The Startup Legal Setup: A Founder''s Guide to the First Documents That Prevent Ninety Percent of Later Problems
Ninety percent of the legal issues that surface during Series A or later diligence are things that should have been done correctly in the first year. Founders discover them at exactly the wrong moment — during a diligence process, with a term sheet in hand and 30 days to close. The fixes are usually expensive, sometimes deal-killing.
This guide covers the specific documents and filings that need to be in place from the start, and the four founder-side filings that are most commonly missed.
The default choice for a venture-backed startup is a Delaware C-corporation. Not Delaware LLC. Not California C-corp. Not S-corp. Delaware C-corp.
Every VC firm''s standard documents are built for Delaware C-corps.
Delaware corporate law is the most developed and predictable in the country.
The Court of Chancery handles corporate disputes with expert judges and no juries.
Every acquiring company''s legal team is fluent in Delaware C-corp mechanics.
Multi-state operating flexibility with a single corporate structure.
The exceptions are narrow: if the company will never raise institutional capital and prioritizes tax pass-through, an LLC might be right. In every venture-scale scenario, Delaware C-corp is the answer.
Six documents produced at incorporation. All should be executed and stored properly. 1. Certificate of Incorporation. Filed with Delaware. Sets authorized shares, par value, and initial capital structure. 2. Bylaws. Internal governance rules — how the board is elected, meeting requirements, officer roles. 3. Board Consent (Initial). The first board resolution — adopts bylaws, elects officers, authorizes stock issuance. 4. Founder Stock Purchase Agreements. One per founder. Governs founder stock purchase, vesting, transfer restrictions. 5. Common Stock Certificates. Physical or electronic evidence of founder stock ownership. 6. Cap Table. Working document tracking all…
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