Business Formation
LLCs, S-Corps, C-Corps, and partnerships — structured correctly at day one to support the business you’re actually building.
Choice of entity
Entity choice sets the default answers to a lot of later questions: how the business is taxed, what ownership interests look like, how new owners are admitted, what happens if someone leaves, and whether the business can raise institutional capital at all. Getting it right at formation is cheaper than fixing it at a financing or sale.
- C-Corporation — default choice for venture-backed companies; required by most institutional investors; qualifies for QSBS; 83(b) on founder stock; Delaware is the standard jurisdiction.
- LLC — flexible governance and pass-through taxation; good for single-purpose vehicles, real estate, service businesses, and operators who don’t expect to raise institutional equity; can be converted to a C-corp later (with tax consequences).
- S-Corporation — pass-through taxation with corporate form; limited to 100 shareholders, all US persons, one class of stock; not suitable for companies planning to raise venture capital.
- Partnerships — general and limited partnerships for specific structures (funds, real estate, family wealth vehicles).
Delaware versus California
For C-corporations intending to raise institutional capital, Delaware is the near-universal default. Delaware’s corporate code is well-developed, its courts decide corporate disputes quickly and predictably, and institutional investors are familiar with it. California-domiciled companies doing business in California still pay California franchise tax either way, so the marginal cost of Delaware incorporation is minimal.
For LLCs and closely-held operating companies with no institutional-capital ambitions, California (or the state where the business actually operates) is often the simpler choice. We walk through the decision in the initial scoping call rather than defaulting either way.
Founder documents
At formation we set up the documents that matter for downstream financings and exits: founder common stock issuances, vesting agreements, proprietary information and inventions assignments, board resolutions, and bylaws. We file Section 83(b) elections within the required 30-day window, preserve qualified small business stock (QSBS) eligibility where the numbers support it, and set the initial option pool sizing with the next round in mind.
Frequently asked.
Should I form an LLC or a C-corp?
If you plan to raise institutional venture capital within the next 12–24 months, a Delaware C-corporation is almost always the right answer — institutional investors won’t invest in LLCs, and converting an LLC to a C-corp at the financing can trigger taxable gain. If you’re building a services business, a single-purpose vehicle, or a closely-held operating company with no plans to raise VC, an LLC is usually simpler and more tax-efficient. The decision isn’t reversible without cost, so getting it right at formation matters.
Why Delaware?
Delaware has the most developed body of corporate law in the United States, a specialized court (the Court of Chancery) that decides corporate disputes quickly and without juries, and a statutory regime that balances shareholder and management interests in predictable ways. Institutional investors are familiar with it and generally require it for C-corp portfolio companies. The incorporation process is fast and the annual fees are modest.
What’s an 83(b) election and why does it matter?
When founders receive stock subject to vesting, Section 83 of the tax code provides two alternative tax treatments. Without an 83(b) election, the founder is taxed on the value of each tranche of stock as it vests — which can be a significant tax bill if the company’s value has grown. Filing an 83(b) within 30 days of the stock grant elects to be taxed on the full value at grant (typically nominal) rather than at vesting. For founder stock, the 83(b) is almost always the right move; missing the 30-day window can cost hundreds of thousands of dollars at exit.
What is QSBS and when does it apply?
Qualified Small Business Stock (Section 1202) is a federal tax regime that allows founders and early employees to exclude up to 100% of gain on the sale of qualifying stock — up to $10 million or 10× basis, whichever is greater. To qualify, the company must be a U.S. C-corporation with aggregate gross assets of $50 million or less at the time of issuance; the stock must be held for five years; and the business must be in a qualifying trade or business. QSBS is one of the most valuable tax preferences in the code for venture-backed founders. Preserving eligibility starts at formation.
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