23 Min Read

Introduction

Delaware has earned its reputation as the gold standard for startup incorporation, and for good reason. More than half of all publicly traded companies in the United States—and approximately 65% of Fortune 500 companies—call Delaware home. For global startups with ambitions to raise venture capital, scale internationally, or eventually go public, incorporating in Delaware isn’t just a preference—it’s often a strategic necessity.

Why do founders from London, Berlin, Singapore, and São Paulo choose a small U.S. state for their legal home? The answer lies in Delaware’s startup-friendly ecosystem: its highly developed corporate law framework, specialized Court of Chancery that handles business disputes efficiently, and the predictability that comes from decades of case law precedent. These factors make Delaware the language that venture capitalists, angel investors, and acquirers speak fluently.

This article walks you through the entire Delaware incorporation journey, from pre-incorporation planning to ongoing compliance requirements. Whether you’re a solo founder in Seoul or a team of three building from Buenos Aires, you’ll learn exactly what to prepare, which documents you’ll need, and how to navigate the process without a U.S. physical presence. While detailed, this information is designed to be revisited in stages as you progress through your incorporation journey—from creating your capitalization table to issuing founder shares and maintaining annual compliance.

Pre-Incorporation Planning

The work you do before filing your Certificate of Incorporation will determine how smoothly your incorporation process goes. Rushing into registration without proper planning can create ownership disputes, governance complications, and costly amendments down the line. Taking time to prepare your capitalization table and make key structural decisions upfront will save you significant headaches later.

Understanding the Cap Table

Your capitalization table—universally known as a “cap table”—is the foundational document that maps out who owns what in your company. Think of it as your company’s ownership blueprint, capturing the equity structure that will govern relationships between founders, future employees, and eventually investors.

A properly prepared cap table includes five essential pieces of information: the identities of all shareholders, the ownership percentage each holds, the class of stock each shareholder receives (typically common stock for founders), the specific number of shares allocated to each person, and any shares reserved for a future option pool to incentivize employees and advisors. Many founders also include unallocated shares—a reserve bucket that provides flexibility for future needs without requiring immediate authorization of additional shares.

Creating your cap table before incorporation isn’t just recommended—it’s critical to avoiding disputes. Many founding teams operate with loose verbal agreements about ownership in the early days: “We’ll split it 50-50” or “I’ll take a bit more since I came up with the idea.” These informal arrangements often fall apart when it’s time to formalize the structure, especially if circumstances have changed or contributions have evolved. By creating a detailed cap table before registration, you force important conversations about equity distribution to happen before your company legally exists, when adjustments are straightforward rather than complicated.

For early-stage startups, the cap table is typically straightforward: founders receive common stock, which represents standard ownership with voting rights and economic participation. At this stage, most startups don’t authorize preferred stock—that complexity comes later when institutional investors join your journey and negotiate for shares with special rights and protections. Keeping it simple at formation means authorizing only common stock, which is sufficient for founder ownership and employee stock options.

Your cap table is strictly an internal document. You won’t file it with the state, your registered agent won’t request it, and it doesn’t become public record. However, every founder should have a signed copy, and it should be stored securely alongside your other foundational documents. This document becomes the source of truth when you’re ready to issue shares after incorporation—and getting it wrong can create ownership disputes that are expensive and time-consuming to resolve.

Determining Your Company Structure

Before submitting your incorporation paperwork, you’ll need to make several structural decisions that shape how your company operates. These aren’t arbitrary choices—each one affects your corporate governance, equity distribution, and administrative requirements.

Initial Directors

Here’s something that surprises many international founders: when your Delaware C corporation is created, it won’t have shareholders. Instead, the company is initially governed by directors who manage the business and handle the subsequent distribution of shares to founders during post-incorporation. This is different from many countries—including the UK and most European jurisdictions—where shares are allocated to initial shareholders at the moment of registration.

Delaware’s approach means you must appoint initial directors who will serve from the moment of incorporation until shares are distributed and shareholders can elect a board. Best practice is to appoint several founders as these initial directors—typically all co-founders if you’re a team of two or three, or a representative group if you’re a larger founding team. While Delaware law doesn’t limit the number of initial directors you can appoint, it’s not recommended to appoint more than three or four. A larger initial board creates unnecessary complexity in corporate governance, making it harder to coordinate decisions and approve post-incorporation actions.

Your initial directors have one primary job: managing the company immediately after incorporation and approving the distribution of shares to founders through unanimous written consent. Once shares are issued and you have shareholders, those shareholders typically elect a board of directors according to your bylaws, and your corporate governance transitions to its long-term structure.

Shares: Number, Price, and Classes

One of the most common questions from first-time founders is: “How many shares should my company have?” While Delaware law doesn’t impose restrictions on the number or price of shares, startup best practice has converged on a standard starting point that works well for most early-stage companies.

The recommended structure is to authorize 10,000,000 shares of common stock at a par value (nominal price) of $0.00001 per share. This structure has become standard because it provides sufficient shares for founder distribution, employee option pools, and multiple rounds of investment without requiring frequent amendments to increase authorized shares. The extremely low par value—one one-hundred-thousandth of a dollar—simplifies the initial purchase process for founders, who can acquire large numbers of shares for nominal amounts.

It’s crucial to understand that the nominal price per share has no relationship to your company’s valuation. Many founders worry that a $0.00001 share price means their company is essentially worthless—but this misunderstands how par value works. Par value simply represents the minimum legal price at which shares can be issued. Your company’s actual value is determined by market conditions, traction, revenue, investor interest, and countless other factors—not by the par value listed in your Certificate of Incorporation. When you raise your first investment round, the price per share will be determined by dividing your company’s valuation by the number of shares outstanding—and that price will likely be orders of magnitude higher than the par value.

Regarding share classes, most early-stage startups authorize only common stock at formation. While it’s legally possible to authorize both common and preferred stock classes when you incorporate, there’s rarely a reason to do so. Preferred stock comes into play when investors join your cap table, and they’ll negotiate the specific terms, rights, and preferences they want. Authorizing preferred stock you won’t immediately use adds unnecessary complexity to your Certificate of Incorporation.

Understanding the difference between authorized shares and issued shares is also critical. Authorized shares represent the maximum number of shares your company can issue—the number specified in your Certificate of Incorporation. Issued shares are the shares you’ve actually distributed to shareholders. The number of issued shares can never exceed authorized shares, but it can certainly be less. For example, you might authorize 10,000,000 shares but initially issue only 8,000,000 to founders (80%), reserving 1,000,000 for an employee option pool (10%) and leaving 1,000,000 unallocated (10%) for future needs. This flexibility is valuable and allows you to respond to opportunities without constantly amending your Certificate of Incorporation.

Company Addresses

Your Delaware corporation needs two types of addresses, and understanding the distinction between them is important for founders without U.S. physical presence.

The first is your registered address, which is provided automatically by your registered agent and becomes part of the public record in Delaware’s corporate registry. This is your legal address in Delaware—the address where official state correspondence and legal notices are sent. You don’t choose this address; it’s determined by which registered agent you select. Every registered agent provides their office address as the registered address for all companies they represent.

The second address is your business address, which you’ll need for federal matters—specifically when applying for your Employer Identification Number (EIN) and for ongoing correspondence from U.S. government agencies. Unlike your registered address, your business address can be located anywhere, and you have several options depending on your circumstances.

If you have an actual office in the United States, using that address as your business address is straightforward. However, most global startups won’t have U.S. physical presence at incorporation. In this case, you have two other options: using a local address in your home country, or renting a U.S. mailbox service.

Using your home country address is possible, but it comes with significant risk: important mail from U.S. government agencies may be delayed, lost, or never arrive during international transit. Missing critical correspondence about your EIN, tax obligations, or compliance matters can create serious problems. To prevent mail from being lost, it’s strongly recommended to rent a mailbox service in the United States and use that address as your business address on all official federal documents. This ensures reliable delivery of all government correspondence and gives you a stable U.S. mailing address for banking, contracts, and other business purposes.

The Incorporation Process

With your cap table prepared and your structural decisions made, you’re ready to formally create your Delaware C corporation. The incorporation process involves selecting a registered agent and filing your Certificate of Incorporation—the foundational document that brings your company into legal existence.

Selecting and Working with a Registered Agent

Delaware law requires every corporation to have a registered agent—a person or company with a physical address in Delaware who receives legal documents and official state correspondence on behalf of your company. Since most global founders don’t have a Delaware physical presence, you’ll work with one of the many commercial registered agent services that specialize in serving startups.

Choosing a registered agent is one of your first practical decisions in the incorporation process, and while the differences between agents matter most at the initial stage, it’s worth taking time to evaluate your options. Registered agents primarily differ in three areas: their pricing structure (both initial registration fees and annual maintenance fees that you’ll pay every year to maintain your company), the functionality and user experience of their online platforms, and the scope of post-incorporation services they provide.

The last factor—post-incorporation support—deserves special attention. Some registered agents handle only the incorporation filing itself, delivering your Certificate of Incorporation and bylaws but providing no templates or assistance for the critical post-incorporation steps like issuing shares to founders or preparing stock purchase agreements.

Filing Your Certificate of Incorporation

Your Certificate of Incorporation is the legal document that creates your company and establishes its fundamental structure. It’s filed with the Delaware Secretary of State, and once accepted and stamped, your corporation officially exists as a legal entity.

The Certificate of Incorporation contains several essential elements that define your company’s basic parameters. It specifies your company name and registered office address in Delaware (provided by your registered agent), details the number of authorized shares along with their classes and par value, states your business purpose (which for most corporations is simply “to engage in any lawful act or activity”), and establishes basic corporate governance rules that work in conjunction with Delaware corporate law.

Before submitting your incorporation paperwork, verify that your desired company name is available using the Delaware Entity Search tool, which allows you to search the state’s corporate registry to ensure no other company has already registered an identical or confusingly similar name. This free search tool is accessible online, though international founders sometimes need to use a VPN if the site doesn’t load properly from their location.

After your Certificate of Incorporation is filed and approved, you’ll receive several important documents that form the foundation of your corporate records. The primary document is your stamped and certified Certificate of Incorporation, issued by the Delaware Secretary of State as official confirmation that your company has been successfully registered. You’ll also receive your corporate bylaws, which serve as your company’s internal operating manual—essentially a set of rules that govern day-to-day operations, board procedures, shareholder meetings, and internal management matters.

 

Post-Incorporation Requirements

Incorporation is a major milestone, but it’s not the finish line. Several critical post-incorporation steps must be completed before your company can operate fully—opening bank accounts, receiving payments, hiring team members, and distributing equity to founders. Understanding the proper sequence of these steps is important because some tasks depend on completing earlier ones.

Obtaining Your EIN (Employer Identification Number)

Before your Delaware corporation can open a U.S. bank account, hire American employees, or properly handle tax obligations, you need a federal tax identification number. The Employer Identification Number (EIN)—sometimes called the Federal Tax Identification Number—is a unique nine-digit identifier issued by the Internal Revenue Service (IRS) that functions as your company’s social security number for tax and banking purposes.

You can obtain an EIN through two different approaches, and the right choice depends on your specific situation and whether your registered agent offers EIN application services. Some incorporation agents include EIN application as part of their service package or offer it as an add-on, handling the application process on your behalf. If your agent provides this service and you already have a U.S. business address, ordering EIN assistance during incorporation is the simplest approach.

However, for startups without U.S. physical presence—which describes most global founders—there’s a sequencing consideration. The EIN application requires a business address, and as discussed earlier, using a U.S. mailing address rather than your home country address prevents important mail from being lost. This creates a recommended sequence for founders in this situation:

First, register your company through an online agent without initially ordering the EIN service. Second, after your company is registered, utilize a mailbox rental service to obtain a U.S. mailing address. Third, once you have your U.S. address, apply for your EIN either through your registered agent (if they offer the service) or directly online with the IRS, providing your mailbox address as the business address on the application.

The EIN application process typically takes up to three weeks, though timing can vary. Once you receive your EIN, you’ve cleared a critical hurdle—you can now open a U.S. bank account and begin receiving wire transfers, processing payments from customers, and conducting normal business financial operations.

Opening a U.S. Bank Account

One of the significant advantages of incorporating in Delaware is the relative ease of opening a U.S. bank account, even for founders who don’t live in the United States. While traditional brick-and-mortar banks often require in-person visits and have stringent requirements for foreign founders, several financial technology companies have emerged to serve the startup ecosystem with online account opening processes designed specifically for Delaware corporations.

The most popular banking options for early-stage startups are Brex and Mercury, both of which allow online account opening for Delaware corporations and have built their products with startup needs in mind. These platforms typically offer features beyond basic banking—such as corporate credit cards, expense management tools, and integration with accounting software—that make them particularly attractive to growing companies.

The one requirement before you can open a U.S. bank account is obtaining your EIN. Banks need your federal tax identification number to establish your account, report interest income, and comply with U.S. banking regulations. Attempting to open an account before receiving your EIN will simply delay the process, so it’s important to follow the proper sequence: incorporation first, then EIN application, then banking.

Once your account is open and active, you can start receiving payments from customers and investors, processing wire transfers, and managing your company’s finances through a U.S. banking institution—a critical capability for startups engaging with U.S. customers, raising capital from U.S. investors, or paying U.S.-based contractors and service providers.

Initial Share Distribution to Founders

With your company incorporated, your EIN obtained, and your bank account opened, you’re ready for one of the most important post-incorporation tasks: distributing shares to founders. Remember that your Delaware C corporation has no shareholders at the moment of creation—shares must be formally issued through a specific process that creates an official record of founder ownership.

The Share Issuance Process

Issuing shares to founders requires preparing and executing a series of interconnected documents, each serving a specific legal purpose. Understanding this sequence helps ensure you complete the process correctly and maintain proper corporate records.

The process begins with a resolution by the board of directors (assuming the initial directors were named in the certificate of incorporation at formation) approving the issuance of shares. This is documented in a Unanimous Written Consent of Board of Directors, which specifies exactly who will receive shares and the quantity allocated to each founder. This consent is an internal corporate document—you don’t file it with the state or any government agency, but it must be kept in your corporate records as evidence that the board properly approved the share issuance.

Following board approval, each founder enters into a Stock Purchase Agreement with the company. This contract specifies the number of shares the founder is purchasing and the price per share—typically the nominal par value established in your Certificate of Incorporation (for example, $0.00001 per share). Even though founders are purchasing shares at this minimal price, creating a formal purchase agreement documents that the transaction was an arms-length purchase rather than a gift, which has important tax and legal implications.

Finally, the company issues a Stock Certificate to each shareholder. This certificate is the founder’s primary document evidencing ownership—it certifies that the founder owns a specific number of shares of a specific class of stock as of a specific date. Think of stock certificates as the equivalent of property deeds for company ownership. While modern practice has digitized many aspects of corporate record-keeping, stock certificates remain a standard part of proper corporate documentation.

Some registered agents provide templates for all these documents, making the post-incorporation share issuance process straightforward even for first-time founders. However, many agents focus only on the incorporation filing itself and don’t offer post-incorporation document support. If you’re working with an agent that doesn’t provide these templates, or if you want additional guidance on completing them properly, working with a legal service provider that specializes in startups can ensure you maintain proper corporate records from the beginning.

It’s important to remember that you can only issue shares within the limits of your authorized capital specified in the Certificate of Incorporation. If you authorized 10,000,000 shares, you cannot issue 10,000,001—doing so would make the excess shares invalid. However, you have complete flexibility to issue fewer shares than authorized. Many startups choose to issue a substantial portion to founders immediately and reserve a portion for an employee option pool. These unallocated shares remain available for future needs—whether that’s bringing on advisors, issuing additional equity to founders who hit milestones, or providing flexibility during investment negotiations.

Increasing Authorized Shares

The flexibility to increase your authorized shares means you’re never locked into your initial structure. As your company grows and you prepare for investment rounds or need additional shares for employee compensation, you can increase the number of authorized shares by amending your Certificate of Incorporation.

The process requires several coordinated steps. First, you must hold a meeting of your shareholders and/or board of directors to approve the increase in authorized shares. Before scheduling this meeting, review your bylaws and any Shareholder Agreement to identify any additional requirements that might apply to amendments of the Certificate of Incorporation—such as supermajority voting requirements or notice periods.

Once you’ve obtained proper approval through the required voting process, prepare an amended Certificate of Incorporation that specifies the new number of authorized shares, along with their par value and any new classes of shares you’re creating. Submit this amended certificate to your registered agent, who will file it with the Delaware Secretary of State on your behalf.

The state registration process for an amended Certificate of Incorporation typically takes up to three weeks. Once the amendment is approved and stamped, your new authorized share limit becomes effective, and you can issue shares up to the new maximum.

Essential Post-Incorporation Documentation

Beyond the share issuance documents, several other categories of documentation are essential for properly operating your Delaware corporation and protecting your company’s interests. These documents establish corporate governance, protect confidential information, and—critically—ensure your company owns all intellectual property created by founders and team members.

Corporate Governance Documents

Two governance documents deserve special attention as you establish your corporate infrastructure. The first is your Minute Book. Your minute book holds records of all board of directors meetings and shareholder meetings, documenting decisions, votes, and corporate actions. While you don’t file these records with the state, maintaining an accurate and up-to-date minute book is legally required. More importantly, if your corporation ever faces litigation concerning corporate governance or the validity of corporate actions, your minute book becomes critical evidence that the company followed proper procedures.

The second key governance document is your Shareholder Agreement, which defines the rights and obligations of shareholders and establishes corporate governance procedures beyond what’s specified in your bylaws. While not legally required, a Shareholder Agreement is standard practice for any company with multiple founders and provides important clarity about how shareholders interact and make decisions.

Employment and Contractor Agreements

As you begin building your team—whether hiring employees or engaging independent contractors—several types of agreements become essential for protecting your company’s interests and clarifying working relationships.

For independent contractors who provide services to your company, a Consulting Agreement establishes the terms of the relationship. This agreement must clearly specify the services the contractor will provide and the compensation structure (which for contractors can only be monetary compensation—contractors cannot receive equity directly, though they may be granted stock options). Service agreements typically include payment terms (fixed monthly rate, hourly compensation, or project-based fees), deliverable expectations, and the duration of the relationship.

For employees, an At-Will Employment Agreement establishes the employment relationship and its terms. This agreement specifies the employee’s salary, benefits package, and job duties, while also establishing termination rights for both parties. The “at-will” structure—which is standard in the United States—means either the employee or employer can terminate the relationship by providing notice to the other party, typically with an agreed-upon notice period but without requiring cause or extensive justification.

Every team member—whether contractor or employee—should sign a Non-Disclosure Agreement (NDA) that establishes their obligation to keep the company’s confidential information confidential. NDAs prevent team members from sharing proprietary information about your product, technology, business strategies, customer lists, or other sensitive information with competitors or the general public.

The most critical agreement for protecting your company’s long-term value is the IP Assignment Agreement, typically structured as a Proprietary Information and Inventions Agreement (PIIA). This document ensures that all intellectual property created by founders, employees, or contractors for the company—or in some cases, even before incorporation—is owned by the company rather than the individuals who created it.

Understanding why IP assignment agreements are non-negotiable requires thinking about your company from an investor’s or acquirer’s perspective. If a potential investor discovers during due diligence that your CTO never signed an IP assignment agreement, they face a frightening scenario: what happens if the CTO leaves the company? Could they claim ownership of critical technology they developed? Could they use that technology to launch a competing company? These uncertainties make your company significantly less attractive and substantially less valuable. The same concerns apply to potential acquirers evaluating whether to purchase your company.

Every founder should sign an IP assignment agreement immediately after incorporation, and requiring these agreements for all future employees and contractors should be non-negotiable policy. This single category of documentation can be the difference between a company that’s attractive to investors and acquirers, and one that faces serious questions about whether it truly owns its most valuable assets.

Ongoing Compliance and Tax Obligations

Incorporating your company creates ongoing obligations that continue year after year. Understanding these requirements prevents costly penalties and ensures your company remains in good standing with Delaware and federal authorities.

Annual Requirements

Delaware requires every corporation to file an annual report and pay franchise tax by March 1st each year. Missing this deadline results in penalties and can eventually lead to your company being declared not in good standing, which creates problems for banking, fundraising, and business operations. The annual report itself is straightforward—it updates basic information about your company’s registered agent, directors, and stock structure.

The franchise tax calculation is more complex and depends on your company’s authorized shares and assumed par value capital. For most early-stage startups with standard capital structures, the franchise tax is typically a few hundred dollars annually—a modest cost for maintaining your Delaware incorporation.

Beyond state compliance, maintaining your minute book with current records of all board and shareholder meetings is an ongoing obligation. Each time your board makes a significant decision, holds a formal meeting, or approves major corporate actions, those proceedings should be documented and added to the minute book. This creates a contemporaneous record that protects the company and demonstrates proper corporate governance.

Tax Considerations for Founders

Tax implications of founder share ownership vary significantly based on your personal tax residency and whether shares are subject to vesting restrictions. While comprehensive tax guidance requires consultation with qualified professionals in your jurisdiction, one specific tax election deserves attention: the 83(b) election.

If you’ve chosen to structure founder shares with reverse vesting—a mechanism where shares are initially issued but vest over time, with unvested shares subject to repurchase by the company if a founder leaves—the 83(b) election becomes relevant for founders who are U.S. taxpayers or non-U.S. taxpayers planning to relocate to the United States.

Section 83(b) of the Internal Revenue Code allows founders to elect to pay income tax on their shares immediately upon purchase rather than waiting until shares vest. Why would anyone want to accelerate paying taxes? Because the tax is calculated based on the value of the shares at purchase—and at formation, when you’re purchasing shares at par value of $0.00001, the taxable value is essentially zero. If you don’t make the 83(b) election and your shares vest over time, you’ll pay tax on the value of the shares as they vest—and if your company has become successful, that value could be substantial.

The critical detail about 83(b) elections is the deadline: the election form must be filed with the IRS within 30 days of completing your stock purchase. This deadline is absolute and cannot be extended. Missing it means you lose the opportunity to make the election and will face taxation as shares vest based on their value at vesting rather than their value at purchase. For founders of successful startups, missing the 83(b) election deadline can result in tax bills that are orders of magnitude higher than they would have been with a timely election.

Whether you need to make an 83(b) election depends on your specific tax situation, residency, and how your founder shares are structured. Consulting with qualified tax professionals in your jurisdiction ensures you understand your obligations and opportunities and make appropriate elections within required deadlines.