If you are in the formation stage of your startup, here are a few key points to keep in mind to avoid legal pitfalls.
Formation/Organization and Incorporation are not the same thing.
When you file a “Certificate of Incorporation” in Delaware, you are “incorporating” your company. It takes a few minutes, and a small filing fee, to do it. It also leaves 99% more work to do before the company is properly “organized,” including from an equity, control, and IP perspective.
When comparing offerings from different firms for organizational legal costs, pay close attention to what is actually included in their “formation package,” because it’s easy for firms to leave things out in order to appear to offer a lower price; while making you pay more later on to get everything done properly.
Don’t assume you want a “standard” Delaware C-Corp.
If you read info from Silicon Valley, you’d think 100% of tech startups are C-Corps. That’s not true. Yes, a majority are, but your particular business model and growth trajectory may make it a less obvious choice. See: More Tech Startups are LLCs.
Be aware of fully automated options.
There are automated and safe options like Clerky, if you are comfortable with a fully template-based structure with no customization whatsoever. If keeping legal costs to an absolute minimum is a top priority, Clerky is far safer than a DIY project with Word-based templates.
Tech entrepreneurs should not use LegalZoom or Rocket Lawyer, both of which are designed for non-tech small businesses (think coffee shops), and lack much of the documentation you’ll need.
Most startups hire law firms. Hire one right-sized for what you’re building in the next 5 years.
See: Checklist for Choosing a Startup Lawyer and Why Startups hire law firms, not a lawyer. Most startup-specialized firms have formation packages that will allow for more flexibility/customization (and guidance) than an automated formation, without incurring excessively high costs.