Choosing the state
A corporation can be formed in any state, regardless of where it operates. Many venture-backed companies incorporate in Delaware because investors and their lawyers are familiar with its corporate law and its courts, while many local businesses incorporate in New York because that is where they operate and a single registration is simpler to maintain. A company formed in one state that does business in another usually has to register there as a foreign corporation, so a Delaware corporation operating in New York pays fees and files reports in both. The right choice depends on your plans for raising money, your investors' expectations, and the cost of keeping two registrations.
The filing and what comes right after
Company incorporation in New York starts with a certificate of incorporation filed with the Department of State. The certificate sets the number of shares the company is authorized to issue, so choose that number and any classes of stock with future financing in mind. After filing, the corporation needs bylaws, initial directors and officers, and a record of the shares actually issued to the founders. It also needs a federal employer identification number, a bank account in its own name, and state tax registrations that fit its activities. Skipping the organizational steps is common and often causes trouble during a later sale or investment.
Before we file
We ask who the founders are, how ownership will be split, and whether anyone is contributing property or intellectual property rather than cash. We also ask whether a corporation is the right vehicle at all, since an LLC may suit some businesses better for tax or flexibility reasons. If you plan to elect S corporation status, ownership restrictions apply and the election has its own timing. Bring the proposed name, a list of owners and their contributions, and any agreements you have already made with co-founders or early investors.
