Formation tools and diligence cleanup

Formation is infrastructure. Banks, payroll and SAFE closes all assume the entity already exists. Budget the week you commit to building together — not the week the first angel wires money.

A Delaware C-corp has stockholders (own the equity), a board of directors (governs; appoints officers), officers (run day-to-day) and bylaws (meeting and notice rules). At formation, the incorporator or initial directors adopt bylaws, appoint officers, authorize founder stock and approve form agreements via written consent. Keep a minute book: certificate, bylaws, consents, stock purchases, PIIAs, SAFE ledger, option grants.

Atlas, Clerky and when to hire a lawyer

Stripe Atlas, Clerky and similar products generate standard Delaware formation packages: certificate, bylaws, founder stock docs, PIIA templates, often 83(b) forms. Cooley GO publishes free formation document generators used widely as a reference. For a vanilla two-founder US startup with no prior entity mess, these tools are often enough to get a correct skeleton.

Hire a startup lawyer when any of these are true:

• Three or more founders with uneven contribution history
• Significant IP from a university, employer or prior company
• Non-US founders needing a flip or holding company
• Converting an LLC or S-corp with history, contracts and assets
• Investors who insist on custom side letters early
• You are about to grant a large option pool or run a priced round

The lawyer's value is rarely typing the certificate. It is spotting the one weird fact that becomes a diligence blocker six months later.

Non-US founders

If founders live outside the US, counsel often still recommends a Delaware C-corp as the fundraising vehicle because US funds know it. Common patterns:

• Form Delaware first and operate through it (simplest when feasible)
• Form a local company first, then flip into a Delaware parent before or during a US raise
• Use a holding structure (Delaware parent, local operating subsidiary) when regulation or customers require a local entity

Flips have tax, securities and timing consequences. Do not DIY a cross-border reorganization from a blog post. The goal is one clean parent that owns the IP and can issue preferred stock to US funds.

Cleanup issues found in diligence

Series A (and even large seed) diligence repeatedly finds the same problems:

1. No signed stock purchase agreements — the "cap table" is a Notion page
2. Missing 83(b) elections
3. IP not assigned — contractors or co-founders never signed PIIAs
4. Wrong entity — LLC with SAFE-like instruments stapled on
5. Shadow advisors with vague equity promises — email threads are not grants
6. Previous employer claims — code written on the wrong laptop
7. Broken authorization — more shares promised than authorized
8. Inconsistent SAFE ledger — signed SAFEs not reflected in any spreadsheet

Every one of these is cheaper to fix at month one than during a term-sheet scramble.

Common mistakes

• Forming the week money hits. The wire then waits on a bank that needs an EIN and a board consent.
• DIY flips. Cross-border share exchanges have tax and securities consequences.
• Two sources of truth. The lawyer's Word table, Carta and the deck disagree.

Check yourself

A UK founder built v1 in a local LTD, then wants a US seed. What is the usual move?

A flip or holding structure so a Delaware parent owns the IP and can issue preferred to US funds — with counsel, not a blog template.

Name two diligence blockers that Atlas will not notice for you.

Prior-employer IP, and informal advisor equity promises. Tools generate docs; they do not audit history.

Key takeaways

• Atlas, Clerky and Cooley GO are enough for a vanilla two-founder US C-corp.
• Hire counsel for flips, prior IP, multi-party history or priced rounds.
• Keep a minute book so Series A is a folder, not archaeology in Slack.
• Diligence cleanup is the expensive version of formation.

Further learning

Stripe AtlasStripe Atlas is a simple, powerful way to incorporate a US company. Everything you need to start a business in a few clicks – we'll handle the legal paperwork.stripe.com ClerkyClerky is an online legal service built just for high-growth startups by top-tier startup attorneys. Incorporate your startup, issue safes and convertible notes, get hiring paperwork done, issue equity compensation, a…clerky.com Cooley GO — How to form a corporation in DelawareI’m ready to form a Delaware corporation for my startup! If you’ve decided to set up your business as a Delaware corporation, you’re in good company.Cooley GO