If you’re starting a company, you’ve probably heard that you need to “become incorporated,” but what does that actually mean, and why does it matter?

For first-time founders, incorporation can seem like just another box to check, but it’s a critical foundation that can shape your company’s legal standing, growth trajectory, and fundraising potential.

Let’s break down what incorporation is, why it matters, and why so many startups form Delaware C corporations to set themselves up for long-term success.

What It Means to Incorporate a Startup

Incorporation is the legal process of forming a business entity that’s separate from you as an individual. By incorporating, you’re creating a company that can own assets, enter contracts, hire employees, issue stock, and crucially limit your personal liability.

For startups, this step goes beyond protection to cover how you lay the legal and operational groundwork to grow, raise capital, and bring on co-founders or employees with equity.

Incorporation is also what allows you to create a cap table (capitalization table), which tracks who owns what portion of the company. That becomes essential as you start to issue equity, fundraise, or grant employee stock options—and keeping it accurate from day one is one of the most overlooked parts of building a strong startup foundation.

Why Incorporation Matters

Founding a company is incredibly exciting, but let’s be honest, the paperwork probably isn’t what got you out of bed in the morning. Still, choosing to incorporate (and doing it the right way) is one of the most important early decisions you’ll make.

Here’s what you could gain by incorporating early:

1.  Liability Protection

When your company is a legal entity, it’s responsible for its own debts and obligations. This helps protect your personal assets from legal or financial trouble the business may face.

2.  Equity Readiness

Investors, co-founders, and employees all expect a company to be structured to issue and manage equity. Incorporating, especially as a C corporation, can make it easier to offer and track ownership.

3.  Fundraising Potential

Most venture capital firms won’t invest in anything but a Delaware C corporation. If you’re serious about raising funding, incorporating this way may give you greater chances.

4.  Credibility & Structure

Incorporation signals professionalism. It shows potential partners, customers, and employees that you’re serious, and it gives you a framework for making decisions, signing contracts, and defining leadership roles.

Why Most Startups Choose Delaware C Corporations

Delaware is home to more than a million businesses (including over 65% of the Fortune 500) for a reason. Its legal system is uniquely business-friendly, and most investors, lawyers, and founders are already familiar with how Delaware corporations operate.

Choosing a Delaware C corporation can also set you up for future growth:

• You can have multiple classes of stock (important for structuring equity).
• You’re not limited to 100 shareholders (unlike an S corporation).
• You’re not restricted to S.-based shareholders.
• You’re aligned with what most investors
  
  

It’s the structure built for scale, and it’s often the simplest choice for startups that plan to raise institutional capital.

When to Incorporate

Incorporating too early can feel premature, but waiting too long can create major headaches. If you’re building something with co-founders, issuing equity, or planning to fundraise, we believe the best time to incorporate is before you start making promises or splitting ownership.

Getting it right from the start avoids the need for costly clean-up later. It can also give you time to handle key documentation steps like filing your 83(b) election (a tax form related to equity grants) and establishing your cap table hygiene (keeping ownership records accurate and up to date).

The Bottom Line

If you’re serious about building a company—especially one that raises money or scales—you should incorporate. And if you want to do it in a way that can set you up for growth, a Delaware C corporation is the standard for a reason.

Fidelity Private Shares℠ helps founders incorporate, manage equity, and grow with confidence from day one. We can help you incorporate your startup. Our platform prepares your paperwork and guides you through the process of filing your company's Charter, and if you have already filed, the workflow will capture the details of your Charter. Our Incorporation workflow also creates your company's bylaws and sets up your company's initial Board of Directors.

We make it easy for you to collaborate right in the system. Inviting your attorney to work with you on our platform creates a relationship that gives your legal counsel access to documents in your Data Room as well as authorization to act on behalf of your company.

Want to learn more about how we support early-stage companies? Let’s talk.

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