The RightFoundation. From Day One.
LLCs, C-Corps, S-Corps, Delaware formation, and operating agreements. The corporate structure that fits your business model, funding plans, and tax situation.
LLC vs. C-Corp vs. S-Corp
LLC
Limited Liability Company- Flexible management structure
- Pass-through taxation (no double tax)
- Operating agreement customization
- Harder to issue equity incentives
- Some investors won't fund LLCs
C-Corp
C Corporation- Required for VC investment
- Stock options for employees
- Double taxation (corp + dividend)
- Formal governance required
- Easier to transfer ownership
S-Corp
S Corporation- Pass-through taxation
- Payroll tax savings possible
- Limited to 100 shareholders
- One class of stock only
- US residents only
What Gets Handled
LLC Formation
Articles of organization, custom operating agreements, membership certificates, and EIN registration.
Corporation Formation
Articles of incorporation, bylaws, initial board resolutions, stock issuance, and 83(b) elections.
Delaware Entities
Delaware formation, registered agent, qualification in home state. The standard for VC-backed companies.
Operating Agreements
Custom multi-member agreements addressing management, distributions, transfer restrictions, and buyouts.
Founder Agreements
Vesting schedules, IP assignments, founder roles, and decision-making frameworks.
Governance Setup
Board structure, officer appointments, meeting requirements, and corporate record maintenance.
Delaware vs. Home State: The Decision Framework
Delaware is the default for venture-backed startups. But it's not always the right choice.
Consider Delaware if:
- Planning to raise institutional capital (VCs expect it)
- Complex ownership or governance structures
- Multiple equity classes or convertible instruments
- Potential M&A or IPO exit
Consider Home State (CT/NY/MA) if:
- Local operating business without outside investors
- Simple ownership structure (solo or family)
- Cost sensitivity (avoid paying fees in two states)
- No plans for institutional fundraising
Note: Forming in Delaware still requires registering as a foreign entity in the state where operations occur—so there are ongoing compliance obligations in both states.
Your Entity Structure Shapes Everything That Follows
Entity selection isn't just a legal formality -- it determines how the business operates, raises capital, compensates employees, and pays taxes for years to come.
What Depends on Entity Type
- Fundraising -- VCs require C-Corps. Angels may accept LLCs. SAFEs need specific corporate structures.
- Employee Compensation -- Stock options require a corporation. Profit interests work for LLCs. ISOs have specific entity requirements.
- Tax Treatment -- Pass-through vs. double taxation. Self-employment taxes. QBI deductions. Each structure has different implications.
- Governance -- Board requirements, meeting minutes, and formalities vary by entity type and state.
Getting It Right From The Start
Restructuring later is possible but expensive and disruptive. Most conversions happen under time pressure -- an investor waiting, an acquisition closing. Getting the structure right initially avoids rushed decisions later.
Get the Structure Right From Day One
Schedule a consultation to discuss LLC vs. Corporation, Delaware formation, and the right structure for your business goals.
Entity Formation Steps
Entity Selection
Document Drafting
State Filing
Final Package
When Entity Structure Matters Most
At Founding
Set up the right structure before operations begin. Harder to change later.
First Employees
Equity incentives require corporate structure. Stock options need a C-Corp.
Raising Capital
Investors expect specific structures. Convert before the term sheet.
M&A or IPO
Acquirers prefer clean structures. Messy cap tables delay deals.
Entity Formation FAQ
Get answers to common questions about our legal services.
It depends on goals. LLCs offer flexibility and simplicity—pass-through taxation, customizable operating agreements, and less formality. Corporations make sense when planning to raise venture capital, issue stock options to employees, or navigate specific tax planning. Analysis of the specific situation determines the recommendation.
For VC-backed companies, yes—investors expect it. Delaware has business-friendly laws, specialized courts (Court of Chancery), and well-developed case law. For local operating businesses without outside investors, home state formation is usually simpler and cheaper since Delaware entities still must register where they operate.
Default state rules rarely match what founders want for management, profit sharing, and exit scenarios. A proper operating agreement addresses: decision-making authority, capital contributions, profit distributions, transfer restrictions, buyout provisions, and dispute resolution. It prevents fights later.
S-Corp status provides pass-through taxation with potential payroll tax savings. But there are restrictions: 100 shareholders max, one class of stock, US residents only. It's often used for owner-operated businesses wanting to optimize self-employment taxes. Analysis of the tax situation determines if it makes sense.
Yes, but it's more complex and expensive than getting it right initially. LLC-to-Corp conversions are common pre-funding. There are tax implications and timing considerations. Planning ahead avoids rushed restructuring when a term sheet arrives.
Still have questions?
Contact UsFree Video Course: Legal Foundations for Startups
Watch our free 5-lesson video course covering entity formation, contracts, hiring, and IP protection. Each lesson includes actionable takeaways you can apply to your business today.
Browse all video courses or listen to the Tabula Rasa podcast for more legal insights.
You May Also Need
Startup Financing
Once formed, many companies raise capital. SAFEs, convertible notes, and priced rounds.
Outside General Counsel
Ongoing legal support as the business grows. Contract review, employment, governance.
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63 Wall St 1B, Madison, CT 06443
Serving clients in CT, NY, MA
Get the Structure Right From Day One
Schedule a consultation to discuss entity options. The right foundation sets up everything that follows.