The Ultimate Startup Formation Checklist

Use this guide to stand up a clean, venture-backable U.S. company quickly and correctly. This checklist is a launchpad, not legal or tax advice. Adapt it to your specific needs and consult with legal and tax professionals.

Launching a startup is a whirlwind of activity. Amidst building a product and finding customers, it's easy to let corporate, legal, and financial foundations slide. But getting these details right from day one is the difference between a high-growth, fundable company and one riddled with problems that scare investors away. This checklist walks you through the critical steps, from co-founder alignment to building a fundraising-ready data room.

0. Align With Your Co-founders 🤝​

Before you spend a single dollar on incorporation, the founding team must be in complete alignment. Misaligned expectations are the number one killer of early-stage companies. Document your agreements to ensure there are no "he said, she said" moments down the road.

• Mission & Scope: Clearly define what you are building for v1 and, just as importantly, what you are not building. A shared vision prevents scope creep and keeps the team focused.
• Roles & Decision Rights: Who is the CEO? Who is the CTO? Who has the final say on product, engineering, or sales decisions? Define these roles to create clear lanes for execution and accountability.
• Equity Split Principles: Document the rationale behind your equity split. Consider factors like initial cash invested, intellectual property (IP) contributed, time and effort commitment, level of risk taken, and the market rate to replace each founder's skill set.
• Communication & Exit Norms: How often will you have formal check-ins? What happens if a founder leaves before their stock is fully vested? Discuss vesting forfeiture and company buyback rights upfront.
• Name Checks: Before you get too attached, ensure your brilliant company name is available. Check for the domain name, social media handles, and potential trademark conflicts in major app stores and the USPTO database.

1. Incorporate Your Company 🏛️​

For most venture-backed startups in the U.S., the standard is a Delaware C-Corporation. This structure is preferred by investors for its well-established and predictable corporate law.

• Choose State and Entity: The default choice is Delaware for your state of incorporation and a C-Corp for your entity type.
• Reserve Company Name: Once you've chosen a name, reserve it with the Delaware Secretary of State. Have a few variations ready in case your first choice is taken.
• File Certificate of Incorporation: This is the official document that creates your company. Authorize a large number of common shares (e.g., 10-20 million) with a very low par value (e.g., $0.00001) to keep initial capitalization costs minimal.
• Appoint a Registered Agent: You must have a registered agent in Delaware to receive official legal and state correspondence. Services like Stripe Atlas, Clerky, or dedicated registered agent companies can handle this.
• Adopt Bylaws & Sign Consents: Adopt your corporate bylaws, which set the rules for how your company is governed. The incorporator and initial board of directors will sign consents to formalize these early actions.
• Appoint Officers: Formally appoint initial officers, typically a CEO, Secretary, and Treasurer. A single founder can hold all these titles.
• Get an EIN: Obtain an Employer Identification Number (EIN) from the IRS. You'll need this to open a bank account and hire employees.
• Open a Bank Account: Open a business bank account as soon as you have your EIN. Establish clear policies for who can sign checks or authorize transfers, ideally requiring dual controls for large payments.
• Foreign Qualification: If your company operates in a state other than Delaware (e.g., California or New York), you must "foreign qualify" to do business there.
• Calendar Key Deadlines: Immediately set a recurring calendar reminder for the Delaware Annual Report & Franchise Tax, which is due by March 1 every year. Failure to pay can result in penalties and loss of good standing. (Delaware Corporations, Division of Revenue)

2. Manage Equity, Your Cap Table, and Taxes 📈​

Your company's equity is its most valuable currency. Managing it cleanly from the start is non-negotiable.

• Set Up Cap Table Software: Ditch the spreadsheet immediately. Use dedicated cap table software as the single source of truth for all equity ownership.
• Issue Founder Stock: Founders purchase their common stock through a Stock Purchase Agreement. This can be paid for with cash or a contribution of relevant intellectual property.
• Standard Vesting: Implement a standard vesting schedule for all founders, typically 4 years with a 1-year cliff. This means you receive no stock until you complete one year of service, after which you get 25%, with the rest vesting monthly over the next three years. Consider adding a "double-trigger" acceleration clause for changes of control.
• File 83(b) Elections: This is EXTREMELY IMPORTANT. If your stock is subject to vesting, you must file an 83(b) election with the IRS within 30 days of the stock transfer. This allows you to pay taxes on the stock's value on the grant date (when it's virtually worthless) instead of as it vests (when it could be worth much more). Missing this 30-day window can have severe tax consequences. Keep proof of timely filing. The IRS now permits online filing for Form 15620. (IRS, Goodwin Law Firm, Mintz)
• Create an Equity Incentive Plan: To grant stock options to employees and advisors, you must create an Equity Incentive Plan (or "option pool") that is approved by both the board and stockholders.
• Obtain a 409A Valuation: Before granting any stock options, you must get a 409A valuation from an independent firm to determine the Fair Market Value (FMV) of your common stock. This protects you and your employees from adverse tax consequences.
• Prepare Grant Templates: Have your lawyer prepare templates for offer letters and option grant agreements.
• Choose Grant Types: Decide whether to offer early-exercisable options or Restricted Stock Awards (RSAs) for early team members.
• Set an Option Pool: Size your option pool based on your hiring plan for the next 12-18 months. A pool of 10-20% of the total equity is common for an early-stage company.
• Choose Financing Docs: For early fundraising, standardize on well-accepted documents like Y Combinator's post-money SAFEs. Keep a standard side letter template handy for any unique investor terms. (Y Combinator Documents)

3. Protect Your IP & Brand 🛡️​

Your intellectual property is your core asset. Protect it rigorously from day one.

• Sign PIIAs: Every single person who contributes to the company—founders, employees, and advisors—must sign a Proprietary Information and Inventions Assignment (PIIA) agreement. This ensures that the company, not the individual, owns all the IP they create.
• Contractor IP Assignment: Ensure that IP assignment clauses are built directly into your Statements of Work (SOWs) or Master Service Agreements (MSAs) with all contractors.
• Open-Source Policy: Establish a clear policy on using open-source software, defining which licenses are permissible and how to handle attribution requirements.
• Secure Digital Assets: Lock down your domain name and all social media handles with two-factor authentication (2FA) on the registrar.
• Trademark & Patents: Conduct a thorough trademark search. Once your name is stable, file for trademark protection. For core technology, consider filing a provisional patent to establish an early priority date; otherwise, you can often defer patent strategy until later.

4. Build Your Finance Stack 💰​

This is the "beancount" section—building the financial nervous system of your company.

• Chart of Accounts: Set up a proper chart of accounts in your accounting software to track assets, liabilities, revenue, cost of goods sold (COGS), R&D, customer acquisition cost (CAC), etc.
• Accounting System: Get your accounting system live immediately. Use the accrual basis of accounting and create a checklist for your monthly close process.
• Expense & Payroll: Implement an expense policy, a reimbursement process, and a payroll system. Make sure founders are on payroll to comply with labor laws. Complete all necessary state payroll registrations.
• Benefits: Set up benefits like health insurance. A 401(k) can come later.
• Corporate Cards: Issue corporate cards with clear spend controls and vendor categorization to make bookkeeping easier.
• Financial Controls: Institute dual-approval requirements for payments over a certain threshold and set up bank rules to prevent unauthorized transactions.
• Tax Calendar: Create a calendar for key tax deadlines, including federal and state income tax estimates and the collection of W-9/W-8 forms for vendors and contractors.
• Runway Model: Maintain a simple financial model that tracks your cash-out date, monthly burn rate, and hiring plan.
• Board Package: Create a template for your board package that includes key performance indicators (KPIs), financials, cash runway, hiring progress, and key risks.

5. Ensure Compliance & Good Governance 📋​

Good corporate hygiene keeps your company clean and avoids legal headaches.

• Minute Book: Keep an organized digital minute book containing your charter, bylaws, board and stockholder consents, and stock ledger.
• Board Meetings: Establish a regular cadence for board meetings and diligently record minutes and formal resolutions.
• Insurance: Stage your insurance coverage:
  • Start with: General Liability, Workers’ Compensation, and Cyber Insurance.
  • Add before a seed round or major contract: Directors & Officers (D&O) and Tech Errors & Omissions (E&O) insurance.
• Privacy & Security: Draft your Terms of Service (ToS) and Privacy Policy. Create a data map and ensure you have Data Processing Addendums (DPAs) with vendors.
• Sanctions Screening: If you operate in a relevant industry, implement a process for screening against U.S. sanctions lists (OFAC).
• Licenses: Secure any state or industry-specific licenses required for your business (e.g., in payments, health, or education).
• CTA / BOI Reporting: As of March 26, 2025, most new U.S.-formed entities are exempt from Beneficial Ownership Information (BOI) reporting under the Corporate Transparency Act (CTA). However, certain foreign entities registered to do business in the U.S. may still need to report. Confirm your company's status before taking any action. (FinCEN.gov)

6. Establish People Operations 🧑‍💻​

Your team is your greatest asset. Build the infrastructure to support them from the start.

• Hiring Plan: Develop a hiring plan with clear job leveling and salary bands to ensure fairness and consistency.
• Hiring Workflow: Standardize your process with an offer letter template, PIIA, background checks, and an I-9 workflow. Use E-Verify if required.
• Contractor vs. W-2: Understand and correctly apply the rules for classifying workers as either independent contractors (1099) or employees (W-2). Misclassification can lead to significant penalties.
• Employee Handbook: Create a simple handbook that covers key policies on IP, confidentiality, device usage, social media, and paid time off (PTO).
• Equity Education: Develop materials to help new hires understand their equity, including how vesting works, how to exercise options, and the potential tax implications.
• Safety & Training: Implement mandatory training where required, such as anti-harassment training in states like California and New York.

7. Implement Security & Operations Early 🔒​

Security is not an afterthought; it's a foundational requirement for any modern company.

• Access Control: Enforce Multi-Factor Authentication (MFA) on all services and require the use of a password manager. Implement role-based access control based on the principle of least privilege. Have a robust offboarding checklist to revoke access immediately when someone leaves.
• Device Management: Use a Mobile Device Management (MDM) solution to enforce disk encryption and auto-lock policies on all company devices.
• Backups & Monitoring: Ensure critical data is backed up regularly and, most importantly, test your restore process. Establish baseline logging and monitoring.
• Incident Response: Draft a simple incident response plan and have a breach communications template ready.
• Vendor Review: Implement a process for reviewing the security and privacy practices of all new vendors.

8. Maintain a Fundraising-Ready Data Room ✅​

Be "always ready to fundraise." A clean, well-organized data room allows investors to conduct diligence quickly and signals that you run a tight ship.

Your data room should be a secure, shared folder with the following sections:

• Corporate: Certificate of Incorporation, bylaws, board consents, minute book, and cap table.
• Equity: Founder stock purchase agreements, proof of 83(b) filings, 409A valuation reports, and the Equity Incentive Plan.
• Finance: Historical financials, bank statements, accounts receivable/payable aging, your financial model, and key metrics.
• Legal: Signed PIIAs for everyone, key customer contracts, NDAs, and vendor DPAs.
• Compliance: Key policies (privacy, security), and proof of insurance.
• Commercial: Customer list, letters of intent (LOIs), a sales pipeline, and churn/retention data.

9. Your First-30-Days Quick Start 🚀​

Copy this into your project management tool and assign owners and due dates.

• File Delaware corporation, adopt bylaws, and make initial board/officer appointments.
• Get EIN, open bank account, and set up accounting and payroll systems.
• Issue founder stock with vesting schedules.
• FILE 83(B) ELECTIONS WITHIN 30 DAYS!
• Set up cap table software.
• Board and stockholders approve Equity Incentive Plan and initial option pool.
• All founders and contractors sign PIIA/consulting agreements.
• Draft initial Privacy Policy and Terms of Service.
• Implement security baseline (MFA, password manager).
• Get quotes for essential insurance.
• Secure domain, conduct trademark search, and lock down your product name.
• Set a calendar reminder for the March 1 Delaware franchise tax deadline. (Delaware Corporations)

10. Common Red Flags to Fix Before Diligence 🚩​

Discovering these issues during investor diligence can delay or even kill a deal. Fix them now.

• Late or missing 83(b) receipts: This is often the first thing a good lawyer checks. It creates a massive potential tax liability.
• No 409A before granting options: Granting options below Fair Market Value can trigger harsh tax penalties for employees.
• Incomplete IP assignments: Missing PIIAs from ex-founders, early contractors, or advisors create a cloud on your IP ownership.
• A messy cap table: If your spreadsheet doesn't match signed legal documents, it's a huge red flag.
• Missing board/stockholder approvals: All equity grants and major corporate actions require formal approval.
• No privacy or security policies: This signals a lack of operational maturity and a potential liability.
• Missed Delaware franchise tax: Falling out of "good standing" in Delaware can block a financing from closing.

Quick References​

• 83(b) Election: A critical IRS filing due within 30 days of receiving stock that vests. Use IRS Form 15620. (IRS Link)
• 83(b) Online Filing: The IRS now allows for convenient electronic filing. (Goodwin Law, Mintz)
• YC Post-Money SAFEs: The industry standard for pre-seed fundraising. (YC Documents)
• Delaware Franchise Tax: Annual report and tax due by March 1. (Delaware Corporations)
• BOI / CTA Update: Most new U.S. startups are exempt from BOI reporting, but confirm your status. (FinCEN.gov)

Final Notes​

• Use bullets, not prose, for your internal wikis and project trackers. Assign an owner and a due date to every task.
• Revisit this checklist at 30, 60, and 90 days. Your needs will evolve as you grow.
• When in doubt, write it down. Document approvals, policies, and exceptions, and keep your file structure clean. A little discipline now saves a world of pain later.