Speaking of startups generally rather than YC specifically:<p>1)  Essentially no startups on the VC trajectory are incorporated anywhere but Delaware.  This is largely because investor confidence in the enforceability of their rights to what they&#x27;re purchasing trumps every other factor in incorporation.  For companies which have substantial business dealings outside of the US, they typically have foreign subsidiaries which are owned lock-stock-and-barrel by the US entity.  That is not a tax optimization.<p>2)  The overwhelming majority of startups pay no corporate income tax.  They use an old, old strategy to avoid it: <i>don&#x27;t make profits</i>.  If you have no profits, you pay no income taxes, and instead book an asset for all the taxes you&#x27;ll get to offset after you finally start making money some years after IPO.<p>Startups don&#x27;t simply avoid making profits because they&#x27;ve got creative international structuring going on where they&#x27;re charged $15 million a year for their own IP by an entity in Ireland.  They don&#x27;t make profits because their revenues are far lower than their expenses.  They run a substantial risk of running out of money and folding catastrophically <i>and this often happens.</i><p>Startups, like all businesses, generate substantial tax revenue outside of their corporate income tax returns.  California, for example, will hit every company doing business there with a franchise tax, which is basically &quot;welcome to California, for the privilege of doing business here please remit $800+.&quot;  Startups are also filled with highly compensated employees when they&#x27;re doing well, and these highly compensated employees both pay substantial income taxes and have substantial FICA&#x2F;etc taxes paid incident to their employ by the company.