Delaware C-Corp vs UK Ltd — Startup Structures

Head to head

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QSBS — why it matters for US investors

The Qualified Small Business Stock (QSBS) exemption under IRC Section 1202 allows US investors in C Corps (not LLCs) to exclude 100% of capital gains (up to USD 10M or 10x their basis) on qualifying stock held for 5+ years. For a US angel investor putting $200K into your company and exiting at $2M, this exemption saves approximately $380,000 in federal capital gains tax.

This is why US angels and early-stage VCs often prefer to invest in Delaware C Corps — not because of the corporate law specifically, but because of QSBS.

Non-US investors: QSBS does not apply to non-US investors. If all your investors are non-US, QSBS is less relevant.

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EMI for UK Ltd — the UK equivalent

• For UK Ltd companies, the Enterprise Management Incentive (EMI) scheme allows employees to receive up to £250,000 of qualifying share options (£3M total across all employees) with favourable tax treatment:
• 0% income tax/NIC on exercise (options must be exercised at market value at grant)
• 10% CGT rate on eventual sale (Business Asset Disposal Relief for qualifying shares)

EMI is one of the world's most generous employee share incentive schemes. For UK-market-focused companies that won't raise US VC, EMI + UK Ltd is the optimal structure.

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Choose Delaware C Corp if: ✅ Raising US institutional VC ✅ US angel investors who value QSBS ✅ Distributing equity broadly to a US-based team ✅ Planning US IPO

Choose UK Ltd if: ✅ Bootstrapped or non-US-investor-backed ✅ EU or UK-facing business ✅ UK team (EMI scheme) ✅ Maximum simplicity and lowest cost

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