Startup Formation & Structure Guide
Set your startup's legal foundation right from day one. This comprehensive guide covers everything from choosing your entity type to structuring founder equity and hiring your first employees.
Formation Essentials
Delaware C-Corp vs Texas LLC
The critical first decision that impacts everything from taxes to fundraising potential
- Why VCs prefer Delaware C-Corps
- Tax implications for Texas founders
- Conversion costs and timing
- State franchise tax comparison
Founder Agreements Template
Protect all founders with proper vesting and IP assignment
- 4-year vesting with 1-year cliff
- IP assignment provisions
- Non-compete considerations
83(b) Election Guide
Don't miss this 30-day deadline that could save you millions
- Step-by-step filing process
- Tax implications explained
- Common mistakes to avoid
Equity Structure & Cap Tables
Setting Up Your Cap Table
Your cap table is your startup's ownership DNA. Get it right from the start with our comprehensive guides on equity allocation, option pools, and dilution modeling.
Early Employees & Advisors
Compensation Structures Comparison
| Type | Best For | Typical Amount | Vesting | Tax Treatment |
|---|---|---|---|---|
| Stock Options (ISO) | Employees | 0.1% - 2% | 4 years, 1-year cliff | Capital gains if held |
| Stock Options (NSO) | Contractors, Advisors | 0.01% - 0.5% | 2-4 years | Ordinary income |
| Restricted Stock | Early employees | 0.5% - 5% | 4 years, 1-year cliff | Ordinary (unless 83b) |
| RSUs | Later employees | 0.01% - 1% | 4 years | Ordinary income |
Texas-Specific Considerations
🤠 Texas Startup Advantages
- No state income tax (but watch franchise tax)
- Business-friendly employment laws
- Strong IP assignment enforcement
- Access to Texas Enterprise Fund
Formation Timeline & Checklist
Choose Entity & State
Delaware C-Corp for VC funding, Texas LLC for lifestyle business
File Formation Documents
Certificate of Incorporation, EIN application, initial board resolutions
Founder Agreements
Stock purchase, vesting schedules, IP assignments, 83(b) elections
Operational Setup
Bank accounts, accounting, insurance, initial contracts
Common Formation Mistakes to Avoid
Handshake Equity Deals
Always document equity splits in writing, even among best friends. Verbal agreements are lawsuit magnets.
Missing 83(b) Deadline
You have exactly 30 days from stock grant. Missing it can cost millions in unnecessary taxes.
No IP Assignment
Every founder and contractor must assign IP to the company. This is non-negotiable for funding.
Wrong Entity Type
LLCs can't issue stock options easily. Converting later costs $10K+ and delays funding.
Free Formation Resources
Download Our Free Templates
Get Expert Formation Help
Ready to incorporate your startup?
Our fixed-fee formation package includes everything you need to launch properly:
- Entity formation (Delaware or Texas)
- Founder agreements with vesting
- IP assignments
- Stock issuance & 83(b) elections
- Initial board resolutions
- Option pool setup
Complete Formation Package: $3,500
Start Your Formation →