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It used to be true that “everyone” incorporated in Delaware due to its more favorable terms, but many of these terms simply don’t apply to startups, or the differences don’t exist anymore. Tags: startup incorporation Arizona Delaware business. I live in Arizona, so I’ll use that state as an example. Now is the time to get started.
Delaware is a very popular state to incorporate in, and boasts the highest number of incorporated entities in America. Because of its popularity, Delaware is also statistically a popular state for investors to finance businesses. This sounds great, but doing business in another state means additional paperwork.
If you’re working closely with partners who are helping you distribute your product, it’s especially important to make sure they understand who you are, how you speak, and who you serve. In fact, GreenPal wasn’t the only one that figured it was best to go for a Delaware-based C-Corp. Delaware permits a single-member board of directors.
Background Reading: When LLCs Make Sense for Startups Not Building a Unicorn If you have spent almost any time reading about the basics of startup legal issues, you know that Delaware C-corps are the default organizational structure for a “classic” tech startup (software, hardware) planning to raise angel/VC money and scale.
Form a legal entity to operate the business (we’ll use a Delaware corporation as an example for Newco). Strategic partnership or distribution agreements. Determine who will serve on the Board of Directors and in executive officer positions (usually founders). Appoint Newco’s initial Board of Directors. Office and equipment leases.
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The equity element will only become a factor if the participating company chooses to raise a round of financing or sell out to an acquiring company. This instrument gives us a lot more flexibility to work with different types of companies than the Delaware C-Corps most commonly funded by VCs. Distributions The heart of the indie.vc
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Adeo was focused on creating mechanisms to protect founders who may lose control of the companies they created after raising financing from investors. The current customary form of venture financing documents has not changed much since with mid-1970s when they first became widely adopted in Silicon Valley. Protective provisions.
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