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Incorporation
TL;DR- It’s time to become a real company. Let’s set up your Delaware C corp.
- Delaware C Corp is the recommended entity for high-growth companies
- Best to incorporate as soon as you’re committed to an idea
- If you eventually want to fundraise make sure you start your data room today
📺 Watch session with MoFo
Startup Incorporation AMA with MoFo
- Morrison & Foerster (MoFo) is a multinational law firm operating in the US, Asia, and Europe, advising clients across industries and practices, including IP, patent litigation, incorporation, fundraising, and more.
- Mike LaPlante, Partner at MoFo, is an attorney with more than a decade of experience acting as a trusted and practical strategic advisor to hundreds of entrepreneurs and the startup companies they have built, at all stages of their lifecycle.
📖 Read Summary
- The recommended entity for most high-growth companies that reinvest revenue and operate without profits is a C Corp, as it offers several advantages over an LLC. While corporations are subject to double taxation, LLCs are not. However, C Corps make it easier to raise money and offer tax advantages through Qualified Small Business Stock (QSBS).
- The company name can be changed later and should not be a reason to delay formation. It is best to form a company as soon as you are committed to the idea. The primary downside to forming a company is the sunk costs, such as the filing fee with Delaware, but the upsides include starting the QSBS 5-year clock, assigning IP to the company, and avoiding disputes during founder breakups. Sunk costs also include Delaware filing fees and an annual franchise tax.
- Founder breakups are common and maintaining control of a company is often misunderstood. Control doesn't lie in owning 51% of the stock but in the board level. There are three control components: stockholders, directors, and officers. Stockholders elect directors, who choose officers. Equal equity splits among founders usually lead to more successful companies. Tiebreakers are not recommended as they can signal mistrust to investors. Control should be focused on the board, and in the event of a founder breakup, negotiations are usually possible.
🔍 Due Diligence
⚠️ If want to eventually fundraise make sure you do the following at the moment of incorporation to avoid issues later on:
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- Filed Certificate of Incorporation
- Initial Board Consent electing officers and executives
- Bylaws
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- Restricted Stock Purchase Agreement / Common Stock Purchase Agreement
- With Vesting
- 83(b) elections or confirmation
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- Offer Letters
- Consulting Agreements
- Founder Agreements
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- SAFEs and other convertibles
- Any Side Letters
- Any priced round documents
- Any debt documents
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- CIIAs and PIIAs
- IP Assignment Agreements
- NDAs
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- Any subsidiary documents
- Any legal changes to company
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- No worries if you don't have anything set up yet! Make sure to check the section for more info.Equity Management
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US-based wire:
- Beneficiary Name
- Routing Number
- Specifically for Wires, not ACH
- Account Number
- Beneficiary Address
If Non US wire:
- Beneficiary Name
- SWIFT Code
- Bank Name
- IBAN/Account Number
- Location of Bank
- Beneficiary Address
🔑 Resources
| Name | Exclusive Perk | Redeem Perk | On Deck Partner |
|---|---|---|---|
* $2,500 flat-rate Formation Package: includes personalized formation strategy, incorporation, issuance of founder preferred stock, IP assignment and set of key forms. * Fee Deferral for 12mo or until you raise 1M. | |||
$100 off Company Lifetime Package | |||
30% off first year of service | |||
$250USD off |
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