How to Start a Corporation
The Complete Guide for Startup Founders, Students, and Creators
How to Start a Corporation: A Complete, Modern Guide for Founders and Entrepreneurs
Starting a corporation isn’t just a formality — it’s a critical move that separates side hustles from serious businesses. Whether you're a startup founder aiming to raise venture capital, a student entrepreneur launching your first company, or a creator turning passion into profit, incorporating provides the foundation you need to protect yourself, scale fast, and attract funding.
In this guide, you’ll discover what a corporation really is, why most startups choose a Delaware C-Corp, and exactly how to form one properly — so you can build your dream on solid ground.
What Is a Corporation? (And Why It Matters)
A corporation is a legally recognized business entity that is separate from its owners. By filing Articles of Incorporation with a state, you create an organization that can:
Own property
Enter contracts
Issue stock
Protect founders and shareholders from personal liability
Raise funding from investors
Unlike a sole proprietorship or general partnership, a corporation exists independently. It doesn’t vanish if a founder quits or passes away. It’s built to last — and to grow.
Why Most Startups Choose the Delaware C-Corp
If you're building a high-growth business, investors expect you to set up as a Delaware C-Corporation. Here's why:
Investor-Friendly: VCs and angel investors overwhelmingly prefer Delaware C-Corps because of the strong legal protections and standardized corporate governance.
Flexible Structure: You can create multiple classes of stock, essential for issuing preferred shares to investors and common stock to employees.
Well-Established Legal System: Delaware's Court of Chancery specializes in corporate law, offering faster, more predictable outcomes in case of disputes.
Pro Tip: Services like Stripe Atlas and Clerky can help you incorporate in Delaware in just a few clicks — setting you up with the right documents from day one.
Key Characteristics of a Corporation
When you incorporate, you unlock several powerful advantages:
Separate Legal Identity: Your company can sue, be sued, sign contracts, and own assets — all without exposing your personal finances.
Limited Liability Protection: Shareholders are not personally responsible for business debts or lawsuits.
Perpetual Existence: Corporations continue to exist even if owners change, ensuring business continuity.
Structured Corporate Governance: A board of directors oversees decisions, maintaining order and accountability.
Direct Taxation: Corporations file their own tax returns and are taxed independently from their owners.
Which Type of Corporation Is Right for You?
Choosing the right corporate structure can determine how much you pay in taxes — and how fast you can grow.
1. C-Corporation (C-Corp)
The default for venture-backed startups.
Benefits:
Strong liability protection
Unlimited shareholders
Ability to issue multiple stock classes
Easier access to venture capital and stock-based compensation (like stock options)
Drawbacks:
Double Taxation: The corporation pays taxes on profits, and shareholders pay taxes again when dividends are distributed.
Best for:
Startups seeking VC funding
Businesses planning to scale nationally or globally
Companies aiming for IPOs or major exits
2. S-Corporation (S-Corp)
Designed for small businesses looking for tax efficiency.
Benefits:
Pass-through taxation (profits taxed once at the shareholder level)
Personal asset protection
Limitations:
100 shareholder cap
Shareholders must be U.S. citizens or residents
Only one class of stock allowed
Best for:
Student founders launching local businesses
Family-owned companies
Service-based startups not planning to raise venture capital
3. B-Corporation (B-Corp Certification)
A status, not a legal structure. Certified B-Corps meet high standards for social and environmental performance.
Benefits:
Boosts brand credibility with consumers and investors
Helps attract purpose-driven employees and partners
Best for:
Startups with a strong mission to drive positive change
Brands focused on sustainability, equity, or community impact
Step-by-Step: How to Incorporate Your Business
Here’s exactly how to form a corporation — without getting overwhelmed.
1. Choose Your State
Delaware is the default for startups.
Your home state may offer lower fees or simpler requirements if you're running a local business.
2. File Articles of Incorporation
Submit formation documents to your chosen state's Secretary of State.
This officially creates your corporation.
3. Appoint a Board of Directors
Even if it's just you, list your directors.
Larger startups will build a more formal board as they scale.
4. Create Corporate Bylaws
These internal rules govern how decisions are made and how the business operates.
5. Issue Stock
Allocate shares to founders, employees, and early investors.
Platforms like Carta help you track your cap table from day one.
6. Get an EIN (Employer Identification Number)
Needed for taxes, payroll, and opening a corporate bank account.
7. Stay Legally Compliant
File annual reports
Hold annual shareholder and board meetings
Maintain clean records
Smart Tools That Make Incorporating Easier
If you're short on time or legal expertise, these platforms can help:
Stripe Atlas: Launch a Delaware C-Corp, set up a bank account, and get tax guidance — all online.
Clerky: Create airtight legal documents for incorporation and early fundraising.
Carta: Manage your equity, employee stock options, and investor ownership cleanly from the start.
Why Founders, Students, and Creators Should Incorporate Early
1. Credibility: Instantly position your brand as serious and professional to investors, customers, and partners.
2. Fundraising Readiness: Only corporations can legally issue stock — crucial for raising venture capital or offering stock options to early employees.
3. Growth Flexibility: Bring on co-founders, advisors, and investors with clear equity structures that scale with your business.
4. Personal Protection: Shield your personal assets from lawsuits, debts, or business disputes.
Final Takeaway
If you’re serious about building a startup, creating a Delaware C-Corp (or the right corporate structure for your goals) is a must. Incorporating isn’t just paperwork — it’s your first real move toward building an investable, scalable company.
But with great power comes great responsibility. Incorporations come with ongoing tax filings, legal compliance, and governance obligations. Always consult a startup-savvy legal or financial advisor to set up your corporation the right way — and avoid costly mistakes later.
Ready to take the first step? Incorporating now could be the smartest investment you make in your startup’s future.
Need More Support to Grow Your Startup?
If you're serious about building and scaling your startup, Pegasus Angel Accelerator offers programs designed to help early-stage founders move faster—with expert mentorship, hands-on resources, and direct connections to investors.
Whether you're launching your first venture or looking to grow an existing company, we have the tools and network to help you level up.
Disclaimer:
This article is for informational purposes only and does not constitute legal, financial, or tax advice. Always consult with a qualified attorney, accountant, or professional advisor before making decisions about incorporating your business, structuring your company, or engaging in fundraising activities.
