Mastering Startup Formation: Is Your Business Following the Right Steps?
Launching a startup is an exhilarating endeavor that demands more than just a brilliant idea. It requires careful planning, strategic execution, and a thorough…
[SERVICE]Business formation and structure
Business formation lawyers for startups and new companies
The right structure protects your personal assets, sets up your taxes and is ready for investors. We choose and form the entity, write its documents and assign your IP to it.
[01]Who it's for
For founders starting on solid legal ground.
A proper formation shields your personal assets from business debts, sets up an efficient tax position, shows partners and investors you are serious, and gives the company room to grow.
Founding teams
Two or more founders who need the equity split, vesting and roles in writing.
Startups planning to raise
A structure investors expect, set up before the first check.
Solo founders and small businesses
Liability protection and a clean setup without overbuilding.
Founders outside the US
Forming a US company to sell to or raise from US customers and investors.
[02]What we handle
The right entity, formed right the first time.
We start with your goals, financial projections and risk, compare the options in plain language, then handle the formation from filing to first meeting.
Formation and IP protection are planned together, so the company owns what it is built on.
What we handle
- Entity selectionLLC, S corporation, C corporation or partnership, chosen for where you are going.
- Formation filingsArticles of incorporation or organization, and the state filings to bring the entity to life.
- EIN and compliance checklistHelp obtaining your federal employer identification number, plus a checklist for after formation.
- Bylaws or operating agreementOwnership, roles, decision-making, exits and succession, written for your company.
Mistakes that cost founders later
- The wrong entity for investorsConverting an LLC before a venture round costs time and money.
- Founder IP left outsideCode or designs written before formation that were never assigned in.
- No vestingA co-founder who leaves early keeps all of their equity.
- A missed 83(b) electionA 30-day deadline that can mean a large tax bill later.
[03]The basics
How to form a business the right way.
A business formation lawyer helps you choose the legal structure for a new company, files it with the state and writes the documents that govern it. Done in the right order, formation takes a few steps.
- Choose the entity. Based on liability, taxes, who will own it and whether you will raise money.
- Choose the state. Usually your home state, or Delaware if you plan to raise venture capital.
- File the formation document. Articles of incorporation for a corporation, or articles of organization for an LLC.
- Get an EIN. Your federal tax identification number, from the IRS.
- Adopt the governing documents. Bylaws for a corporation or an operating agreement for an LLC.
- Issue founder equity and assign the IP. With vesting where it fits, and every founder’s work assigned to the company.
- Stay in good standing. Annual reports, registered agent, and registration in other states where you do business.
Which state should you form in?
Most small businesses form in the state where they operate. Startups that plan to raise venture capital often form a Delaware C corporation, because investors and their counsel know its corporate law well. A company formed in one state that does business in another usually also registers there as a foreign entity.
For a founder-focused walk-through, read mastering startup formation.
[04]Your options
LLC, S corporation or C corporation. Which fits?
Each protects owners from business debts. They differ in how they are taxed, who can own them and how investors view them.
| LLC | S corporation | C corporation | |
|---|---|---|---|
| How it is taxed | Pass-through by default, or can elect corporate tax | Pass-through to the owners | The company pays tax, and owners pay again on dividends |
| Who can own it | Anyone, any number of members | Up to 100 shareholders, generally US individuals, one class of stock | Anyone, any number of shareholders |
| Raising venture capital | Uncommon, and often converted first | Not workable for most venture investors | The usual choice |
| Equity for employees | Profits interests or units | Limited by the one-class rule | Stock options and preferred stock |
| Where it fits | Small businesses and holding companies | Profitable owner-run businesses | Startups planning to raise |
Only C corporation stock can qualify for the federal qualified small business stock exclusion, which can reduce tax on a later sale. Tax treatment depends on your situation, so we recommend confirming the choice with your accountant.
[05]Founder documents
The documents that govern your company.
Your operating agreement or bylaws are the backbone of how the company runs. We write them for your business, not from a one-size template.
- Ownership, roles and responsibilities. Who owns what, and who decides what.
- Decision-making. How major decisions are made and what needs everyone’s approval.
- Exits and succession. What happens when an owner leaves, dies or wants to sell.
- Vesting. Founder shares earned over time, commonly four years with a one-year cliff.
- 83(b) election. Filed with the IRS within 30 days of receiving restricted stock, so later vesting is not taxed as income.
- IP assignment. Every founder’s work moved into the company in writing.
More on founder terms in the founders agreement, and on what happens to IP if founders split in what happens to IP when founders dissolve a company.
[06]Fees
One flat fee, quoted before work begins.
There is no hourly billing. Your formation is quoted as a flat fee on your strategy call, once the scope is clear, and nothing starts until you approve it.
Book A Free Strategy CallWhat sets the fee is the work itself, not the time on the clock.
- The entity. An LLC, or a corporation ready for investors.
- The documents. Formation filings alone, or bylaws, founder agreements and equity as well.
- The founders. One owner, or a team with vesting and IP assignments.
State filing fees are paid at cost and are not part of our fee.
Ongoing work for a growing company can run on a monthly Fractional IP Counsel plan instead of one fee per document. This service is not covered by The RLG Guarantee, which applies to patentability searches, provisional patents, design patents and trademarks.
[07]The process
From first call to a formed company.
What happens at each step and who does the work. State processing times vary and are never a promised date.
Business formationCall to formed
- Day one01Day oneStrategy callFree. Walk us through the deal, the documents or the problem.
- Flat fee02Flat feeScope and flat feeWhat the work covers and its price, in writing, before it begins.
- 03Entity and filingsWe recommend the structure and prepare the state filings.
- 04Governing documentsBylaws or operating agreement, founder equity and IP assignments.
- 05Formed and compliantEIN obtained, documents signed and a checklist for what comes next.
[08]Questions
Questions about business formation.
Still deciding? Your first call is free and comes with a straight answer on the structure that fits.
Book A Free Strategy CallDo I need a business formation lawyer?
You can file formation documents yourself. A business formation lawyer helps with the decisions that are hard to undo, such as the entity, the state, the founder split, vesting and IP ownership, and writes the governing documents instead of leaving you with a state form.
Should my startup be an LLC or a C corporation?
If you plan to raise venture capital or grant stock options, usually a C corporation, often in Delaware. If you plan to stay owner-run and profitable, an LLC or an S corporation election can be simpler and more tax-efficient. We walk through it with you and recommend confirming the tax side with your accountant.
Why do startups incorporate in Delaware?
Because venture investors and their lawyers know Delaware corporate law well, and its courts handle business disputes regularly. A Delaware company that operates elsewhere also registers in its home state.
What is the difference between bylaws and an operating agreement?
Bylaws govern a corporation, with its board and officers. An operating agreement governs an LLC and its members. Both set ownership, decision-making and what happens when an owner leaves.
What is an 83(b) election?
A filing with the IRS, due within 30 days of receiving stock that vests over time, that lets you be taxed on its value now, usually close to nothing, instead of as it vests. Missing it can create a large tax bill later.
Can a non-US founder form a US company?
Yes. Founders outside the US can form a US LLC or corporation. S corporation status is generally limited to US individuals, so a C corporation or an LLC is more common.
How long does it take to form a company?
Filing is often quick, but state processing times vary. The governing documents, founder equity and IP assignments take longer, and they are what matter most later.
How much does a business formation lawyer cost?
With us it is a flat fee, quoted on your strategy call before any work begins. It depends on the entity and the documents you need. State filing fees are paid at cost.
[09]Learning Center
Go deeper on starting up.
The Founders Agreement: A Critical Step Toward Your Startup’s Future
Most people are familiar with the basics of a business plan, yet there is another important legal document every business should have in place: The Founders Agreement…
What Happens To The IP When Founders Dissolve A Company?
In the second half of 2020, new business formations were up 40%, an all-time high for startups. While the founders behind these companies hope for the best and have big…
[10]Client reviews
Founders who started with us.
4.7 across 614 public reviews on Google, Trustpilot and Avvo.
#1Top reviewed IP law firm*
Read client reviews“The Rapacke Group stands by their fees with no surprises.”
Lowell CrawfordClient review “From creating a new business and checking to make sure we were in full compliance, the team at The Rapacke Law Group handled everything with ease for us.”
Aqua Fire PitBusiness formation · Client review “I always felt confident that my intellectual property was in good hands.”
JakePatent · Client review
Reviews reflect individual client experiences. Quotes are excerpts. Prior results do not guarantee a similar outcome. *#1 top reviewed means the most public client reviews on Google, Trustpilot and Avvo of any US patent or trademark firm.
Start your company the right way.
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