Entity Formation

entity-formation

Agent: Corporate Counsel

L2 corporate counsel (1x) responsible for compliance scanning, legal risk register, third-party TOS review, entity formation, corporate governance, and founder equity.

Department ethos: ideal-legal.md

Skill Description

Handles the legal entity formation process including selecting entity type, preparing incorporation documents, filing with the state, and obtaining required registrations.

When to Use

• When founders are ready to incorporate and need the legal entity established before issuing equity, opening bank accounts, or signing contracts.
• When expanding into a new jurisdiction that requires a subsidiary or foreign qualification filing.
• When converting from one entity type to another (e.g., LLC to C-Corp) in preparation for venture financing.

Workflow

1. Entity Type Confirmation: Follow the pre-filing preparation section of references/checklist.md. Confirm the entity type decision (C-Corp, LLC, S-Corp) and verify the chosen state of incorporation. Check name availability with Secretary of State and reserve if needed. Deliverable: entity type confirmation memo.
2. Document Preparation: Prepare the certificate of incorporation (DGCL 102 for Delaware C-Corp) or articles of organization for LLC. Follow the certificate checklist in references/checklist.md: authorized share structure (standard 10M Common + 5M Preferred at $0.00001 par value), DGCL 102(b)(7) exculpation provision, registered agent designation, and purpose clause. Deliverable: draft formation documents.
3. State Filing: File formation documents with the Secretary of State per the state filing section of references/checklist.md. Pay filing fees (Delaware C-Corp: $89 standard / $189 expedited). Obtain the stamped filing confirmation and entity number. Deliverable: filed and stamped formation documents. [GATE]
4. Post-Formation Setup: Follow the federal and state registrations sections of references/checklist.md. Obtain EIN (Form SS-4). Register for state tax accounts. File foreign qualification in each state where the company will transact business. File S-Corp election (Form 2553) within 75 days if applicable. Deliverable: EIN confirmation and state registrations.
5. Corporate Records Assembly: Assemble the corporate minute book per the records assembly section of references/checklist.md: formation documents, EIN letter, registered agent agreements, state registrations, and blank stock ledger. Calendar annual report deadlines (Delaware: March 1 for C-Corp). Hand off to bylaws-and-board-setup and founder-equity-issuance. Deliverable: organized corporate minute book.

Anti-Patterns

• Incorporating in the wrong state: Choosing a state based on cost alone without considering investor expectations, tax implications, or case law. Why: most venture-backed startups incorporate in Delaware for its well-developed corporate law; deviating without reason creates friction during fundraising.
• Incorrect share authorization: Authorizing too few shares or wrong share classes at formation, requiring an early amendment. Why: amendments cost time and money, and under-authorized shares can block equity issuance to founders and employees.
• Skipping foreign qualification: Operating in states without registering as a foreign entity. Why: failure to qualify can result in penalties, inability to enforce contracts in that state's courts, and back-taxes.

Output

On success: Produces stamped formation documents, EIN confirmation, state registrations, and an organized corporate minute book. Delivered to founders and General Counsel.

On failure: Report which filings could not be completed (e.g., name conflict, missing information), what the current entity status is, and what corrective actions are needed. Escalate to General Counsel.

Related Skills

• bylaws-and-board-setup -- Bylaws and board setup is the immediate next step after entity formation.
• founder-equity-issuance -- Founder equity cannot be issued until the entity is legally formed.