What are some of the best services that I can use to setup a Delaware based C-Corp?
I just came across Stripe Atlas and I’m not sure if that’s a good service or not.
I am working on a startup that’s getting pretty serious. We are US (CA) based and we are complete novices when it comes to all legal matters.
Any tips/advise would be much appreciated!
Also would like to hear input on this. I am going to incorporate early next year and was looking at Clerky.
Based on the word “we” being used repeatedly in your post and assuming it means you have a co-founder, I recommend you hire an attorney. In addition to forming the legal entity of the corporation, which requires issuing stock, which requires dividing the stock, setting up voting rules, vesting/reverse vesting, etc., you also need to tend to some important things like filing an 83(b) election and assigning IP to the corporation, and all the rest of it.
If you’re serious, do it right. If it’s not worth doing right, then don’t waste your time on it at all.
Are you going to take outside investors? That’s the only reason to incorporate in Delaware, otherwise it’s just overhead.
Yes very likely.
I used stripe atlas, and can say it’s pretty amazing. Stripe partners with lawbite.co.uk and you can talk with them as well. Stripe is $500 to set up a c corp and take care of everything involved, including setting up ownership shares, to filing all the paperwork.
Based on what you wrote about raising money later on, if you hire an attorney, you should, at a minimum, make sure they specialize in high growth startups. That means venture capital financings should pretty much be their bread and butter.
A lot of people make the mistake of assuming that just because they are working with a lawyer means everything will be done correctly. This is nowhere close to being a safe assumption. When I was at Orrick (which has one of the top startup practices), a lot of the most annoying cleanups were when we got a new client that had worked with a random lawyer who knew little about startups (usually a family member or friend of the family). Part of the problem is that some people think any new business is a “startup”. You are likely better off not having done anything at all than working with an inexperienced or incompetent lawyer.
There are too many good firms / attorneys to list here but I’m happy to help make some recommendations over DM if it’s helpful (I don’t do client work myself anymore).
Let’s say one registers via clerky or atlas. At what point in time would they need to go to an attorney, and would attorneys be ok running with what atlas/ clerky has done? Few cases I can think
- adding a cofounder later
- raising money from friends and family
- raising money with institutional investors
- adding an advisor
- contracts with workers in a different country
- subsidiary in a foreign country
At what point in time would they need to go to an attorney, and
Clerky co-founder here — worth noting that using Clerky and working with an attorney aren’t mutually exclusive. A lot of startups use us with their attorney. You’d just have your attorney review the information you’re putting into Clerky, which is super quick (and thus cheap).
In general, I’d recommend working with a startup attorney (with or without Clerky) if you need legal advice. In the US, only law firms can provide legal advice. If you’re ever unsure about whether you need legal advice or not, feel free to reach out to us and we can give our thoughts, even if you haven’t used Clerky yet. We’re also more than happy to help recommend startup attorneys if needed!
would attorneys be ok running with what atlas/ clerky has done?
My experience is that nearly all good, experienced startup attorneys are pretty comfortable with working with startups that formed on Clerky. A huge percentage of YC companies form on Clerky and that would not be happening if we were causing problems for them. Where we usually see friction is with attorneys that work more with regular small businesses than actual startups (e.g. attorneys that aren’t spending most of their time on VC financings).
BTW if you use Clerky and run into issues working with a lawyer later on, please definitely reach out and we’ll do our best to help however we can. With the wrong attorneys, there can often be some confusion or misinformation, so much so that we’ve put together some help center content on what to do in that situation.
adding a cofounder later
raising money from friends and family
raising money with institutional investors
adding an advisor
We (Clerky) have products for all of this, but worth noting that the fundraising products are for convertible notes and safes. If you’re doing an equity financing, you’ll want to work with a startup attorney (there’s no good online service for this that I’m aware of).
contracts with workers in a different country
A lot of startups use our hiring products for this. It’s worth noting though that the forms were designed for U.S. workers, so it is possible that there are some countries where you would want to make modifications. The best thing to do would be to work with a startup attorney, who would probably need to reach out to colleagues in overseas offices or else find a firm in the worker’s jurisdiction to consult with. That can get expensive though, of course. There are PEOs out there that solve this problem (though from what I hear, with varying degrees of legal quality), for a price.
subsidiary in a foreign country
Definitely work with a startup attorney on this. There is no way to do this safely with any online service (though Clerky could be used for bits and pieces of the overall process).
Wow! Appreciate a cofounder replying to my queries! I am sold. They only reason to start without an attorney is being frugal initially (being frugal is not being cheap 😀) and get an attorney when funds are there. Or if I can find an attorney who can defer getting paid till we raise funds.
Honestly, none of them.
The paperwork involved is fairly easy and you can do it yourself in very little time.
But knowing what you’re doing is another story.
The best would of course be consulting with an attorney… Otherwise, save yourself the fees and do it yourself.
PS: even if you set up a DE corp, you will likely have to register in your home state. If you live in CA, then you certainly need to register your foreign (meaning DE) corp in Cali.
Stripe Atlas, Clerky, and others have some limitations you should check out first, like not having a lot of flexibility for different legal terms/conditions. It’s boilerplate.
You can also create your docs with CooleyGo for free, and then use a filing service like https://www.delawareinc.com. After that, you can get things like your Certificate of Good Standing (which you need for to file your California Qualification paperwork) directly on the delaware.gov website.
It really shouldn’t be complicated to register a businesses, but yet, it is :-(