Nailing taxes, IP and payroll before a Delaware Flip

Planning to flip to the US? Here’s what you need to know before you get started packing up your cap table. 

From fundraising friction to IP transfers and tax traps, the decision to do a ‘Delaware Flip’ – where your UK company becomes a subsidiary of a US parent – can feel like opening a can of cross-border compliance worms. But with the right timing, structure and expert support, it could be your ticket to securing US investment and scaling globally.

Join SeedLegals CEO Anthony Rose and Anand Krishna, Co-Founder and CEO of Inkle – a US tax and compliance platform for startups – to get the step-by-step breakdown of the Delaware Flip. Take home top tips on investor expectations and employment setup and learn how to avoid costly pitfalls when building your US structure.

Key takeaways

Should you do a Delaware Flip?

• A ‘Delaware flip’ involves creating a US parent company (usually a Delaware C-corp) and making your UK company its subsidiary – often required by US investors or accelerators like Y Combinator.
• Founders should only flip if there’s a clear reason: either a US investor insists, or you’re planning to actively raise from or operate in the US.
• The earlier you flip, the simpler and cheaper it is. Doing it post-investment or with IP in place makes things more complex (eg share transfers, tax implications).
• Delaware is the preferred state because of investor familiarity and strong corporate legal infrastructure – avoid the noise about Wyoming or Texas.

Why timing can make or break your flip     

• Before you incorporate or raise investment, you have maximum flexibility. Once your cap table fills or you create valuable IP though, flipping becomes harder and riskier.
• Anthony breaks it down into four levels – from no incorporation yet, all the way to companies with SEIS/EIS investors or revenue. The later the level, the more expensive and admin-heavy the flip.
• Pre-seed founders with global ambition should consider starting with a US parent and UK sub from day one – especially for SaaS and AI companies.

Employment, payroll and compliance 

• Setting up a US entity costs $200-800 via platforms like Stripe Atlas or Clerky, but the ongoing compliance costs add up.
• Expect to pay $1-3k/year minimum for filings, tax returns, bookkeeping and franchise tax – more if you have a subsidiary or complex operations.
• If you’re pre-revenue and pre-funding, hold off. The costs will come out of your own pocket and add unnecessary admin.
• Inkle helps with everything from filings to accounting to multi-state compliance – especially useful once you start hiring in different US states.

The cost of flipping – and staying flipped

• Founders often ask: where should I pay myself? The answer depends on where you’re based, your visa/residency status, and if you’ve set up a UK entity.
• If you’re UK-based long-term, set up a UK entity and pay yourself and your team via payroll. Don’t run US payroll without a US visa or Social Security number.
• Avoid triggering ‘permanent establishment’ – where governments can tax and regulate a foreign company if they believe it’s operating locally.
• Tools like Deal, Oyster and EORs can bridge the gap, but long term it’s cleaner (and cheaper) to have a UK subsidiary if you’re building a UK-based team.