Question 1

Should I form an LLC or C-corp?

Accepted Answer

C-corp if you plan to raise VC funding—it is the expected structure. LLC if you want pass-through taxation and don't plan to raise institutional money. Most tech startups should be C-corps from the start.

Question 2

Why do startups incorporate in Delaware?

Accepted Answer

Delaware has established corporate law, specialized courts (Court of Chancery), flexibility, and privacy. VCs expect it. You can be a Delaware company while operating anywhere. It is the standard for good reasons.

Question 3

What is Stripe Atlas and is it worth it?

Accepted Answer

Stripe Atlas is a $500 package that forms your Delaware C-corp, provides lawyer-vetted documents, sets up your bank account, and gives you Stripe for payments. It is worth it for the convenience and proper document setup.

Question 4

What legal documents do I need when incorporating?

Accepted Answer

Articles of Incorporation (filed with the state), Bylaws (internal governance), Stock Purchase Agreements (for founders), 83(b) Elections (for tax), and Initial Consent (board actions). Atlas and similar services provide templates.

Question 5

What is 83(b) election and why is it critical?

Accepted Answer

An 83(b) election lets you pay tax on unvested stock at current (low) value instead of when it vests at (presumably higher) value. Must be filed within 30 days of stock grant. Missing this deadline can cost enormous amounts in taxes.

Question 6

How do I divide equity among co-founders?

Accepted Answer

There is no formula—it depends on relative contributions, roles, and risk taken. 50/50 is common for equal co-founders. Use vesting (typically 4 years with 1 year cliff) so equity is earned over time.

Question 7

What is vesting and why does it matter?

Accepted Answer

Vesting means equity is earned over time. Standard: 4-year vesting with 1-year cliff. If a co-founder leaves after 6 months, they keep nothing. This protects remaining founders from early departures.

Question 8

Can international founders form a US company?

Accepted Answer

Yes, non-US residents can form Delaware corporations. You do not need US citizenship or residency. Services like Stripe Atlas specialize in helping international founders incorporate in the US.

Question 9

Do I need a registered agent?

Accepted Answer

Yes, every Delaware company needs a registered agent in Delaware for legal documents. Incorporation services provide this. It costs $50-300/year. Do not skip it or use your personal address.

Question 10

What ongoing compliance is required?

Accepted Answer

Delaware franchise tax (minimum $400/year), annual report, maintaining a registered agent, proper board/shareholder meetings (can be documented consents), and keeping accurate stock records.

Question 11

Should I incorporate before or after validating my idea?

Accepted Answer

Incorporate when you need to: accepting money, signing contracts, or bringing on co-founders/employees. Pure ideation doesn't need a company. But don't delay once you're doing real business—liability protection matters.

Question 12

How much does incorporation cost?

Accepted Answer

DIY: $89 Delaware filing + registered agent ($50-300/year). Stripe Atlas: $500 all-in first year. Lawyers: $1,500-5,000+. For most startups, Atlas or similar services offer the best value.

Question 13

Can I change my company structure later?

Accepted Answer

Converting LLC to C-corp is possible but involves legal/tax complexity. Converting C-corp to S-corp has restrictions. Best to choose correctly upfront if you know your path. Consult a lawyer for conversions.

Question 14

What is the difference between authorized and issued shares?

Accepted Answer

Authorized shares are what your certificate of incorporation allows you to issue (commonly 10 million). Issued shares are what you've actually given out. Keep authorized high for future flexibility.

Question 15

Do I need a lawyer for incorporation?

Accepted Answer

For simple formations with services like Atlas, probably not. For complex situations (multiple founders, unusual structures, international considerations), yes. The cost of getting it wrong exceeds lawyer fees.

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