How to Incorporate Your Startup
Delaware C-Corp Guide
The complete guide to incorporating your startup as a Delaware C-Corp — the standard entity structure for VC-backed companies. Covers entity types, why Delaware, step-by-step formation, post-incorporation tasks, and cost.
What is incorporation?
Incorporation is the legal process of forming a corporation — a separate legal entity that is distinct from its founders and owners.
Once incorporated, the corporation can enter contracts, hire employees, own property, raise capital from investors, and be subject to lawsuits — all independently from the founders as individuals.
For startups seeking venture capital, incorporation is essential. VCs invest in corporations, not in individuals or informal business relationships.
Why you need to incorporate before...
- Raising money from investors (angels, VCs, accelerators)
- Issuing equity to co-founders or employees
- Signing contracts with customers or vendors
- Hiring employees and running payroll
- Getting a 409A valuation for stock options
- Applying to YC, Techstars, or other accelerators
- Opening a business bank account
- Protecting yourself from personal liability
C-Corp vs LLC vs S-Corp
For VC-backed startups, the answer is almost always Delaware C-Corp. Here is why.
| Feature | C-Corp | LLC | S-Corp |
|---|---|---|---|
| Can raise VC funding? | Yes — required by most VCs | Rarely — VCs typically will not invest | No — S-Corp restrictions disqualify VC |
| Can issue stock options? | Yes (ISOs and NSOs) | No — issues membership units, not options | Limited — no ISOs; NSO complications |
| Multiple share classes? | Yes (common, preferred, etc.) | Limited membership classes | No — only one class of stock |
| Taxation | Double taxation (corporate + dividends) | Pass-through (owners taxed directly) | Pass-through (with restrictions) |
| QSBS eligibility | Yes — significant tax savings for investors | No | No |
| Simplicity / formalities | Formal — board, minutes, annual reports | Flexible — fewer formalities | Formal + shareholder restrictions |
| Best for | VC-backed startups, tech companies | Lifestyle businesses, real estate | Small service businesses (no VC) |
Why Delaware?
More than 66% of Fortune 500 companies and the vast majority of VC-backed startups are incorporated in Delaware. Here is why.
Developed corporate law
Delaware's General Corporation Law (DGCL) is the most comprehensive and flexible in the US. Decades of Court of Chancery rulings provide clear precedent for corporate governance disputes.
Court of Chancery
Delaware's Court of Chancery handles corporate disputes with judges (not juries) who specialize in corporate law. Cases resolve faster and more predictably than in other states.
VC and investor familiarity
Every VC firm, startup attorney, and accelerator has standard documents for Delaware C-Corps. Non-Delaware entities require custom legal work and may face resistance from investors.
No Delaware income tax for out-of-state companies
If you incorporate in Delaware but operate elsewhere, you owe no Delaware income tax on income earned outside Delaware — only the annual franchise tax.
Steps to incorporate a Delaware C-Corp
Choose your company name
Pick a name and verify availability on the Delaware Division of Corporations website. Reserve the name if needed. Check trademark availability at USPTO.
Appoint a registered agent
Delaware requires a registered agent with a physical address in Delaware. Services like Stripe Atlas, Legalinc, or Cogency Global provide this for $50–$200/year.
File Certificate of Incorporation
File with the Delaware Division of Corporations. Standard filing: $90 state fee + registered agent. Expedited 24-hour filing: $125 additional. Online services handle this for you.
Obtain EIN from the IRS
Apply for an Employer Identification Number (EIN) at IRS.gov — free, takes 5 minutes online. Required before opening bank accounts or hiring employees.
Adopt bylaws and organizational minutes
Prepare board-level organizational resolutions: elect officers, adopt bylaws, approve issuance of founder shares, authorize bank accounts. Usually handled by your startup attorney.
Issue founder shares
Issue restricted stock to co-founders with vesting schedules. File 83(b) elections within 30 days. Use a 10,000,000 share structure (common for seed-stage C-Corps).
Open a business bank account
Open a corporate bank account using your EIN and Certificate of Incorporation. Mercury, Brex, or traditional banks. Keep personal and business finances completely separate.
Register in your home state
If your team is in California, New York, or another state, you may need to foreign qualify there. Consult your attorney — foreign qualification adds state fees and tax obligations.
Post-incorporation checklist
Incorporating is just the beginning. Here are the critical tasks to complete immediately after formation to protect your company and prepare for fundraising.
- Set up your cap table with founder share details
- Create an equity incentive plan (typically 10–20% option pool)
- File for S-election if applicable (within 75 days for S-Corps)
- Get a Delaware franchise tax estimate for year-end planning
- Prepare IP assignment agreements for all founders
- Set up payroll if hiring employees (Gusto, Rippling)
- Get a 409A valuation before issuing any stock options
- Apply for QSBS qualification (eligibility tracking)
Cost breakdown
| Item | Cost |
|---|---|
Delaware state filing fee Paid directly to Delaware | $90–$200 |
Registered agent (annual) Required in Delaware | $50–$200/yr |
Incorporation service (e.g., Stripe Atlas) Handles state filing + legal templates | $500 one-time |
Startup attorney (full service) Custom bylaws, stock plan, IPA agreements | $1,500–$3,000 |
Delaware franchise tax (annual) Calculated on authorized shares (use assumed par value method) | $400–$1,200/yr |
Foreign qualification (CA/NY/etc.) Required if you have employees in that state | $25–$200/yr |
After incorporating — next steps
Set Up Your Cap Table
Issue founder shares and set up your equity plan on OpenCap — free.
409A Valuation — $999
Get an IRS-defensible 409A before issuing stock options.
SAFE Notes Guide
Raise your first round with a YC SAFE note.
Vesting Guide
Set up founder and employee vesting schedules.
What is Equity?
All equity types at startups explained.
RSA vs RSU
Which equity grant type is right for your early hires.
Incorporation — frequently asked questions
What does incorporated mean?
Incorporation means creating a legally separate business entity — a corporation — distinct from its founders. The corporation can own assets, sign contracts, hire employees, raise money, and bear liability separately from its individual owners.
Why do startups incorporate in Delaware?
Delaware has the most developed corporate case law, predictable courts (Court of Chancery), flexible corporate statutes, and is familiar to VCs and institutional investors. Most VCs and accelerators require Delaware C-Corp status before investing.
What are articles of incorporation?
Articles of Incorporation (called Certificate of Incorporation in Delaware) is the founding legal document filed with the state to create a corporation. It includes company name, registered agent, authorized shares, and incorporator details.
What is the difference between a C-Corp and an LLC?
A C-Corp can issue multiple stock classes, grant stock options, and is required by most VCs. An LLC is simpler with pass-through taxation but cannot issue standard stock options and most VCs will not invest in LLCs.
How much does it cost to incorporate in Delaware?
Delaware state filing fees are $90–$200. Registered agent services: $50–$200/year. Online services like Stripe Atlas charge $500. Startup law firms: $1,500–$3,000. Annual Delaware franchise tax: $400–$1,200 for early-stage startups.
Set Up Your Cap Table After Incorporating
You just incorporated. Now issue founder shares, create your option pool, and track vesting — all on OpenCap. Free to start.