What a Delaware corporation offers, how it works as a holding company above operations in Egypt and the region, and how we can incorporate yours in two business days.
Delaware is the most widely used place of incorporation for venture-backed companies in the United States, and an increasingly common choice for founders in Egypt, Saudi Arabia and the wider region who plan to raise from international investors. This briefing explains why, how a Delaware company is typically used as a holding company, and what it takes to set one up and keep it in good standing.
Why Delaware
A developed and predictable corporate law. The Delaware General Corporation Law is detailed, regularly updated and supported by decades of case law. Investors and their counsel know how it will apply to share classes, board decisions, mergers and disputes.
A specialist business court. The Delaware Court of Chancery hears corporate disputes before expert judges, without juries. That predictability is one of the main reasons investors prefer Delaware.
Investor familiarity. US venture funds, and many international funds, expect to invest in a Delaware C-corporation. Standard US venture documents, such as the Y Combinator SAFE and the NVCA model financing documents, are designed with Delaware corporations in mind.
Flexibility. A Delaware corporation can issue several classes of shares, including preferred shares with negotiated investor rights, adopt an employee share option plan and take board and shareholder decisions by written consent.
No local residency requirement. Directors, officers and shareholders do not need to live in the United States.
Delaware as a holding company
In a typical structure, the founders and investors hold shares in the Delaware corporation, and the Delaware corporation owns all or most of the local operating company, for example an Egyptian limited liability company or joint stock company.
- Investment happens at the top. Investors subscribe for shares in the Delaware parent, so there is one cap table and one set of investor rights for the whole group.
- Employee options are granted at the parent level, under a single plan that can cover staff in several countries.
- Local law still applies to the operating company. Licensing, foreign ownership rules, employment law and reporting obligations such as Egypt's quarterly FDI reporting continue to apply in each country of operation.
- Moving an existing business under the new parent (often called a "flip") involves transferring the founders' shares in the operating company to the Delaware corporation. This requires corporate approvals and tax analysis in each relevant country, and is best planned before the first round rather than during it.
- Intra-group arrangements, such as IP ownership and service agreements between the parent and the operating company, should be documented from the start.
Most venture-backed businesses use a corporation rather than a limited liability company. A Delaware LLC can suit some holding, joint venture or family structures, but it is rarely what institutional investors expect.
Ongoing obligations
- Annual franchise tax and annual report, due by 1 March each year. Franchise tax can be calculated by the authorised shares method or the assumed par value capital method; the second method usually produces a much lower figure for startups with many authorised shares. Delaware LLCs pay a flat annual tax instead, due by 1 June.
- A registered agent with a physical office in Delaware.
- US federal tax. A Delaware corporation is a US taxpayer and must file a federal corporate income tax return each year, even if it has no US revenue. A corporation that is 25% or more foreign-owned also has additional information reporting on transactions with related parties, and penalties for missing it are significant.
- Corporate housekeeping: board minutes, share issuances recorded in the share register, and the formalities required by the company's bylaws and investor documents.
Each founder and the group should take tax advice in their own country of residence and in each country of operation before the structure is put in place.
How we can help: incorporation in two business days
We can incorporate your Delaware corporation within two business days of receiving complete information and identification documents. Our service covers:
- A short call to agree the structure, share capital and any option pool.
- Identity checks on the founders and directors.
- Filing the certificate of incorporation and arranging the registered agent.
- The post-incorporation documents investors will ask for: bylaws, initial board consents, founder share purchase agreements with vesting, and IP assignments to the company.
- Applying for the company's US tax identification number (EIN).
We can also assist you in opening a US business bank account for the company. Account opening remains subject to the bank's own review and approval, and the timing of the EIN application depends on the US tax authorities.
If you are planning a fundraise or reorganising an existing business under a Delaware parent, contact us to discuss the right structure before you file.
This briefing is for general information only and is not legal advice. For advice on your situation, contact us.