Startup Incorporation Checklist

How to bootstrap a Delaware C-corp (or S-corp) with employee(s) in California

Disclaimer: I am not a lawyer (IANAL). This list is intended as a learning tool and you should definitely consult with a lawyer if you have any questions or concerns. This is a work in progress, so suggestions and pull requests are welcome!

Intro

Other than building a product people want, incorporating a new business is essential to raising money, opening a bank account, and creating a legal entity for contracts and other liabilities. For technical folks like me, it's the "necessary evil" of founding a company and just needs to get done. Having gone through this recently, I made a checklist in case I'd have to do it again in the near future. Why you should incorporate in DE is outside the scope of this article, but other folks have written good answers.

Some notes:

• The full process will take several weeks to complete
• Most steps are sequential and depend on an earlier step being complete
• Many steps require the use of snail mail or a fax machine
• For brevity, Delaware and California are shortened to DE and CA
• Again, consult your lawyer. Some will defer fees for startups

The checklist

Register with DE

• Choose a name for your business and check that it's available. DE Name Search & CA Name Search
• Generate incorporation documents and sign them [free document service]
• Buy registered agent service in DE - 1 yr Free
• File incorporation docs with DE - ~$150 including fees for 1 week service
  • You can do this yourself, but it will probably take longer and not save you much money

First steps with the IRS

• Apply for a Federal Employer Identification Number (EIN) - Free
  • IRS info & form
  • Expect the IRS to mail you a document containing your EFTPS Pin. This allows you to pay federal taxes electronically
• (for founders with stock vesting) File 83b election within 30 days of stock grant
  • reference: https://www.irs.gov/irb/2012-28_IRB/ar12.html
  • example letter: http://accountalent.com/83b-elections-for-dummies/
  • include 2 extra signed copies and self-addressed stamped return envelope
• (only for S-corp) File IRS Form 2553 to convert C-corp to S-corp
  • IRS Form 2553

NOTE: Most of the following steps require a valid U.S. checking account and the steps above allow you to open an account. This is probably the best time to do so.

Register with CA

NOTE: This section applies to companies that are doing business or have employees in CA - similar requirements apply for other states.

• (optional, see below) Order certified copy of Certificate of Good Standing from DE - $50
  • Within 6 months of DE registration, you can use the "Filed Certificate of Incorporation" signed and stamped by Secretary of DE (document forwarded by DE registered agent following incorporation)
  • Fill out DE fillable form and fax to (302) 739-3812. more info
  • Or, find an agent with online access
• Sign up for Registered agent service in CA 1 yr free
• Register your foreign entity with CA Secretary of State - $100
  • Fill out CA form S&DC - S/N
  • Make sure NOT to include mailing address for registered agent
  • Include either Filed Certificate of Incorporation (signed and stamped by Secretary of DE) or, if registering in CA 6mo+ after incoporation, DE Certificate of Good Standing with mailed form
• (optional for solo founders) Exclude yourself from paying SDI taxes
  • CA form DE459
• Within 90 days of CA registration, file Statement of Information (SI-550) - $25
  • eFile CA Form SI-550 via CA Secretary of State website
  • if multiple directors, also attach CA Form SI-550A if sending by mail

Set up payroll tax payments with IRS and CA

• Sign up to make IRS payroll tax payments electronically - Free
  • Enroll via phone call to IRS 1-800-555-3453
    • have your EFTPS Pin and checking account info handy
    • be prepared to write down enrollment number
  • Set password via EFTPS password form
  • Confirm enrollment via EFTPS login form
• Register with CA Employer Development Department (CA EDD) - Free
  • CA EDD Enrollment
• Sign up with Social Security Business Services - Free
  • guide: https://support.waveapps.com/entries/60125574-Social-Security-Business-Services-Online-Registration-Guide
  • form: https://www.ssa.gov/bso/bsowelcome.htm

Recurring items

• varies File and pay CA payroll taxes
  • quarterly eFile CA Form DE9 & CA Form DE9C
  • File forms via CA EDD website
• varies File and pay Federal payroll taxes
  • Mail or eFile federal tax form (Medicare, Social Security, Federal Income Tax) (reference) (eFile tool)
    • quarterly use IRS Form 941 (instructions)
    • yearly use IRS Form 944 (instructions)
  • Pay via EFTPS website
• yearly File federal tax return
  • (S-corp only) File IRS Form 1120S (instructions)
  • (C-corp only) File IRS Form 1120 (instructions)
  • (LLC-only) depends on ownership structure, but partnerships must distribute IRS Schedule K-1 to each owner
• yearly File DE annual report and pay franchise tax >= $350
  • https://corp.delaware.gov/paytaxes.shtml
• yearly File CA statement of information $25
  • File CA Form SI-550 via CA Secretary of State website
• yearly File CA tax return >= $800
  • Note: First year loss might waive $800 minimum [ref]
  • File and pay via CA Franchise Tax Board (FTB)
• yearly Send W2 to employees (eFile tool)
• yearly File W3 with IRS
• yearly Send 1099 to contractors, lawyers, et. al. (eFile tool)

Tools & References

Free or mostly-free tools

1. Founder's Workbench - generate incorporation documents
2. FreeRegisteredAgent - one year of free registered agent service in DE and/or CA
3. HelloFax - send faxes without a fax machine
4. Wave - free accounting software, with extra services for a $fee

Non-free tools

1. Clerky - software to handle the complete set of company formation paperwork online (incorporation, appointing directors and officers, issuing stock, protecting IP, etc.)
2. Stripe Atlas - like Clerky, handles most of the company formation paperwork, it will also automatically setup a bank account with SVB as well as a Stripe account
3. InCorp - will file DE incorporation papers quickly on your behalf for ~$150, including state fees
4. Tax1099 - e-file federal tax forms (e.g. tax return, 1099, W2, etc), small fee per form
5. Intuit 1099 service - generate and e-file 1099 forms, small fee per form
6. VirtualPostMail - virtual mailbox for real mail. Good for nomadic workers and short-term offices. Also offers free registered agent in CA with paid plan

References

• Q: Choosing between C-corp, S-corp, and LLC? Answer
• Q: Why incorporate in DE? Answer

Known unknowns

• Sales taxes
• Generate Terms of Service, Privacy Policy, etc (Docracy.com has some good templates)
• Liability insurance
• Start using bookkeeping software right away to track expenses, income, etc. Lots of free/affordable options