Formation and founders
How to Incorporate a Delaware C-Corp for a Venture-Backed Startup (Step by Step)
The short answer
To form a startup that venture investors will fund, file a short Certificate of Incorporation in Delaware with about 10,000,000 authorized shares of common stock at a very low par value (for example $0.00001), then complete the "post-incorporation" steps the same week: incorporator action, bylaws, initial board consent, founder stock purchase agreements with vesting, IP assignment and an 83(b) election for each founder within 30 days. Filing the charter takes an afternoon; the steps after it are what investors check in diligence.
Key numbers
| Item | Typical value | Note |
|---|---|---|
| Authorized common stock at formation | 10,000,000 shares | Room for founders, a pool and early SAFEs |
| Shares issued to founders | 6,000,000 to 9,000,000 | Issuing most of the authorized shares keeps franchise tax low |
| Par value | $0.00001 or $0.0001 | Founders pay at least par in cash |
| Delaware franchise tax, assumed par value method | $400 minimum plus $50 annual report fee | Due March 1 each year |
| Franchise tax under the default authorized shares method, 10M shares | $85,165 | The "shock bill" many founders receive; see the franchise tax guide |
| 83(b) filing window | 30 days from issuance | No extensions |
| Share of priced seed rounds sold to investors | Median 19.5% (2025) | Carta, 5,118 US priced rounds |
Why Delaware, and why a C-Corp
Venture funds invest in Delaware corporations because the law is predictable, the Court of Chancery decides corporate disputes without juries, and every standard financing form (the YC SAFE, Series Seed, the NVCA model documents) assumes a Delaware corporation. A C-Corp, rather than an LLC or S-Corp, is required for three practical reasons:
- Preferred stock. A priced round issues a separate class of preferred stock. S-Corps cannot have two economic classes, and LLC units do not map cleanly onto standard venture documents.
- Investor tax. Many funds have tax-exempt and foreign limited partners who cannot hold pass-through interests without unwanted tax consequences.
- Founder and employee tax benefits. Only C-Corp stock can qualify as Qualified Small Business Stock under Section 1202 (see our QSBS guide), and incentive stock options (ISOs) can only be granted by corporations.
If you are building a cash-flow business with no plan to raise venture capital, an LLC may be the better fit. If you expect to raise a SAFE round within the next year, start as a Delaware C-Corp: converting later costs legal fees and can reset tax clocks.
Step by step
Step 1: Check the name
Search the Delaware Division of Corporations entity database for availability. The name must include a corporate designator such as "Inc." or "Corporation". Availability in Delaware is not trademark clearance: search the USPTO trademark database and the domain you want before you commit to the brand.
Step 2: Appoint a registered agent
Every Delaware corporation needs a registered agent with a Delaware street address to receive legal process. Commercial agents typically charge between $50 and a few hundred dollars per year. Let the agent lapse and you risk default judgments and loss of good standing, which will surface in every later diligence review.
Step 3: Draft and file the Certificate of Incorporation
A startup charter can be two pages. It should cover:
- Name and registered agent.
- Purpose: any lawful act or activity under the Delaware General Corporation Law (DGCL).
- Authorized stock: usually 10,000,000 shares of common stock. Some companies also authorize "blank check" preferred stock; most leave preferred for the first priced round, when the charter is amended and restated anyway.
- Par value: a fraction of a cent, such as $0.00001 per share. Low par value lets founders buy millions of shares for a few dollars and keeps the franchise tax calculation favorable.
- Exculpation: a DGCL Section 102(b)(7) provision eliminating monetary liability of directors (and, since the 2022 amendments, officers) for breaches of the duty of care, to the extent the law allows.
- Indemnification and advancement to the fullest extent permitted, usually expanded in the bylaws and in separate indemnification agreements.
- Incorporator: the person who signs and files, often the founder or the law firm.
Avoid no-par stock: it blocks the cheaper franchise tax method. Avoid authorizing hundreds of millions of shares "for flexibility": you can always amend later, and a large authorized count with few shares issued inflates the franchise tax under both methods.
Step 4: Incorporator action
The incorporator signs a written action that adopts the bylaws (if not adopted by the board), elects the initial directors and then resigns. A common defect found years later: the action was signed by someone other than the incorporator named in the filed charter, which casts doubt on who the directors are.
Step 5: Bylaws
Bylaws set board size, quorum, notice, written consents, officers, indemnification and transfer restrictions. Check three items: (i) a company right of first refusal on transfers of common stock that the company can assign; (ii) the right to act by unanimous written consent; (iii) a board size that founders control.
Step 6: Initial board consent
The new board acts by unanimous written consent to: appoint officers (at minimum a president or CEO and a secretary; one person may hold several offices); approve the founder stock issuances and purchase agreements; adopt a fiscal year; authorize the bank account and an EIN application; approve indemnification agreements; adopt the form of confidentiality and invention assignment agreement for future hires; and ratify pre-incorporation expenses.
Step 7: Issue founder stock with vesting
Each founder signs a stock purchase agreement (often called a restricted stock purchase agreement) under which they buy common stock at par, paying a small amount of cash plus an assignment of any pre-incorporation technology. Market terms: four-year vesting with a one-year cliff, monthly thereafter, and a company right to repurchase unvested shares at the lower of cost and fair market value if the founder leaves. Read founder vesting explained.
Step 8: File the 83(b) election within 30 days
Because founder shares vest, each founder should file a Section 83(b) election with the IRS within 30 days of the issuance date. Missing it cannot be fixed. See the 83(b) guide.
Step 9: Assign IP and sign confidentiality agreements
Every founder signs a technology assignment for work done before incorporation and a confidential information and invention assignment agreement (CIIAA) for work done after. Use "hereby assigns" language. See IP assignment for founders, employees and contractors.
Step 10: EIN, bank account and foreign qualification
Apply for an Employer Identification Number (EIN) online if a founder has an SSN or ITIN; otherwise by fax or mail with Form SS-4 (see the non-US founder guide). Open a bank account in the company's name and keep company and personal money separate. If the company has employees or an office in another state (for example California or New York), register as a foreign corporation there.
Worked example: setting up the share structure
Two founders, Ana and Ben, form Acme, Inc. with 10,000,000 authorized shares of common stock at $0.00001 par value.
- Ana buys 4,500,000 shares and Ben buys 3,500,000 shares, each at $0.00001. Ana pays $45.00; Ben pays $35.00. Both also assign their pre-incorporation code.
- Issued shares: 8,000,000 (80% of authorized). The remaining 2,000,000 shares are available for an equity incentive plan and future issuances.
- Later, the board adopts a plan reserving 1,000,000 shares. On a fully diluted basis (9,000,000 shares), Ana holds 50.0%, Ben 38.9% and the pool 11.1%, close to the 11.8% median seed-stage pool reported by Carta.
- Franchise tax: because 80% of the authorized shares are issued and gross assets are small, the assumed par value capital method produces the $400 minimum tax plus the $50 annual report fee.
Common mistakes
- Stopping after the charter. The company exists, but nobody owns it until stock is issued by board consent.
- Equity promised in percentages. Always grant a fixed number of shares, approved by the board.
- Founder money booked as stock. Extra cash a founder puts in should be a documented loan or a SAFE, not a high-priced stock purchase that raises the value of common stock for later option grants.
- No vesting. Investors will impose it at the first priced round, often on worse terms than you would have chosen.
- Missing 83(b) or IP assignment. These are the two defects most often found in seed diligence.
- Choosing an LLC "to save tax" and converting later. The conversion is doable but restarts the QSBS holding period and adds cost.
How much does it cost?
The Delaware filing fee for a short charter is modest (under two hundred dollars with a certified copy, more for expedited service). A registered agent adds an annual fee. Formation services and law firm packages range from a few hundred dollars to several thousand, depending on whether they include the post-incorporation documents, 83(b) filing and an equity plan. Startup Engine generates the full document set for free; we recommend a lawyer review if you have more than two founders, any pre-existing company, or non-US founders.
Frequently asked questions
Can I incorporate in Delaware if I do not live in the United States?
Yes. Delaware does not require directors, officers or stockholders to be US residents or citizens. You need a Delaware registered agent, and you will need an EIN for banking and tax filings. Non-US founders have extra steps (EIN without an SSN, Form 5472 if a foreign person owns 25% or more, home-country tax rules).
How many shares should a startup authorize?
Ten million shares of common stock is the market default. It is enough for founders, an option pool and conversion of early SAFEs, and the charter can be amended to increase the number before a priced round.
What par value should I use?
A fraction of a cent, typically $0.0001 or $0.00001. Founders must pay at least par value for their shares, so low par keeps the purchase price trivial and supports the cheaper franchise tax method.
Do I need a lawyer to incorporate?
Not to file the charter. But the post-incorporation documents (stock purchase agreements with vesting, IP assignments, board consents, 83(b) elections) are where mistakes happen, and investors will review them. Use reliable forms and have them checked if your facts are unusual.
Should I authorize preferred stock at formation?
Usually not. Preferred stock is created when you close a priced round, through an amended and restated charter whose terms are negotiated with the lead investor. SAFEs and convertible notes do not require preferred stock to be authorized at issuance.
Is a Delaware C-Corp required for a SAFE?
The standard YC post-money SAFE is drafted for a US corporation, and Delaware is the expected default. YC also publishes versions for Canada, the Cayman Islands and Singapore companies.