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A Delaware flip puts a US holding company on top of your existing business so US investors can write a cheque into a structure they recognise. Done at the wrong moment it triggers tax you did not need to pay.
Shareholders in your existing company exchange their shares for shares in a newly formed Delaware corporation. Your original company becomes a subsidiary. The cap table, the IP and the operating business all end up in the right places for a US round.
US venture documents assume a Delaware C-corp. Funds have mandates, tax positions and standard paper that do not travel well to a foreign entity. The flip removes a reason to say no.
Equity moves up to the new parent. Employees, contracts and often the IP stay where they are, at least at first. Deciding what to migrate and when is most of the work.
A flip done while the business is worth very little is usually straightforward. The same flip after real value has accrued can create a taxable event for your shareholders in their home country.
The exchange can be taxable to them personally depending on their local rules. A structure that is clean for a Czech founder may not be clean for a German or Canadian one, and you may have all three on the same cap table.
If the IP sits with individuals, or with a local entity, or with an employer of record, the assignment chain has to reach through all of that to the Delaware parent. This is the item diligence finds.
Innovation grants, tax credits and similar programmes frequently carry conditions about ownership and residence. A flip can breach them quietly. Check before, not after.
A flip takes weeks, not days. Starting it the week a term sheet lands is the most common way founders end up rushing something that should have been deliberate.
How long does a flip take?
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Typically four to eight weeks depending on how many shareholders you have and how many countries they sit in. The legal drafting is rarely the slow part. Getting signatures and local tax confirmations is.
Will this create a tax bill for my shareholders?
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It can, and it depends on their individual jurisdictions rather than on yours. We structure the exchange and work with local advisers in each country involved. Anyone who tells you the answer without asking where your shareholders live is guessing.
Can we keep operating through the original company?
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Usually yes, and often you should. The subsidiary continues to employ people and run the business while the Delaware parent holds the equity and takes the investment.
Does a flip affect QSBS?
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It affects when your holding period starts and whether your shares count as originally issued, so yes, materially. Raise it before the flip is designed rather than after.
Do you work with founders outside the US?
Constantly. A large share of our work is founders in Europe and elsewhere setting up in the US properly the first time.
Countries, rough cap table, where the IP sits, and when you expect to raise. We will tell you whether to flip, when, and what it will cost.
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