VC-friendly corporate structures for African startups

Most founders in Lagos, Kano, and Accra are building brilliant products. Few are building them in structures that investors actually want to fund. This matters because the wrong corporate wrapper-even with the right product-can cost you six months in diligence, kill a deal in its final week, or lock you out of international capital entirely.

This article walks you through why structure matters for VC, which jurisdictions work for African startups raising from US and European funds, and how to move your existing Nigerian company into a VC-ready vehicle without losing control or triggering a tax nightmare. By the end, you'll know whether you need a Delaware C-Corp, a Mauritius holding company, or a Cayman Islands structure-and why most African founders get this wrong.

Why structure is the first question VCs ask

When you sit across from a US or European venture capital firm, they're not just evaluating your market or your team. They're asking: "Can we legally own this? Can we exit it? What's our tax exposure?" Your corporate structure determines all three answers.

Here's the problem: Nigeria's Companies and Allied Matters Act (CAMA) 2020 and most African corporate codes were written for family businesses and government contractors, not for venture-backed startups. They don't anticipate:

• Multiple liquidation preferences (what investors need to protect downside)
• Employee stock option pools (how you retain talent at scale)
• Founder vesting schedules (how investors protect against founder exit)
• Anti-dilution provisions (how investors protect against down rounds)
• Drag-along and tag-along rights (how exits actually happen)

A Nigerian LLC or a sole proprietorship registered with the Corporate Affairs Commission (CAC) can legally exist, but it can't easily accommodate these terms. An investor's lawyer will flag it as "non-standard" and require restructuring before they'll commit capital. That restructuring-done at the last minute-costs time, legal fees, and often founder dilution.

The solution: use a VC-standard jurisdiction as your holding company or primary vehicle, then operate in Africa through subsidiaries or branches. This is not tax evasion. It's standard practice for every African startup that has closed a Series A or beyond-from Flutterwave to Paystack to Moniepoint.

The three structures that work for African startups

Delaware C-Corporation

Delaware is the default choice for African startups raising from US and UK funds. Here's why:

Advantages:

• US investors know it. Their template documents assume Delaware law.
• It supports all VC-standard terms: preferred stock, option pools, liquidation preferences, anti-dilution.
• Tax-efficient for foreign founders. You don't pay Delaware income tax on profits earned outside Delaware (which is all of them).
• Established case law. Judges have decided thousands of startup disputes-investors know how disputes will be resolved.
• Straightforward to establish: 48 hours, ~$300 with a registered agent.

Disadvantages:

• You'll still need a Nigerian operating subsidiary to legally conduct business in Nigeria (Paystack, Flutterwave, and Stripe all do this).
• Requires annual compliance: filing, registered agent fees, franchise tax (~$150-$400 per year).
• Non-resident founders need a US tax identification number (ITIN) and may need to file US tax returns even if they owe nothing.

When to use it: You're raising from US or UK VCs, you're building a pan-African or global product, or you want the default structure that works everywhere.

Mauritius company

Mauritius has quietly become the holding company of choice for African tech founders. The reasons are practical:

Advantages:

• Tax treaty network: Mauritius has double-taxation treaties with most African countries, including Nigeria. This means your Nigerian subsidiary can pay dividends to the Mauritius parent with minimal withholding tax.
• Investor comfort: Funds managing African portfolios (Andreessen Horowitz, Sequoia, Accel, Lightspeed, Greycroft) all have Mauritius structures in their portfolio companies. They understand the jurisdiction.
• Flexibility on equity terms: Mauritius law, like Delaware law, allows preferred stock, options, and liquidation preferences.
• Simpler compliance for African founders: Mauritius is geographically and culturally closer to Nigeria than Delaware. Accounting is easier.

Disadvantages:

• Less familiar to early-stage US angels and micro-VCs (though this is changing).
• Requires a local director and registered office in Mauritius (typically ~$1,500-$3,000 per year).
• Mauritius-to-Nigeria transfer pricing rules apply. You need to document that intercompany charges are at arm's length.

When to use it: You're raising primarily from African or pan-African funds (TinCaps, Ventures Platform, Loftyinc, Greycroft's Africa fund), you're building an African-first product, or you want tax efficiency across multiple African jurisdictions.

Cayman Islands company

Cayman is less common for African tech startups but useful in specific scenarios:

Advantages:

• Preferred by mega-funds (Sequoia, Accel, Bessemer) for large Series A and beyond deals.
• Zero corporate income tax and no reporting requirements on beneficial owners (privacy).
• Established offshore fund jurisdiction. If you're raising from international LPs, they may prefer Cayman.

Disadvantages:

• Overkill for pre-seed and seed rounds. You'll pay $5,000+ annually for minimal benefit.
• Perceived as "tax haven" by some African regulators. Not ideal if you're operating primarily in one African country.
• Requires a Cayman director and registered agent.

When to use it: You're raising a Series B+ from mega-funds, or you're building a fund (not a startup).

How the structure actually works: the operating subsidiary model

Most successful African startups use this architecture:

1. Holding company (Delaware, Mauritius, or Cayman) - owns 100% of the operating company.
2. Operating subsidiary (Nigeria, Kenya, Ghana, etc.) - where the business actually operates and generates revenue.
3. Investors buy shares in the holding company. When you raise, VCs invest in the Delaware or Mauritius entity. They don't invest in the Nigerian subsidiary.

Here's why this works:

Element	Holding Company	Operating Subsidiary
Investors own	Yes (100% diluted by new rounds)	No (owned by holding company)
Revenue generated	No	Yes (Paystack payments, Flutterwave transactions, etc.)
Legal risk	Low (no direct operations)	High (employment, contracts, regulation)
Tax jurisdiction	Delaware, Mauritius, or Cayman	Nigeria, Kenya, Ghana, etc.
Restructuring cost	Low (already VC-ready)	High (CAC registration, tax clearance, etc.)

Example: How Paystack is structured (public knowledge)

Paystack (now owned by Stripe) was founded by Shola Akinlade and Ezra Olubi in Lagos. The company operates through:

• Paystack Inc. (Delaware C-Corp) - the entity VCs invested in, the entity Stripe acquired.
• Paystack Nigeria Limited (CAC-registered) - the operating company licensed by CBN, holding customer funds, processing transactions.

When Stripe acquired Paystack in 2020, they bought Paystack Inc. The Delaware shell owned the Nigerian operating company. This structure meant:

• Stripe's lawyers could review a Delaware company (they know that law).
• Paystack's Nigerian banking licenses and CBN relationships stayed intact.
• Tax efficient: dividends could flow from Nigeria to Delaware with minimal withholding.

Setting up the structure: the practical steps

If you're currently a Nigerian sole proprietor or LLC and you want to raise VC, here's the path:

Step 1: Decide on your holding company jurisdiction (2 weeks)

Ask yourself:

• Where is my lead investor based? (US → Delaware; African → Mauritius; Mega-fund → Cayman)
• What's my primary market? (Nigeria → Mauritius or Delaware; Pan-Africa → Mauritius; Global → Delaware)
• How much am I raising? (Pre-seed/Seed → Delaware; Series A+ → Mauritius or Cayman)

For most Nigerian founders raising their first institutional round: Delaware.

Step 2: Incorporate the holding company (1 week)

Delaware:

• Use a registered agent (Stripe, Loom, and most YC companies use Clerky or Northwest).
• Cost: $300-$500 total. Annual maintenance: $150-$400.
• Process: online, 48 hours.

Mauritius:

• Use a local company formation agent (Mauritius has dozens; check references).
• Cost: $1,500-$3,000 initial. Annual maintenance: $1,500-$3,000.
• Process: 5-10 business days.

Cayman:

• Use a Cayman-licensed formation agent.
• Cost: $3,000-$5,000 initial. Annual maintenance: $3,000-$5,000.
• Process: 3-5 business days.

Step 3: Transfer your assets and IP (2-4 weeks)

This is where most founders get stuck. Your existing Nigerian company owns your code, your brand, your customer contracts. You need to transfer these to the holding company structure without triggering tax or legal issues.

The process:

1. Audit what you own: Code (GitHub), domain names, trademarks (NIPPON), customer contracts, employee agreements.
2. Document the transfer: Create a written agreement showing the Nigerian company is transferring all IP to the holding company in exchange for equity (usually 100% of the holding company's shares, held by the Nigerian company).
3. File with CAC: Notify the Corporate Affairs Commission of the change in ownership. This is not a dissolution-it's a restructuring.
4. Tax clearance: Get a tax clearance certificate from FIRS showing no outstanding liabilities. This is critical. Investors will ask for it.

You'll likely need a Nigerian corporate lawyer for this. Budget: ₦500,000-₦1,500,000 (~$300-$900 USD). This is a one-time cost.

Step 4: Register the operating subsidiary in your jurisdiction (1 week)

If you're keeping a Nigerian operating company, you'll likely already have it registered. If you're expanding to Kenya or Ghana, register a new company there following local rules.

Why keep the Nigerian company?

• CBN banking regulations require a Nigerian entity to hold banking licenses.
• Customer contracts often require a local entity.
• Tax compliance is simpler if revenue is generated locally.

Step 5: Set up intercompany agreements (1 week)

Your holding company and operating subsidiary need a written agreement explaining:

• Service agreement: What services does the holding company provide to the operating subsidiary? (IP licensing, management, R&D.) At what cost?
• Transfer pricing: How much does the operating subsidiary pay for these services? This must be "arm's length"-what an independent company would pay.

This is critical for tax compliance. If the Nigerian subsidiary pays the holding company nothing, the Nigerian tax authority (FIRS) will flag it. If it pays too much, the same happens.

Typical model: The operating subsidiary pays the holding company 3-8% of revenue for IP licensing and management services. Your accountant can model this.

Step 6: Update your cap table and agreements (1 week)

Your existing shareholders (founders, early employees, angel investors) now own shares in the holding company, not the operating subsidiary. This requires:

• Updated cap table: Who owns what percentage of the holding company?
• New shareholder agreements: If you have one, update it to reflect the new structure.
• Employee option pool: Move existing options to the holding company or reissue them.

If you have early investors or employees, this can get complicated. You may need to offer them new shares in the holding company to replace their old shares in the operating company. Communicate clearly and early.

The legal and tax considerations

Read Delaware C-Corp vs Nigerian LLC: which structure for your startup? for a detailed breakdown, but here are the key points:

Tax implications for Nigerian founders:

• Personal income tax: You don't pay Nigerian income tax on the holding company's income (it's not earned in Nigeria). You pay tax only on dividends or salary you withdraw.
• Corporate tax in Nigeria: Your Nigerian operating subsidiary pays corporate income tax at 30% on profits earned in Nigeria (standard rate).
• Withholding tax on dividends: If the Nigerian subsidiary pays dividends to the holding company, Nigeria withholds 10% (or less if a treaty applies). Mauritius has a treaty that reduces this to 5% in some cases.
• Transfer pricing: If the holding company charges the operating subsidiary for services, FIRS will scrutinise the price. Document it carefully.

Investor legal requirements:

When you raise a round, your investors will require:

1. Certificate of incorporation (holding company).
2. Cap table (who owns what).
3. Articles of incorporation (holding company bylaws).
4. Board resolutions (approving the investment).
5. Tax clearance certificate (from FIRS for the Nigerian operating company).
6. IP audit (confirming all code, trademarks, and customer contracts are owned by the holding company).
7. Intercompany agreements (showing the operating subsidiary is a legitimate subsidiary, not a separate business).

Your lawyer will prepare these. Budget: $5,000-$15,000 for a seed round, $15,000-$40,000 for Series A. This is paid from the investment.

Common mistakes founders make

1. Waiting until the last minute to restructure

Many founders approach restructuring when they're in final diligence with an investor. By then, it's too late to fix issues cleanly. You're under time pressure, your lawyer is rushing, and mistakes happen. Restructure 3-6 months before you plan to raise.

2. Not getting tax clearance from FIRS

If your Nigerian operating company has outstanding tax liabilities, the holding company structure doesn't erase them. FIRS will still pursue them. Get a tax clearance certificate before you restructure. If you owe taxes, pay them or negotiate a payment plan with FIRS.

3. Assuming the holding company is tax-free

It's not. You'll file annual returns with the Delaware Department of State or Mauritius registrar. You may owe franchise tax (Delaware charges $150-$400 annually). Mauritius companies file annual accounts. Keep records.

4. Not documenting IP transfer

If your code, brand, or customer contracts aren't formally transferred to the holding company, investors will require you to do it during diligence. This creates risk and delays. Do it upfront.

5. Forgetting about employee options

If you have employees with stock options in the old Nigerian company, you need to reissue them in the holding company or provide new shares. Communicate this clearly. Don't leave it to surprise them during diligence.

When you don't need to restructure (yet)

Not every startup needs this immediately:

• Pre-seed, friends and family only: If you're raising ₦5-₦50 million from Nigerian angels and friends, a Nigerian LLC is fine. Restructure when you're raising from institutional VCs.
• Bootstrapped and staying that way: If you're profitable and not raising VC, keep your Nigerian structure. It's simpler.
• Micro-VCs and African angel networks: Some investors are comfortable with Nigerian structures. Ask them upfront. If they say "restructure before we invest," that's your signal.

But if you're planning to raise a seed round or beyond from US or European VCs, start the restructuring conversation now.

What your cap table looks like after restructuring

Let's say you founded a startup with a co-founder. You each own 50%. You took ₦10 million from a Nigerian angel. You want to raise a $500k seed round from a US VC.

Before restructuring (Nigerian company):

• You: 45% (you own 50%, diluted by angel)
• Co-founder: 45%
• Angel investor: 10%

After restructuring (Delaware holding company):

• You: 45% (of the Delaware company)
• Co-founder: 45%
• Angel investor: 10%
• New VC investor: 25% (post-money valuation $2 million)

Everyone's percentage goes down, but the pie grows. Your 45% of a $2 million company is worth more than 45% of a $500k company.

For a deeper breakdown of what investors are actually looking for in your structure, see Raising pre-seed in Nigeria: what investors actually want in 2026.

The term sheet and structure

Once you've restructured and you're raising, your term sheet will reflect your structure. This is where terms like "liquidation preference" and "anti-dilution" come into play. These terms are only possible in a VC-ready jurisdiction.

For a line-by-line breakdown of what a term sheet actually means, read A startup term sheet, line by line - from a Nigerian founder's view. But know this: every material term in that sheet depends on your company being in a jurisdiction that supports it.

FAQ

Q: Do I need to move to Delaware or Mauritius to incorporate there? A: No. You can incorporate remotely using an online agent (Clerky for Delaware, a local agent for Mauritius). You don't need to be physically present. You'll need a US tax ID (ITIN) for Delaware and a local director in Mauritius, but neither requires you to move.

Q: If I restructure, do I lose my Nigerian business licenses and CBN approvals? A: No. Your Nigerian operating subsidiary keeps all licenses and approvals. The restructuring is a change in ownership, not a dissolution. Notify CBN and other regulators of the change, but licenses remain valid.

Q: What if my angel investors don't want to convert to the new structure? A: Communicate early. Most angels understand this is necessary for institutional funding. Offer them new shares in the holding company at the same percentage ownership. If they refuse, they can stay in the old Nigerian company (which becomes a subsidiary), but they won't participate in future rounds unless they convert.

Q: How much does restructuring cost in total? A: Roughly $2,000-$8,000 for a Delaware structure (lawyer + incorporation + initial compliance). Mauritius is $3,000-$10,000. This is a one-time cost. Don't skimp on the lawyer-a bad restructuring costs far more to fix later.

Q: Can I restructure if I already have a Nigerian trademark or patent? A: Yes. Trademarks and patents are owned by the company, not the founder. When you restructure, you transfer ownership to the holding company. File a change-of-ownership form with NIPPON (for trademarks) and the Nigerian Patent and Designs Registry. It's straightforward.

What to do next

1. Decide your jurisdiction: Are you raising from US VCs (Delaware), African VCs (Mauritius), or staying bootstrapped (stay Nigerian for now)? Make this decision this week.

2. Get a lawyer: Find a Nigerian corporate lawyer with VC experience. Ask for references from founders who've restructured. Budget ₦500,000-₦1,500,000 for a consultation and restructuring plan.

3. Start the IP audit: List every asset your company owns-code, domains, trademarks, customer contracts, employee agreements. Make sure it's all legally owned by your current company. This takes 2-3 weeks.

4. Plan the timeline: If you're raising in 2026, restructure in Q1 2026 at the latest. Don't wait until you're in diligence.

For more on what investors actually want to see before they commit, read Raising pre-seed in Nigeria: what investors actually want in 2026. And when you're ready to understand the legal differences between structures in detail, Delaware C-Corp vs Nigerian LLC: which structure for your startup? breaks it down line by line.