For a venture-backed startup, the only choice is a Delaware C-Corporation. Incorporate when you're about to raise money, hire, sign a major contract, or launch. Use a platform like Clerky or Stripe Atlas, authorize 10M shares, and file your 83(b) election within 30 days to avoid massive tax penalties.
Key takeaways
- Incorporate when you have a trigger moment: raising funds, hiring, or launching.
- Choose a Delaware C-Corp. An LLC is a costly mistake you will have to pay to fix.
- Use a platform like Stripe Atlas or Clerky for a streamlined, flat-fee process (~$500).
- Authorize 10,000,000 shares of common stock at a par value of $0.00001.
- You MUST file your 83(b) election within 30 days of receiving your founder stock. No exceptions.
- Assign all pre-existing IP to the corporation and set up a clean cap table from day one.
It feels like administrative trivia, but incorporation is a company-defining event. Getting it wrong creates messes that can delay funding rounds, create massive personal tax liabilities, and even kill your company.
Incorporate too early, and you're burning cash on legal fees and franchise taxes for nothing more than an idea. Incorporate too late, and you're personally liable for everything, co-founder ownership is dangerously ambiguous, and you’ll have to pay lawyers to clean it all up right when an investor is ready to wire money.
Don't guess. If any of these events are on your 60-day horizon, it's time to incorporate. Not "thinking about" them, but actively preparing for them.
You're about to accept outside money. This means a priced seed round, an angel check, or a convertible note. Serious investors only give money to a corporation, never to an individual.
You're hiring your first employee. You can't run payroll or grant equity without a legal corporate entity. Contractors are a gray area, but for a full-time employee, it's a hard requirement.
You're signing a significant contract. The company—not your personal bank account—must be the entity of record for major customer deals, office leases, or critical software licenses.
You're launching or taking on users. The moment your product is in the hands of users, you have potential legal liability. A corporation acts as a legal shield between business liabilities and your personal assets (your home, car, and savings).
Significant IP has been created. If you and a co-founder have been building for months, you need to formalize that the company —not the two of you as individuals—owns the code, brand, and domain. Otherwise, one founder walking away could take half the IP with them.
The Only Choice for a Venture-Backed Startup: Delaware C-Corp
Let's be clear: If you plan to raise money from venture capitalists, you do not have a choice. You are forming a Delaware C-Corporation.
An LLC or an S-Corp is not a "simpler first step."…
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Frequently asked questions
- How much does it cost to incorporate a Delaware C-Corp?
- Using a platform like Stripe Atlas or Clerky costs about $500. You will also pay state filing fees (~$90) and annual costs for a registered agent (~$100) and Delaware Franchise Tax (~$450+).
- What happens if I miss the 30-day 83(b) election deadline?
- You will owe ordinary income tax on the value of your stock as it vests. As your company's valuation increases, this can lead to a huge tax bill on money you haven't actually received.
- Can I start with an LLC and convert to a C-Corp later?
- This is a common and expensive mistake. An investor will require you to convert, and the legal and accounting fees to clean it up typically cost $5,000 to $15,000 and can delay your funding round.
- What is standard founder stock vesting?
- The standard is a 4-year vesting schedule with a 1-year "cliff." This means you get 0% of your stock for the first year, and then 25% on your one-year anniversary, with the rest vesting monthly for the next three years.
- Do I need a lawyer to incorporate?
- For 95% of startups, a platform like Clerky or Stripe Atlas is sufficient. You might use a law firm for highly complex situations, like unusual IP arrangements or multiple pre-existing corporate entities.
