Delaware vs Washington: Where Should You Incorporate?
A comprehensive guide comparing Delaware’s venture-scale corporate governance against Washington State’s 0% income tax and Business & Occupation (B&O) gross receipts tax.
Choose Delaware If:
- You plan to raise institutional VC: Seattle and Silicon Valley VCs (Madrona, Voyager, Pioneer Square Labs) mandate Delaware C-Corps.
- You want Court of Chancery predictability: 230+ years of corporate case law decided by specialized chancellor judges without juries.
- You issue employee stock options: Automated equity systems (Carta, Pulley) are built around Delaware DGCL rules.
Choose Washington If:
- You run a local service business or agency: If operating strictly in Seattle/Bellevue with no outside investors, forming locally avoids dual registration.
- Low annual report carrying cost: Washington charges only $60/year for its annual report, vs Delaware’s $450 C-Corp tax.
- 0% Personal and Corporate Net Income Tax: Washington constitutionally prohibits graduated net income taxation.
Should a Washington startup incorporate in Delaware or Washington?
If you plan to raise venture capital, incorporate in Delaware; most institutional investors require a Delaware C-corporation. If you are building a bootstrapped or local business, a Washington corporation avoids paying for two states.
A Delaware corporation operating in Washington pays Delaware’s franchise tax and annual report fee (a $450 minimum under the Assumed Par Value Capital Method) and also registers in Washington as a foreign corporation and files Washington’s annual report.
Does incorporating in Delaware avoid Washington’s B&O tax?
No. Washington’s Business & Occupation tax is a gross receipts tax based on business activity in Washington, not on where the company is incorporated. A Delaware corporation with Washington operations or customers owes B&O on its Washington gross receipts just as a Washington corporation would.
Does Washington have a corporate income tax?
No. Washington has no corporate income tax and no personal income tax on wages; it taxes businesses through the B&O tax instead. That means Delaware’s income-tax treatment makes no practical difference for a Washington-based startup, and the choice comes down to investor expectations and corporate law.