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While incorporating is a relatively straightforward process, there are a few spots where founders commonly get hung up. Here are common mistakes we often see and what to do instead.

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Incorporating while still employed

Incorporating before you and your co-founders have officially left your jobs can cause serious headaches, especially when it comes to IP ownership. If you’re still employed elsewhere, your current employer may have a claim to anything you build, even if it’s on your own time. To keep things clean, make sure all co-founders have formally left their previous jobs before incorporating. This ensures the company owns the IP from day one, and helps you avoid messy disputes later, like Richard getting sued by Hooli on Silicon Valley.

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Going to lawyers before looking at other options

Incorporation used to mean engaging with a lawyer, spending thousands of dollars, and dealing with weeks of paperwork. Today, founders can set up their company in hours, affordably, and right in front of their computer.
Just like how YC invented SAFEs to make it simple for founders to raise funding without hiring expensive lawyers and taking months to close, tools like Stripe Atlas and Clerky do the same for incorporation.
Both cost $500 to get started, then $100/year to maintain your registered agent. That lawyer route makes sense only if your setup is more complex, like restructurings, recapitalization, or if you know what you’re doing and want a customized incorporation setup. Keep in mind that your legal name does not have to be your company’s name. It’s just what is registered with the government. Think of your legal name like your company’s birth certificate. It doesn’t have to match the name you use day to day. Stewart Butterfield, founder of Slack, was born “Dharma,” but started going by Stewart around age 12. Same person, different name.
Instacart incorporated under the legal name Maplebear Inc. as the founders were pivoting but needed a legal entity. It’s still their legal name today as a $10B+ public company.
Most software companies go with something like [Startup Inc.] [Name Corporation] or [Name Incorporated]. Stripe Atlas and Clerky will automatically check Delaware name availability as part of their process. If you’re handling it yourself, you can check for existing companies with the same name using the Delaware Entity Search.

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Registering for DBAs

Incorporating under a legal name is enough. A adds paperwork, offers no legal protection, and creates extra work if your name changes later. If a vendor, customer, or investor partner explicitly requires it or your legal team recommends it as part of scaling, you can handle it then. Until that happens, skip it.

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Overcomplicating your cap table

Early on, your cap table should be simple. You don’t need to stress over preferred shares, optimize for dilution, or fine-tune the employee pool before you’ve even launched. Stick with what Stripe Atlas and Clerky recommend, which is to authorize 10 million shares total, reserve 2 million for your employee pool, and split the remaining 8 million between cofounders.

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Unequal co-founder ownerships

There are many differing opinions on this topic, but we believe co-founder ownership should be equal. Even if you had the original idea or started working a few months before bringing on a co-founder, you should still consider offering equal ownership. Why? Ownership is about the potential value of the future, which is what matters in the long term.
Equity isn’t about what’s already been done, it’s a commitment to building the future together. If you want a co-founder who’s all in, the split should reflect that.
Think about it this way: if your co-founder has significantly less equity than you, are they really going to stick around when things get hard? Will they still be motivated as much as you are in 1, 2, 5, or 10+ years? If you’re serious about building something big and lasting, start from a place of shared ownership. Great YC post on this.

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Missing your 83(b) election

An 83(b) election is a short IRS form that tells the government you want to be taxed on the value of your stock now, while it’s worth basically nothing, not later, after it appreciates. It also locks in your QSBS timeline, which can lead to huge tax savings when you sell your shares. Stripe Atlas and Clerky handle this for you automatically within 10 business days after your founder shares are issued.
As of July 2025, you can now digitally submit your 83(b) election to the IRS at ID.me if you’re not using Stripe Atlas or Clerky. Previously you had to send it by certified mail.
You have 30 days from the date founder stock is issued to file your 83(b) election with the IRS.
It’s not the end of the world if you miss that deadline, but it’s messy and costly to try to fix. You may be able to work with a lawyer to “reset” the 30-day clock by amending your . This workaround only works if there’s a legitimate reason the stock wasn’t actually issued yet (e.g., signatures were missing, board consent wasn’t final, or payment hadn’t been made), and there is still some risk that the IRS will not accept the revised timeline.

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Using temporary addresses for the company

Using a home or short-term office for your company’s official address might seem fine at the time, but once you move, you’ll have to update the address everywhere, including the IRS, state filings, banks, payroll, etc.. It’s a huge hassle, and it can lead to missed mail and compliance issues.
The best option is to get a virtual mailbox through services like Stable or EarthClassMail.
For around $20/month, you get a permanent business address where all your company mail is scanned, stored, and managed online. It works like a digital mailbox you can check from anywhere, and if you ever need the physical copy, you can have it forwarded with one click. The beauty of this is that once you set this address as your official company address, you can leave it as is forever and not have to worry about address changes.

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Incorporating around end of the year

Once you incorporate in a year, you’re instantly obligated to handle requirements like tax filings in the immediate year after. For example, if you incorporate on December 31, 2025, you’re required to file 2025 taxes by April 15, 2026, even if your company had no profit, no revenue, no employees, even no activity in 2025! But instead, if you had incorporated on January 1, 2026, you could avoid that for an entire year, one less thing to worry about right out of the gate.
That’s why nearly 25% of companies we see at Finta incorporated on January 1st.

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Charging customers before incorporation

Any revenue you earn before incorporating is considered personal income. Then, once you form a company and start charging through it, the income belongs to the business. That split can cause confusion at tax time and mess up your financial records. If you’re using tools like Stripe, the payout accounts and ownership settings may be tied to your personal info, which makes cleanup a nightmare later. The cleanest path is to incorporate before you start charging customers. That way, the company owns the revenue, the bank account is properly set up, and you avoid having to untangle money flow down the road.

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Mixing personal and business expenses

Even though you can’t open a business bank account until after you incorporate, you can still start tracking expenses from day one. You’ll likely pay out of pocket for early costs like domains, software, or design help, and once your company is set up, you can reimburse yourself for those once you incorporate.

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Forgetting to register for foreign qualification

If you incorporate in one state (like Delaware) but will work out of or hire employees from another (like California), you’re legally required to register in those additional states. This is called a foreign qualification. Waiting can lead to penalties, backdated fees, and other compliance issues. Clerky offers this additional service to the incorporation process. Once you’re registered, your company will be listed in the state’s business database, like the California SOS website.

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Registering for a foreign qualification too early

You don’t have to file for foreign qualification if you’re staying in a state for a short stint. Let’s say you live in New York, but move to San Francisco to attend the YC batch in person for a few months. If you register in California for that time period, then move back to New York, you’re still on the hook for California’s annual filings and franchise tax going forward, even though you have no ties to it at all. What’s worse is that withdrawing your registration (de-registering) is its own pain involving more forms, legal fees, and time you didn’t need to spend. Before you register, make sure your presence in the state is clearly long-term. That could mean working remotely, having an office, or hiring full-time employees there.
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