Introduction
This article will describe how to incorporate your company using the Incorporation Workflow.
Once you’ve finished entering all of your information, Fidelity Private Shares will take care of the rest and submit your information to the Delaware Division of Corporations. The document being filed to incorporate goes by several names - Articles of Incorporation, Certificate of Incorporation, or the 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
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After incorporation: next steps
Why Companies Incorporate
Incorporating your company offers numerous benefits, including protection for your personal assets. It also 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, Why Do So Many Companies Incorporate in Delaware?.
What to Expect During the Incorporation Workflow
The Incorporation Workflow will help you to gather the information that Delaware requires for incorporation. Once you've finished, our team will take care of the rest and submit your Certificate of Incorporation to Delaware for their review. If you have already filed, Fidelity Private Shares will capture the details of your Certificate of Incorporation.
For a detailed overview of the Incorporation Workflow process, check out our step-by-step article, The Incorporation Workflow Step-by-Step.
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, Fidelity Private Shares will also 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.
Preparing to Incorporate
You’ll need to establish the number of authorized shares, the par value of the company's common stock, and your Board of Directors. If you have questions, this may be a good time to introduce your lawyer to the platform and seek their guidance on best practices.
Authorized Shares
During the workflow, you will be asked to indicate the number of common stock shares that will be available (or authorized) for issuance. Any subsequent changes to this number will require a filing with Delaware to amend your Certificate of Incorporation, as well as approval from your Stockholders and Board of Directors. 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 you're done with the Incorporation Workflow, you’ll be able to Request your EIN and 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, Fidelity Private Shares can help you 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.
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