The Delaware Flip, end to end

A "Delaware flip" is the legal restructuring that turns a non-US startup into a Delaware C-Corp, with the old entity becoming a wholly-owned subsidiary. For Georgian-incorporated startups that want Silicon Valley money, the flip is the most common gate the lawyers will hold open before the wire transfer clears.

This primer covers what the flip actually is, why Western investors ask for it, what changes in your cap table when you do it, and what to watch for if your Georgian LLC has taken grant money or signed early customer contracts.

Why investors ask for it

US venture investors price legal risk into every deal. With a Delaware C-Corp, the risk is well-understood — there are decades of Delaware case law on shareholder rights, board duties, and dispute resolution. With a Georgian LLC, the risk is unknown, which for a fund manager is the same as unacceptable. Cooley GO — Delaware Flips — cooley-go

The list is roughly:

• Familiar shareholder protections (NVCA standard docs assume Delaware)
• Predictable tax treatment for the fund's LPs
• Cleaner exit mechanics for a US acquirer
• KYC/AML on a US entity that the fund's bank can clear
• A board that meets in a US-recognized governance framework

You can argue with each item individually. You will not move the position.

What the flip actually is

Mechanically: you incorporate a new Delaware C-Corp ("TopCo"), then the existing shareholders of your Georgian LLC ("LocalCo") exchange their LocalCo shares for TopCo shares on a defined ratio. LocalCo becomes a wholly-owned subsidiary of TopCo. Operations continue in Georgia under LocalCo; the cap table, fundraising, and IP ownership move to TopCo.

The exchange is governed by:

• A share exchange agreement between TopCo and each LocalCo shareholder
• Updated founder agreements with vesting that mirrors the original terms
• A services agreement or transfer pricing arrangement between TopCo and LocalCo (LocalCo is now performing R&D for TopCo and needs to be paid at arm's length)
• IP assignment from LocalCo (and individual contributors) to TopCo

The order matters. The flip needs to happen before the new money comes in, not as part of it. Stripe Atlas — Founder's guide — stripe-atlas

What changes for the cap table

The most-asked question. Founders often assume the flip is share-for-share neutral. It isn't, quite.

• Existing Georgian shareholders receive TopCo shares on the agreed exchange ratio. Their proportional ownership of TopCo should match their pre-flip ownership of LocalCo. If anyone gets a different ratio, that's a separate negotiation with separate tax consequences.
• The new investor then puts new money into TopCo at the post-flip valuation. They own a new fraction; existing holders dilute by that fraction. This is the same math as any priced round — the flip itself shouldn't dilute, only the new money does.
• Option pool is usually re-sized at the flip to the target the new investor wants (often 10–15% of post-money). The pool comes from pre-money, diluting existing holders only.

The mistake is treating "the flip" and "the round" as one transaction in your head. They are two transactions on the same closing day, with separate dilution math.

What changes for Georgian shareholders

Existing Georgian angel investors who own a piece of LocalCo will be asked to swap into TopCo. Most of them should. If they don't, they hold equity in a subsidiary with no liquidity path; LocalCo's exit is bounded by TopCo's exit, but they don't participate in TopCo's exit.

The dynamic that hurts is when a Georgian angel doesn't have the documentation or the bank arrangement to receive US-domiciled shares. The fix is to start that paperwork months before the flip, not the week of.

What changes for IP

If your engineers wrote the code as employees of LocalCo, LocalCo owns the IP. The flip moves IP ownership to TopCo via formal assignment. Two failure modes:

1. Pre-incorporation work. Code written by founders before LocalCo existed needs a separate "confirmatory IP assignment" from each founder. If anyone hesitates, the flip stalls.
2. Contractor work. Anything contracted out — design, infrastructure, even consultants — needs IP assignment language in the original contract. If it's missing, you need a retroactive assignment from each contractor before the flip closes. Some will refuse or extract a fee.

US investors will run an IP audit. If they find a gap, they don't fix it for you — they pause the round. WIPO — IP assignment basics — wipo

Georgia-specific considerations

A few items the generic Delaware-flip guides skip:

• Grant compliance. If your LocalCo took funding from GITA, EU programs, or other Georgian grant sources, those grants typically require the company to remain Georgian-registered for a defined period. The flip does not terminate LocalCo (it becomes the subsidiary), but the grant terms may require notice, consent, or a clawback calculation. Check before the term sheet, not after.
• Currency and transfer-pricing. The TopCo↔LocalCo services agreement needs to satisfy both US and Georgian tax authorities. Georgian transfer-pricing rules (Tax Code chapter on related-party transactions) apply. Underprice it and Georgia challenges you. Overprice it and the US challenges you.
• Existing customer contracts. If LocalCo signed deals naming "LocalCo OÜ" or "LocalCo შპს" as the counterparty, those don't auto-migrate. You'll either keep LocalCo as the operational counterparty (common for B2B SaaS) or formally assign each contract — which usually triggers a counterparty consent.

The honest cost

A flip done well costs $25k–$50k in legal fees (US + Georgian counsel), takes 4–8 weeks of calendar time, and consumes 100+ hours of founder attention. A flip done badly costs more later. NVCA Model Legal Documents — nvca

The savings from "let's just incorporate Delaware first" don't materialize if you actually had to operate in Georgia first to win grants, customers, or local talent. Flipping later is the price of starting locally.

Take this to your attorney

The paired one-pager — attorney-questions — gives you the 10 questions to bring to the first conversation with your lawyer. Don't sign a term sheet with a flip provision until you have answers to at least the first three.