoming mentioned. Lower fees, more privacy, no franchise tax. Is Wyoming actually viable in 2024 or is Delaware still the default?
I made the mistake of incorporating in Delaware "just in case I raise money later." Four years in, still bootstrapped, and I've paid like $3,000 in franchise taxes for nothing.
Honest answer for your situation (B2B SaaS, bootstrapped, small team): just form an LLC in Colorado.
You're already there. If you form in Delaware or Wyoming you'll still have to register as a foreign entity in Colorado. That means paying fees in TWO states instead of one.
Quick breakdown on when each makes sense:
Delaware: Court of Chancery (specialized business court), 100+ years of case law, VCs require it. But franchise tax can be $200-200K+ and you pay it even if you're not profitable.
Wyoming: $50/year flat fee, no state income tax, best privacy. But no specialized court system and investors will make you convert anyway.
Home state: No foreign registration needed, simplest setup, convert later if you raise.
Counterpoint: I'm an angel investor and I've passed on deals because they were Wyoming LLCs and the founder didn't want to convert. It creates friction. Every term sheet assumes Delaware C-corp.
If there's even 20% chance you might raise, just start with Delaware. The franchise tax minimum is like $175/year for small companies.
@KimM_Counsel if I do Colorado LLC now, how hard is it to convert to Delaware C-corp later?
$2-5K in legal fees, couple weeks. Form new DE corp, exchange LLC membership interests for stock, transfer assets, dissolve LLC. There can be tax implications so you'd want a CPA involved.
But here's the thing - if you're raising a proper seed round, investors often pay for or reimburse this legal work anyway. It's standard.
Quick note on Wyoming privacy: it's not as meaningful as people think. If you have any California nexus (employees, customers, whatever), CA will still require you to register and disclose there. The privacy only helps if you're truly isolated in Wyoming which... you probably aren't.
tl;dr:
oh also fun fact - Delaware's franchise tax calculator is confusing as hell. First year I got hit with a $7K bill because I calculated it wrong. There are two methods and you need to use whichever is lower. Almost had a heart attack before I figured it out.
Decision made: Colorado LLC. Keeps things simple, can always convert later. Thanks everyone - way more helpful than the generic "just use Delaware" advice I was getting elsewhere.
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