Incorporating a corporation in Delaware involves preparing several formation documents. These outline the company’s structure, management, and operations. Importantly, a Certificate of Incorporation must be filed with the Delaware Secretary of State. The following offers a summary of the documents typically included in a Delaware corporation’s incorporation package. Upon forming the corporation, management should consult with legal and tax professionals to ensure appropriate corporate upkeep.
- Certificate of Incorporation – This is the foundational document for forming a Delaware corporation. When filed with the Delaware Secretary of State, it establishes the company as a separate legal entity. The document includes basic details such as the company’s name, registered agent and office in Delaware, purpose, duration, and stock structure. Delaware law requires that crucial rights and restrictions be contained in this document. Often referred to as a company’s “charter,” the Certificate of Incorporation serves as the constitution of a Delaware corporation.
- Bylaws – The Bylaws are second in importance only to the Certificate of Incorporation in a Delaware corporation. They function as a comprehensive rulebook for the company. They govern matters such as board of directors meetings and actions, stockholder meetings and actions, officer roles, and other procedures. They may also outline stock transfer restrictions and procedures. While the Bylaws are not filed with the Delaware Secretary of State, they still must be closely and formally observed.
- Action of Incorporator – The Incorporator is the person who signs and files the Certificate of Incorporation on behalf of the Delaware corporation. After the filing is complete, the Incorporator signs an Action of Incorporator document, to record the adoption of the company’s Bylaws, the appointment of the initial board of directors, and the transfer of management to the newly appointed board. A founder can serve as the Incorporator and also hold one or more roles (e.g., director, various officers, stockholder) as described below.
- Initial Unanimous Written Consent of the Board of Directors (Board Consent) – This document, often shortened to “board consent,” records the actions taken by the board of directors to establish the corporation. It usually includes the election of officers, the approval of stock issuances to the founders, and other significant formation matters. Major corporate actions must be authorized by the board of directors, either during a live meeting (which should then be documented in written meeting minutes) or through written consent. According to Delaware law, all actions taken via written consent must be unanimous, meaning each board member must sign the consent for it to be valid.
- Initial Written Consent of the Stockholders (Stockholder Consent) – This document, also known as a “stockholder consent,” records the actions taken by the stockholders to establish the corporation. Some corporate actions may require both board and stockholder approval. The initial stockholder consent typically approves a form of indemnification agreement for the corporation’s directors and officers, among other important matters.
- Indemnification Agreement – This agreement outlines the policies and procedures for how the corporation will indemnify its officers and directors if they are sued for actions taken on the company’s behalf in their roles as directors or officers.
- Restricted Stock Purchase Agreements (RSPAs) – The Restricted Stock Purchase Agreement (RSPA) is the agreement by which a corporation sells stock to its founders. Founders typically pay a nominal amount of cash and assign any intellectual property or business plan they’ve developed to the corporation in exchange for shares of common stock. The RSPA includes any vesting restrictions and acceleration provisions for the founders’ shares. If the founders’ shares are subject to vesting restrictions, the RSPA should include an 83(b) election form. This should be completed and mailed to the United States Internal Revenue Service (IRS) within 30 calendar days after the stock purchase. Upon executing the RSPA and paying for the shares, the founders become stockholders of the new company.
- Confidential Information and Invention Assignment Agreements (CIIAA) – The CIIAA, also known as PIIAA (Proprietary Information and Invention Assignment Agreement) or IP Assignment Agreement, among other names and acronyms, ensures that any intellectual property created by an employee during their employment is assigned to the company. This agreement should also include obligations to protect the company’s confidential information. It’s essential for founders, employees, and other service providers to sign a CIIAA or equivalent IP assignment and confidentiality agreement.
- Securities Law Filings – The sale and issuance of stock to founders and others during the corporation’s formation may necessitate state or federal securities law filings.
- Qualification Filings to Do Business as a Foreign Corporation – If a corporation intends to establish its headquarters or conduct most of its business in a state different from where it is incorporated, it may be required to qualify as a “foreign corporation” to operate in that state. For instance, Silicon Valley-based startups that are incorporated in Delaware must file and register as foreign corporations with the California Secretary of State and pay annual California franchise taxes.
- Federal Employer Identification Number and State Identification Numbers – After filing the Certificate of Incorporation and forming the corporation, the company should apply for a Federal Employer Identification Number (EIN) and necessary state identification numbers. The EIN is needed to open bank accounts and file tax returns. Currently, founders with a U.S. taxpayer identification or social security number can apply for a new EIN online through the IRS. If not, acquiring an EIN may require mailing a paper application, sending a fax, or making a phone call. An accounting professional can assist the corporation in understanding ongoing tax obligations.