“Should we incorporate in Delaware?” is the standing item of our first meetings with Turkish founders, and it is almost always asked in the wrong order. The place of incorporation is not an identity preference but a capital strategy decision: where will the company’s money come from, where will its customers be, where will its team work from? A structure decided before those three answers are clear comes back either as an unnecessary cost layer or as an expensive restructuring at the next round.
At the two ends sit two clean scenarios. For a startup whose customers, investors and growth plan are in the US, a C-Corp governed by the Delaware General Corporation Law is the natural choice. For one whose market and revenue are in Türkiye and whose investment comes from local funds, the joint-stock company is a sufficient and far cheaper shell. The difficulty is that most startups stand somewhere between the two ends: a regional market, a team in Türkiye, and a mixed target investor base. In that middle band the decision is not taken in one stroke, and even once taken it is retested at every round. The framework below is the one we use to order the questions of that test.
The question is not “which is better” but “where will the capital come from”
Delaware’s appeal does not come from the abstract superiority of its law; it comes from its ecosystem. The internal workings, investment committees and document standards of US venture funds are built around the Delaware C-Corp. The joint-stock company’s strength lies elsewhere: the natural counterpart of operations, employment and public incentives in Türkiye is a domestic company.
That is why we begin the analysis not with a comparative law table but with a target capital map: from whom do you plan to raise over the next two rounds? Look at those investors’ past transactions — which structures have they invested in? If your investor base will consist of US funds, going to their comfort zone is your job; expecting the reverse is unrealistic.
There is also a genuine difference in legal flexibility. Delaware leaves wide room for freedom of contract on share classes, preference design and board structure; in the joint-stock company, mandatory provisions of the TCC constrain some constructions, and certain standard mechanics of investment documents can only be built by indirect routes. But that difference is not, on its own, large enough to determine the structure decision; the decisive factor is almost always the geography of the capital.
The investor base sets the documentation standard too
For US funds the Delaware C-Corp means not just a familiar legal entity but a familiar document set: standard charter documents, settled preferred share mechanics, predictable case law. When a US fund invests in a Delaware company, legal review runs in a narrow lane and transaction costs fall. A direct investment by the same fund into a Turkish joint-stock company is seen only exceptionally; and when it is, the review and translation of the Turkish law layer and the foreign element stretch the transaction.
For regional and domestic funds, the joint-stock company is the standard; shareholders’ agreements, preferred shares and the corporate mechanics are settled in that ecosystem. We also see some Gulf- and Europe-based investors able to work with either structure. The critical warning is this: do not decide the structure on the preference of a single interested investor; that round may never close, and the structure remains. The decision should rest on an investor profile spanning two or three rounds.
The ESOP reality: where does an option plan actually work?
One of the most concrete legs of the structure debate is the employee equity plan. On the Delaware side the ESOP is a mature institution: option plans are standard, the tax regime is known, and instruments such as the 83(b) election are conceptually settled for founders and employees taking early stock. For a startup competing for global talent, this is a recruitment weapon.
In a Turkish joint-stock company, building a genuine option plan is still laborious: the TCC’s capital and share issuance mechanics are not directly adapted to option exercise, practice runs on contractual constructions (promises to transfer shares, treasury-share-like solutions, phantom stock), and the tax dimension requires separate planning. The summary judgment is this: if you plan to give real share options to a significant part of your team, that alone is a factor weighty enough to influence the structure decision. In a dual structure the practical standard is clear: options are granted over the Delaware holding’s shares, and employees in Türkiye join the plan at holding level. That preserves the plan’s appeal, but it means the taxation of the Turkish employees has to be planned separately and from the outset.
The hidden cost of a dual structure
The typical solution for startups caught between the ends is the dual structure: a holding company in Delaware, an operating company in Türkiye. Built through a flip-up, this structure combines access to US capital with the Turkish operation under one roof. But it does not come without a bill, and the line items are invisible on signing day.
- Two legal systems, two sets of accounts, two calendars. Every year carries filing, bookkeeping and corporate maintenance in two countries; for an early-stage team this is a cost not only in money but in attention.
- Transfer pricing. Service and licence relationships between the holding and the operating company must be priced at arm’s length and documented; neglect produces tax risk in both countries at once.
- The tax intersection. Profit distribution, withholding and the double tax treaty dimension should be thought through in scenarios, even without quoting rates, before the structure is built; fixing it afterwards is expensive.
- The location of the IP. Which company holds the intellectual property is the heart of both investor due diligence and the tax analysis; the whole chain, including rights founders carry personally, must be cleaned up.
Once built, a dual structure demands discipline: intercompany service agreements must actually be signed, invoices actually issued, board resolutions properly passed at both levels. The weakness we see most often in practice is a structure set up on paper but run in fact as a single company; that neglect produces expensive questions in the next round’s legal review and in any eventual exit.
When to flip up, and when to stay in Türkiye?
The decision matrix reduces to three questions. First, the capital question: if the investors of the next two rounds are US-based, the Delaware direction weighs heavier; if they are domestic and regional funds, the joint-stock company suffices. Second, the market question: if the weight of revenue will shift to the US, the structure moves that way too; if revenue sits in Türkiye and the near region, the cost of a dual structure has no justification. Third, the team and ESOP question: a global team and a broad option plan write in Delaware’s favour; a local team and the incentive ecosystem — technopark advantages, R&D support schemes — write in Türkiye’s favour.
Timing is part of the decision. An early flip-up is cheap and clean while the company is small, but pulls forward a cost that may never be needed; a late flip-up means carrying a grown cap table, a matured IP portfolio and a transaction whose tax dimension has become heavy. The path that works most comfortably in practice is tying the structure to a concrete capital event: with a US-based lead investor’s term sheet on the table, a flip-up is justified; done without one, a flip-up is usually an invoice issued against hope. We covered the mechanics in five key points of the flip-up.
An anonymised example: a fintech startup earning mostly in Türkiye executed an early flip-up on the logic of “we’ll need it one day”; it carried the maintenance cost of the dual structure for two years, the US round never came, and the structure had to be simplified in the next domestic round. The opposite example carries the same lesson: at a SaaS startup whose US lead had signed the term sheet, the flip-up was run in a planned way as a closing condition of the round and completed within two months. The difference lay in tying the structure to a concrete event rather than to hope.
To sum up the framework: the choice between a Delaware C-Corp and a Turkish joint-stock company is not a quality contest but an alignment problem — the structure must align with the geography of the capital, the market and the team. For a startup growing on domestic capital in a domestic market, the joint-stock company is a low-cost, functional home; for one heading towards US capital, Delaware is the unavoidable stop, and the flip-up should be executed in a planned way when the right moment arrives. The most expensive scenario is the one in which nobody takes the decision and the structure shapes itself under the pressure of a round.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
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