Concepts
Delaware flip
A Delaware flip inserts a Delaware C corporation as the new parent above a non-US operating company. Existing shareholders exchange into the Delaware parent so the group has a US top company. For timing, tax and the flip-versus-subsidiary choice, see The Delaware flip for non-US founders.
Why it matters
Section titled “Why it matters”Early US investors often want Delaware corporate law they already know and, when the rules allow, stock that can qualify as qualified small business stock on new money. A flip is a heavier step than setting up a US subsidiary under the current parent.
From the room
Section titled “From the room”the rationale for the flip is twofold
The two reasons in that session were QSBS for early US investors and familiarity with Delaware rights and obligations versus foreign notary processes.
Where founders get it wrong
Section titled “Where founders get it wrong”- Flipping when a subsidiary would have been enough for US hiring.
- Skipping home-country tax modeling on the share exchange.
- Expecting QSBS treatment from a non-US issuer.
- Assuming the exchange makes existing shares QSBS.
Go deeper
Section titled “Go deeper”- The Delaware flip for non-US founders covers stage timing, the tax caveat and a flip-versus-subsidiary table.
- Related concepts: QSBS, 409A valuation.