VC Lab explains why over 60% of new VC managers choose Delaware as fund domicile, citing pass-through LP or LLC formation costing just $200-300 plus a $300 annual tax, same-day expedited entity formation, no state-level corporate income tax, and the Court of Chancery's deep, predictable business law expertise, as Europe grows more regulated, the UK faces Brexit isolation, and the Cayman Islands grow costlier under tightening AML and KYC rules. The guide also outlines Delaware's downsides, IRS oversight that some non-US LPs may see as added scrutiny, SEC accreditation and general solicitation compliance requirements, and greater exposure to US litigation, alongside SEC Regulation D's specific accredited investor tests: over $1 million net worth excluding primary residence, or income over $200,000 individually ($300,000 with a spouse) for two years running. Four specific exceptions are flagged where another domicile fits better: Ontario for Canadian funds given the US-Canada tax treaty, the British Virgin Islands for cryptocurrency funds given US hostility to the asset class, home-country domicile when all portfolio companies and LPs sit in one European country or Israel, and Singapore where local regulation requires domestic domicile regardless of preference.

Emerging fund managers deciding where to legally form their fund get specific, checkable cost figures, roughly $200-300 in formation fees versus multiples of that elsewhere, plus a concrete comparison against Delaware's fading rivals, the UK, Luxembourg, and the Cayman Islands, all explicitly named as having lost their earlier cost or regulatory advantage. The accredited investor test spelled out in exact dollar figures gives fund managers and prospective LPs a precise, self-checkable standard for fundraising eligibility, directly complementary to the LP-sourcing and fund-sizing guidance already cataloged from the same VC Lab series in this archive. The four named exceptions to defaulting into Delaware, Ontario, BVI, home-country Europe or Israel, and Singapore, are especially useful for non-US fund managers who might otherwise assume Delaware is automatically the right choice, since the guide makes clear the optimal domicile actually depends on LP location, asset class, and local regulatory mandates.