Startup Incorporation Checklist: 20 Steps for a Solid Legal Foundation
Why a Checklist Matters, The 20-Step Startup Incorporation Checklist, and Critical Deadlines At a Glance
Incorporating involves a long list of tasks, and a small number of them have deadlines that cannot be met retrospectively.
That is the reason a checklist is worth having. Most items can be done late without consequence; a few cannot, and founders routinely discover which is which after the window has closed.
This covers the full list in the order worth doing it, the deadlines that genuinely matter, the mistakes that come up most often and what they cost, and how the founding documents differ from one another.
Why a Checklist Matters
Most incorporation mistakes are not big strategic errors, they are small procedural misses. Missing a 30-day deadline, skipping a filing, or forgetting an annual report. This checklist covers the 20 steps that matter most in the first 90 days.
The items with statutory deadlines are the ones to do first, because they cannot be caught up later. The equity election in particular has a short window from the grant date, and missing it is expensive in a way nothing on the rest of the list is.
Abhinav Gupta, CPA, CA, MBA · LinkedInThe 20-Step Startup Incorporation Checklist
- Choose Entity Type: Delaware C-corp for VC-track. LLC for bootstrapped service businesses. S-corp rarely the right choice for startups.
- Choose State: Delaware for most startups. Wyoming for private businesses focused on asset protection and privacy.
- Reserve Company Name: Check state availability. Reserve for $75 in Delaware if you need time before filing.
- File Formation Documents: Articles of Incorporation (C-corp) or Certificate of Formation (LLC). File online for same-day processing.
- Appoint Registered Agent: Required before filing. Must have physical presence in the state. Cost: $50-$200/year.
- Get EIN (Employer Identification Number): Apply online (instant) if you have a US SSN/ITIN. Form SS-4 by fax for international founders (4 business days).
- Draft Bylaws (Corp) or Operating Agreement (LLC): Governs internal operations. Not filed with state but essential for banking, investors, and dispute resolution.
- Issue Founder Equity with Vesting: Issue all founder shares at formation when company value is minimal. Attach 4-year vesting with 1-year cliff to every founder's shares.
- File 83(b) Election Within 30 Days: If any founder shares are subject to vesting, file with the IRS within 30 calendar days. No extensions. No exceptions.
- Open Business Bank Account: Mercury or Relay for startups. Keep business finances separate from personal from day one.
- Register for State Taxes: Register with state department of revenue for sales tax (if selling taxable goods/services) and income tax withholding (if hiring).
- Get Business Insurance: General liability insurance at minimum. D&O (Directors and Officers) insurance before fundraising. Workers' comp if you have employees.
- Obtain Sales Tax Permit (if applicable): Required in states where you have nexus and sell taxable goods/services. Economic nexus thresholds apply even without a physical presence.
- Set Up Payroll (if hiring): Register with federal (Form 941) and state payroll agencies before first paycheck. Use Gusto, Rippling, or ADP.
- Sign IP Assignment Agreement: All founders must assign all relevant intellectual property created before and during the company to the company. Do this at formation.
- Establish Board of Directors: Initial board resolution to appoint officers, authorize issuance of shares, and ratify formation. Document in meeting minutes.
- Prepare Initial Corporate Records: Stock ledger, stock certificates (or book-entry equity), executed bylaws, and initial board resolutions. Keep in a corporate records book.
- Set Up Accounting Software: QuickBooks Online, Xero, or Wave. Connect to your bank account. Start from day one, retroactive bookkeeping is expensive.
- File BOI Report with FinCEN: Beneficial Ownership Information report required under the Corporate Transparency Act. Due within 90 days of formation for new entities.
- Build Annual Compliance Calendar: Delaware franchise tax, state annual report, Form 1120 or 1065, BOI updates, registered agent renewal. Missing these creates penalties.
Critical Deadlines At a Glance
| Action | Deadline |
|---|---|
| 83(b) election | 30 calendar days from stock issuance |
| BOI report (new entities) | 90 days from formation |
| New hire reporting | 20 days from hire date |
| Delaware C-corp franchise tax | March 1 annually |
| Delaware LLC franchise tax | June 1 annually |
| Federal corporate tax (Form 1120) | April 15 (extend to October 15) |
Common Incorporation Mistakes and Costs
| Mistake | Consequence |
|---|---|
| Missing 83(b) election | Ordinary income tax on all vesting events instead of capital gains at exit |
| Not filing Form 5472 (foreign LLCs) | $25,000 IRS penalty per year |
| Missing Delaware franchise tax | Late fees + entity in bad standing |
| Not signing IP assignment agreements | Founder can walk and take IP with them |
| Skipping BOI report | Civil and criminal penalties |
| Using personal accounts for business | Commingling destroys limited liability protection |
Founders Agreement vs Bylaws vs Operating Agreement
| Document | Purpose |
|---|---|
| Founders Agreement | Vesting terms, equity split, IP assignment, departure clauses, founder restrictions |
| Bylaws (Corp) | Corporate governance: board structure, voting, officer roles, share procedures |
| Operating Agreement (LLC) | Member rights, voting, profit/loss allocation, exit procedures |
| Shareholder Agreement | Investor rights: information rights, pro-rata, drag-along, ROFR |
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Frequently Asked Questions
Can I incorporate without an attorney?
Yes. Formation platforms (Stripe Atlas, Clerky, Firstbase, Incfile) provide templates and handle filings for $500-$2,000. For simple single-founder businesses, this is sufficient. For multi-founder startups or complex equity structures, a startup attorney is strongly recommended.
What is the single most important action in the first 30 days?
Filing the 83(b) election, assuming your shares are subject to vesting. The dollar cost is $0. The cost of missing it can be hundreds of thousands in unnecessary taxes.
Do I need to open a bank account before I have any revenue?
Yes. Open it immediately. Investors, banks, and accountants will ask for a clean financial history from formation. Starting with a personal account and switching later creates accounting complexity.
What is the BOI report?
The Beneficial Ownership Information report is filed with FinCEN (part of the US Treasury) under the Corporate Transparency Act. It discloses who ultimately owns and controls the entity. Required for most small businesses and startups.
What on this list is genuinely hard to fix later?
Anything involving equity, and anything with a filing window attached. Shares issued without the paperwork, a founder who left with no written leaver arrangement, intellectual property created before the company existed and never assigned to it, and elections that had to be made within a set period of an event. Everything else here is administration that can be caught up. These are the ones that surface in a funding round or a sale, at the worst moment and with the least leverage.
Written by
Abhinav Gupta, CPA, CA, MBA
Abhinav works with business owners across the US on industry-specific bookkeeping, from dental practices and restaurants to construction and e-commerce. He writes about what each trade's books actually need. Connect on LinkedIn
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