Incorporation turns your idea into a real company with legal protection, clear ownership, and the structure you need to hire, raise, and grow. It’s the first step you take to build your business legally. If you’re getting ready to take that first leap, congrats! This guide breaks down what to know, what to do, and when to do it, so you can incorporate correctly and avoid missteps that cost a lot of time and money later.

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Why incorporate

Incorporation isn’t just paperwork; it gives your company the legal standing and structure to operate like a real business, and it unlocks key protections and opportunities and adds credibility to what you’re building:
  • Limited liability: protects your personal assets if the company is sued or goes into debt.
  • Raising funding: enables you to accept capital from investors.
  • Issuing equity: allows you to offer stock or options to your team.
  • Legal separation: ensures obligations and contracts belong to the company and not to you.
  • Tax advantages: can include eligibility for QSBS and lower capital gains taxes.

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When to incorporate

There’s no hard rule, but timing matters. After you incorporate, your company takes on ongoing responsibilities like filing taxes, submitting forms, and keeping legal records up-to-date. These tasks aren’t hard, but the time it takes to complete them adds up when you have more important things to focus on. So it makes sense to wait while you’re still exploring.
  • Testing ideas
  • Finding a co-founder
  • Launching a basic landing page
  • Validating ideas
  • Interviewing users
Before incorporating, make sure two things are in place. First, separate your personal and business finances. If there’s any mix, clean it up now. Second, all co-founders need to have officially left their previous jobs. This ensures clean IP ownership and helps you avoid issues down the line, like Richard getting sued by Hooli on Silicon Valley.

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Key setup decisions

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C-Corp vs LLC

Startups should skip the LLC and form a C Corporation. LLCs work for small or solo businesses, but they break down when you need to raise, hire, or grow fast. Top reasons to incorporate as a C-Corp:
  • Supports multiple stock classes and stock options
  • Required by most investors and platforms
  • Eligible for QSBS tax exemption (up to $10M in gains)
  • Easier for future M&A or IPO
If you already formed an LLC, convert early. That usually means forming a Delaware C-corp and transferring assets and ownership. Given it’s quite complex, reach out to a lawyer for help.

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Delaware vs other states

Delaware is the standard state for incorporation for a reason. Investors will expect you to be a Delaware C-Corp because the legal system is predictable, well-established, and founder-friendly. It’s also one of the easiest states to manage ongoing compliance. While you’ll pay a minimum $450 franchise tax annually, incorporating elsewhere to save money usually ends in a costly restructuring later, especially when it’s time to raise.

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Software vs lawyers

Incorporation used to mean hiring a lawyer, spending thousands, and dealing with weeks of paperwork. Today, founders can set up their company in hours, not months. Just like how YC’s SAFEs made it simple for founders to raise capital without hiring a lawyer, tools like Stripe Atlas and Clerky have done the same for incorporation. They were built to make the process fast, affordable, and founder-friendly. Both cost $500 to get started, then $100/year to maintain your registered agent, and they handle everything you need without a lawyer. Traditional law firms, on the other hand, can cost $2,000–$5,000 and take weeks of back-and-forth. That 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.

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Business Contact Setup

When you incorporate, you’ll need to provide reliable contact details for your company. It’s tempting to use your personal information, but that usually causes issues later. Here’s how to set it up the right way from the start.

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Registered agents

Every U.S. company is legally required to list a registered agent when incorporating, and to maintain one at all times in every state where the company is registered. Without one, your company can fall out of good standing and face penalties. A registered agent is the official contact the government or a court can use to deliver legal documents like tax forms, compliance notices, or lawsuits. The agent must have a physical address in the state (a P.O. box won’t cut it) and must be available during business hours. This ensures there’s always a reliable way to reach your company, even if you’re fully remote. Stripe Atlas includes a registered agent in Delaware for the first year, with a $100/year renewal after that. If you need coverage in multiple states or want to manage it separately, services like Stable offer registered agent services nationwide. This address is different from your physical business address. It exists solely to ensure legal documents reach you.

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Physical address

When you incorporate, your company needs a reliable U.S. address to list with the IRS and other government agencies. This is where official notices, most of which are still sent as paper mail, will be sent. Founders often use a home or temporary office, but that creates a mess if you move. The best option is a virtual mailbox through services like Stable or EarthClassMail (now LegalZoom). 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.

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Phone number

You’ll also need to provide a US-based phone number. Listing your personal number can create future issues. If the number leaks, you’ll get non-stop spam, yet you can’t easily change the number. The better move is to use something like OpenPhone, which gives your company a dedicated virtual number. It works like a virtual mailbox. You can make calls, receive texts and voicemails, set automations, block spam, and use it for 2FA as you would a regular phone, but it’s an app that you can access anytime in front of a computer. It also gives a clear separation between your personal life and startup.

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Officers and board

When you incorporate, you’ll need to assign officer roles and form your board of directors. This creates the legal framework for how your company makes decisions, approves actions, and maintains control.

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Purpose of the board

The board approves major actions like issuing equity, fundraising, acquisitions, and officer changes. Shareholders vote on larger structural moves, such as amending your charter. In the early days, founders typically control both the board and the common stock, which keeps governance straightforward.

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Board titles and assignments

Delaware requires every corporation to assign at least two officer roles: a President (or CEO) and a Secretary. These titles are formalities and don’t affect how you run the company day-to-day. One person can hold both roles, or if you have a co-founder or even a CTO, you can split them however is easiest, since these titles don’t matter at this stage. It only starts to matter later when you raise money, bring in outside board members, or set up more complex governance structures. As for your board of directors, keep it simple and limit it to founders only. Don’t add friends or advisors, since board seats come with legal authority, and removing someone later is difficult. If you want outside input, give them an advisor title instead. Your board structure can stay lean until a priced round like a Series A, when investors may request a formal seat.

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Decision conflicts

Many co-founders default to a 50/50 split in ownership and board seats. In rare cases, some founders choose to structure things differently from the start, giving one person 50.1%, so there’s always a legal path forward when decisions stall. That extra 0.1% doesn’t affect financial outcomes in an acquisition or IPO, but it technically breaks ties when board-level votes happen. That said, if your team is relying on this kind of workaround to make key decisions, it’s worth paying attention to what that signals. A voting edge can move things forward legally, but it doesn’t solve the deeper problem of misalignment. If tension is already surfacing at this stage, it’s likely to come up again in higher-stakes situations. Better to work through that now, before the company and the cost of conflict grow.

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Cap table

A cap table defines how many shares your company has and who owns how many shares. We’ll go deeper on cap tables on another page, but here’s the standard most startups use, and what Stripe Atlas and Clerky suggest. Authorize 10 million shares. This is your company’s total share pool, and how much you can issue.
  • Reserve 2 million shares for future employees. This is your option pool of shares and is not part of the founder split. These are authorized, but not issued yet.
  • Split the remaining 8 million shares among the founders, typically equally.
This setup is clean, standard, and makes future raises easier. If you’re navigating a situation that feels high stakes or unique, reach out to Andy at Finta.