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Delaware or Delay? When to Time Your Delaware Flip for Maximum Impact

Alexa Carrero-Haig

16 Jun 2025

We frequently receive inquiries from scaling businesses in the UK who are interested in setting up a US holding company as a strategic method for accessing US investment. Our blog, Delaware Flip: What It Is, How It Works, and Why UK Businesses Use It to Enter the US Market, discusses the steps and merits of this process, known as a Delaware flip. But when is the ideal point in a company’s growth plan to undertake a Delaware flip?

In simple terms, a Delaware flip is where a new US holding company, registered in Delaware, is created to hold the shares of an existing UK company. It is typically achieved by the shareholders of the UK company exchanging their shares for shares in a newly-formed Delaware C corporation.

It may be simpler to put in place a new US holding company and flip company ownership when the company is at an early stage of development, and the process may be more complex as its capital, debt and operational structure develops and become more complicated.

Early Flips – Pre-Seed and Seed Funding Stage

Reasons companies decide to incorporate a Delaware holding company early on in their lifecycle or even as a first step prior to incorporating in the UK include because they have interest from US investors, such as acceptance onto a US accelerator program which requires a Delaware C corporation, such as Y-Combinator or Techstars, or they have IP or products that they plan to bring to the US.

Pros

Cons

Simpler Process

Having a smaller cap table with fewer shareholders and other stakeholders should facilitate a simpler share exchange process.
The process should involve less administrative burden and be less costly with fewer participants to manage.
If share options have been granted, or ASAs or SAFEs have been issued, these will also need to be included in a flip transaction making the process more complex.

Expense

The time and costs involved without the certainty of investment may have a negative impact on a company’s limited resources and finances at an early stage in its growth.

Readiness for Expansion

A US entity may be critical to a business’s US expansion including entering into new commercial arrangements, hiring US employees, granting options to staff and contracting with third parties if the ultimate goal is to expand quickly into the US market.

Operational Focus

If the company’s business is principally focused in the UK and staff are UK-based, the time and costs of incorporating in Delaware without significant US operations may not be justified. Unless there is a clear operational or fundraising advantage, time may be better spent on building traction in the UK or other markets before expanding to the US.

Access to Capital

A US holding company may open up access to US investors (especially VCs, accelerators and other institutional investors) who may require US incorporation before they are willing to commit to an investment (typically due to investment restrictions and familiarity with US entities)

Lack of flexibility

Once the company has set up a US holding company, that step may be difficult and costly to reverse if plans change in the future.

Late Flips – Post-Seed, Series A Funding or Later

Undertaking a Delaware flip at a later stage may allow a company more time to scale up in its home market and to develop a US strategy or gain traction for a US investment round.

The pros and cons of a later stage Delaware flip include:

Pros

Cons

Retain flexibility

Focusing on the UK entity may be more attractive to UK investors who may prefer to engage with a local entity and to avoid any US tax implications.

Cap Table Complexity

The more stakeholders in a company, the greater the work involved in implementing the share exchange, involving more complexity and time, higher costs, greater administrative burden and tax implications.

Alignment with a Fundraise

If funding a Delaware flip is a concern, this can be timed in relation to a fundraise that would provide funds necessary to cover the flip transaction costs.

Tax Risks

The greater the value of a business, the greater the potential for a flip to trigger tax liabilities for its shareholders, dependent on whether HMRC clearance can be obtained.
The flip may also have implications on eligibility for any EIS or VCT investors and EMI option holders.

Developing your business model

Start-ups often pivot in the early stages and if a company does not have its global business model fully formed yet, it can be advantageous to allow time to develop such a model before committing to expansion to new jurisdictions.

Potential to Roadblock Investment

The more complex the process is, the more costly and lengthy it is likely to be, and this may delay and even roadblock an investment round if it is reliant on the flip’s completion.

Tax implications

In addition to the above pros and cons, companies should consider the tax implications of a Delaware flip including the implications for any EIS investors and on EMI options. Tax issues in both the UK and US should be reviewed and analysed and tax advice taken. On the UK side, it may be possible to accomplish the flip on a tax-neutral basis for the UK company and its shareholders, typically with prior HMRC approval, and it may be possible to retain EIS eligibility. In the US, the Delaware corporation will be subject to US federal and state tax filings and transfer pricing advice may be required.

Conclusion

There are pros and cons to undertaking a Delaware flip at each different stage in a company’s growth plan. However, a company should consider these factors in relation to its specific short- and long-term goals for US expansion. At MBM, we have experience advising clients on Delaware flips in unique positions at various points in their lifecycle, so if you are considering a Delaware flip or would like to understand more about the process, please contact MBM Commercial’s US Team for more information.

Please note, this article does not constitute legal advice and should not be relied upon for business or legal decisions.