The answer to this question depends on many factors. If the subsidiary will always be wholly-owned by the European parent, the choice of state of incorporation is probably not too important from a corporate law perspective, because there is no need for very developed corporate law and special courts as there probably will not be any relevant disputes. In these cases, the state of incorporation should generally be Delaware or the state of the principal office of the subsidiary. The state of the subsidiary's principal office may be more convenient and cost effective, and may have some tax advantages. In these cases, the European parent company should consult with local counsel and tax advisors before deciding between Delaware and another state. Final Note: Companies incorporated in one state can be "reincorporated" in another state by merging the company into a company formed in the other state. This may get complicated in some cases, but it means that the state can be changed if necessary or desirable.

By John Pomerance, Attorney at Law.
If you have questions, you can e-mail John at jrpomerance@mintz.com.