What is a Delaware flip?

A Delaware flip is when a non-US company creates a new Delaware corporation that becomes the parent company, with the original entity becoming a subsidiary. This restructure makes it easier to raise from US investors.

Why do US investors prefer Delaware corporations?

US investors prefer Delaware because of its well-developed corporate law, business-friendly courts, predictable legal outcomes, and standardized investment documents that work with Delaware law.

When should a startup do a Delaware flip?

Consider a Delaware flip before raising from US investors, especially VCs. It's typically done before a Series A but can be done earlier if you're targeting US institutional investors.

How long does a Delaware flip take?

A straightforward Delaware flip typically takes 4-8 weeks, but can take longer if there are complications with existing shareholders, contracts, or tax issues.

What are the tax implications of a Delaware flip?

Tax implications vary by jurisdiction. The flip should be structured as a tax-free reorganization where possible, but founders should consult with tax advisors in both the original and US jurisdictions.

How much does a Delaware flip cost?

Legal fees for a Delaware flip typically range from $15,000 to $50,000+ depending on complexity. Additional costs include Delaware franchise taxes and registered agent fees.

Delaware Flip

What It Actually Means (and Why It's Not "Just Incorporation")

For non-US B2B founders raising from US investors (Angel → Series A): the legal restructuring process that moves your business into a US entity—and why simply forming a Delaware company isn't enough.

Delaware flip structure diagram showing stock-for-stock exchange, partial acquisition, asset purchase, and cross-border merger options

TL;DR


A "Delaware flip" is not just forming a US company. It is a legal restructuring that moves ownership of assets, intellectual property, and equity into a US entity.

US investors require it because they want to invest in an entity that owns the valuable parts of the business under US law.

If the valuable parts of your business stay outside the US, investors won't be satisfied, even if you incorporate in Delaware.

What Is a 'Flip'?

Companies based outside the United States can operate in the US. But many US investors will only invest in a Delaware corporation.

As a result, founders are often told to "flip into the US" before taking US investment.

A flip exists to:

•
Move assets and intellectual property into a US entity
•
Ensure the invested-in company owns the valuable parts of the business
•
Put investor rights under US law and US courts

Key insight: Simply forming an empty Delaware company is usually not enough.

Why Investors Care

US investors want to know that:

•
The entity they invest in owns the IP
•
Their rights are governed by US jurisdiction
•
The value of the business is not trapped in a foreign entity

A flip aligns legal reality with economic reality.

How Does a Flip Work?

There are multiple ways to structure a flip. The most common approaches include:

Stock-for-Stock Exchange

•
The Delaware company owns all shares of the foreign company
•
Founders exchange foreign shares for Delaware shares

Partial Stock Acquisition

•
The Delaware company buys some of the foreign company's stock
•
Founders or foreign investors keep some foreign shares

Asset Purchase

•
The Delaware company purchases the assets and IP of the foreign company
•
Payment may be cash or Delaware company stock

Cross-Border Merger

•
The Delaware company and foreign company merge
•
The Delaware company survives the merger

These are not the only methods—but they are the simplest and most common.

Important: In every scenario, incorporation is only one step. Multiple additional legal transactions are required.

Choosing the Right Flip Structure

The correct approach depends on your specific facts, including:

Ownership & Stakeholders

•
Who owns equity in the foreign company?
•
Are there outside investors?
•
What rights do they have?
•
Will they continue after the flip?

Intellectual Property

•
Does the company own valuable IP?
•
What is the IP worth?
•
What taxes apply to transferring it?
•
Does IP need US registration?
•
Are there existing foreign registrations that require reassignment?

People & Operations

•
Who will continue contributing IP?
•
Who needs to be employed in the US?
•
How will incentives be structured post-flip?

Money & Taxes

•
Will payments continue to flow to foreign entities or individuals?
•
How are those payments taxed today?
•
How will they be taxed after the flip?

What Actually Gets Done

Once the structure is chosen, the flip is executed through a packet of legal documents, typically 10+ documents, including:

•
Customized Delaware incorporation documents
•
IP transfer or license agreements
•
Stock exchange or purchase agreements
•
Board and stockholder approvals
•
Ancillary compliance documents

You will usually also need:

•
US accountants
•
Foreign accountants
•
Sometimes tax-specialist lawyers

This is especially true where IP or prior investments exist.

What Does a Delaware Flip Cost?

Costs depend heavily on complexity, but typical drivers include:

•
Number of stakeholders who must consent
•
Type and value of assets and IP transferred
•
Whether a specific investor is driving the process
•
Whether existing accountants understand the business
•
Whether prior legal work introduced problems

Typical Legal Fees

•
Smaller specialized firms: $400–$1,000/hour
•
Large firms: $1,000–$3,000/hour
•
Total legal cost: ~$8,000–$25,000, higher for complex cases

Typical Accounting Fees

•
$25,000–$80,000
•
IP valuation is particularly expensive
•
Under-valuing IP can trigger severe IRS penalties

Common Founder Mistake

"We already incorporated in Delaware."

If the IP, contracts, or assets remain outside the US entity, you did not complete a flip.

FAQ

Q: Can I raise US money without flipping?

A: Sometimes, but many US investors will require a Delaware corporation that owns the core assets.

Q: Is forming a Delaware company enough?

A: No. Assets and IP usually must move as well.

Q: Do I need accountants?

A: Almost always, especially when IP or prior investment exists.

Q: Is a flip taxable?

A: It can be. That depends on structure, valuation, and jurisdictions involved.

Bottom Line

A Delaware flip is a cross-border restructuring, not a formality.

It touches equity, IP, taxes, accounting, and investor rights—simultaneously.

Need Help With Your Delaware Flip?

We built Aegis to apply knowledge like this so busy founders don't have to.

*Account required

We're lawyers, remember? Please read this important note:

Story LLP is a law firm, and Story's lawyers built Aegis to deliver better, standard legal services at scale so founders can choose between elite specialized lawyers and standardized process automations that replicate those lawyers according to their needs and budget. By definition, a standardized process may not be perfect for you. Please review our Policies page to better understand the difference, as well as how we use AI and how we manage conflicts, privilege, etc.

As a law firm, we must screen clients for conflicts of interest, and we treat all correspondence with clients seeking legal advice as privileged and confidential to the maximum extent possible in consideration of any conflicts. However, Story's law firm or our Attorney Allies do not represent you or your company as your lawyer, do not have an attorney-client relationship with you or your company, and do not provide you with legal advice absent a formal Engagement Letter signed between you and the Story LLP law firm. Please don't confuse the free knowledge we offer on this site with legal advice for you.