Overview
Incorporating your startup is an important milestone, but it is only the first step toward building a fully functional company. After incorporation, several legal documents and governance measures are required to establish structure, protect intellectual property, and prepare for growth.
Essential Post-Incorporation Documents
1. Action of Incorporator
Key Consideration: Transferring Initial Corporate Authority
Primary Objectives:
- Officially transfer incorporation authority from initial filer to board of directors
- Establish foundational corporate governance
- Validate subsequent corporate actions
Critical Components:
- Adoption of company bylaws
- Establishment of initial board of directors
- Ensuring legal validity of future corporate actions
2. Bylaws
Key Consideration: Operational Roadmap and Governance Framework
Bylaws Serve Multiple Critical Functions:
- Define company vision, mission, and operational guidelines
- Establish decision-making processes
- Provide clarity on roles and responsibilities
- Offer legal protection for founders and the company
3. Initial Board Consent
Key Consideration: Formal Establishment of Corporate Governance
Typical Board Consent Resolutions Include:
- Ratification of incorporation documents
- Election of corporate officers
- Establishment of fiscal year
- Approval of share issuance
- Authorization for employer identification number (EIN)
- Management of financial processes
4. Restricted Stock Purchase Agreements (RSPA)
Key Consideration: Equity Allocation and Protection
Critical RSPA Provisions:
- Define equity ownership terms
- Establish stock vesting schedules
- Create transfer limitations
- Clarify investment and tax representations
5. 83(b) Election
Key Consideration: Tax Strategy for Founder Equity
Tax Planning Benefits:
- Option to pay taxes on stock value at grant time
- Potential reduction of future tax liability
- Locking in current valuation for tax purposes
6. Confidential Information and Invention Assignment Agreement (CIIAA)
Key Consideration: Intellectual Property Protection
Primary Objectives:
- Safeguard corporate intellectual property
- Define confidentiality obligations
- Clarify IP ownership for employees and contractors
7. Additional Potential Agreements
Supplementary Documents:
- Indemnification Agreement
- Shareholder Agreement
- Founders Agreement (if not previously executed)
Recommended Next Steps
Navigating the post-incorporation landscape requires careful attention to detail and strategic planning. While these documents might seem overwhelming, they form the critical foundation of your startup's legal and operational framework. Take time to work closely with legal counsel who understands the nuanced needs of emerging companies. Each document serves a specific purpose in protecting your interests, clarifying expectations, and setting the stage for future growth. Remember that a thoughtful, comprehensive approach now can prevent potential complications and provide clarity for your team, investors, and stakeholders.
Disclaimer
This memo provides general guidance. Each startup's situation is unique, and professional legal consultation is recommended before finalizing any corporate documents.
Frequently Asked Questions
FAQs
What is the most important document after incorporating a C-Corp?
Bylaws are critical because they establish how the corporation is governed and how decisions are made. However, other documents like stock purchase agreements and the 83(b) election are equally important for founder protection.
Why is the 83(b) election so important for startup founders?
The 83(b) election allows founders to pay taxes on stock at the time of grant, which can save significant money if the company’s valuation increases in the future.
Do all employees need to sign a CIIAA?
Yes. Employees, contractors, and consultants who contribute to product development or intellectual property should sign a CIIAA to ensure the company owns all IP rights.
What happens if we skip some of these documents?
Failing to complete essential post-incorporation documents can create legal disputes, ownership confusion, and tax complications. It may also discourage investors who expect proper documentation to be in place.
Don't DIY your legal anymore
Leave it to the pros.