This article will describe our process for incorporating your company using the "Incorporation Workflow."
Once you’ve finished entering all of your information, Shoobx will take care of the rest and submit your information to Delaware. The document being filed to incorporate goes by several names (examples are Articles of Incorporation and Certificate of Incorporation) but it is most commonly referred to as your company's Charter.
This article covers the following topics:
- Why companies incorporate
- What to expect during the incorporation workflow
- Preparing to incorporate
- Authorized Shares
- Par Value
- After incorporation: next steps
Why Companies Incorporate
Incorporating your company offers numerous benefits, including protection for your personal assets and it allows the business to continue in perpetuity, regardless of changes in leadership. Importantly, incorporating also gives you the ability to raise capital for your company.
Why Delaware C Corps? Many companies choose to incorporate in Delaware because their taxation and legal liability protections can be favorable to businesses. Since so many companies choose to incorporate there, many stakeholders and potential stakeholders in your business will likely have experience working with DE's corporate laws. You can learn more about this in our blog post, You'll End Up Incorporating in Delaware.
What to Expect During the Incorporation Workflow
The incorporation workflow prompts you to enter the necessary information and once you've finished, Shoobx will take care of the rest and submit your information to Delaware. If you have already filed, Shoobx will capture the details of your Charter.
For the Incorporation workflow process, check out our step-by-step article, Incorporation.
The workflow will also create your company's bylaws and set up your company's initial Board of Directors by executing the Consent in Lieu of Meeting of Sole Incorporator. If you don't already have one, Shoobx will engage a registered agent for you. Having a registered agent is required for all Delaware corporations. You can learn more in our blog post, Understanding Your Registered Agent.
For a quick overview check out Tyler’s video:
Preparing to Incorporate
You’ll need to know the number of authorized shares, par value of common stock, and your board. If you have questions, this may be a good time to introduce your lawyer to the platform and seek their feedback on best practices.
Authorized Shares
During the workflow, you will be asked to indicate the number of common stock shares that will be available (authorized) for issuance. Any subsequent changes to this number will require a filing with Delaware to amend your Certificate of Incorporation and will also require approval from your Stockholders and Board. For more information, read our blog post, Authorized Shares: Where Do They All Go?
Par Value
Par value is the lowest dollar amount a share of Common Stock can be worth. There are tax implications based on this value for stockholders as well as the company depending on how the company decides to pay their annual franchise tax. Delaware offers two methods for calculating the taxes you'll pay each year for being a corporation in that state. If you choose the par value method (which is likely), a low par value may keep your tax bill lower. See our blog post, Par Value: More Than Zero, for more information.
After Incorporation: Next Steps
After that, you’ll be able to 1) Request your EIN and 2) Begin post incorporation. Post incorporation includes organizing your board, selecting company officers, and granting equity to founders. Although you can begin the post incorporation process right away, you can’t complete the workflow until after your Certificate of Incorporation has been fully processed.
After you complete post incorporation and register your legal counsel, Shoobx can help you hire employees, create a stock incentive plan, perform a financing round, and much more!
Additional Resources:
The Post-Incorporation Workflow Step-by-Step
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
© 2023 FMR LLC. All rights reserved.
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