Step-by-Step Checklist

We’ll go into each step into more detail — but here is an overview of what’s important to do upfront.

• Step 1: Create a C-Corp
• Step 2: Buy Your Founder Shares From the Company
• Step 3: File an 83b Election
• Step 4: Set up a Business Bank Account

Step 1: Set up a C-Corp

The most important thing here is you want to ensure you set up a C-Corporation for your company.

The most typical structure is a Delaware C-Corp and it’s what most incorporation tools will automatically set up for you.

How C-Corps Work

• C-Corps have the most flexibility and support to raise capital. Most investors will insist on only investing in a C-Corp so they aren’t responsible for unexpected taxes.
• A big benefit of C-Corps is they make every single shareholder eligible for the most generous tax break in America — QSBS, which we’ll talk about later.
• Unlike an LLC or an S-Corp, a C-Corp is NOT a pass-through entity. Passthrough entities mean profits and losses automatically pass through to shareholders — on a C-Corp, they are held at the corporate level until a distribution is made.
• A perceived downside of C-Corps is they have “double taxation” — profits are taxed on the business level, and then again when paid out as dividends. As a startup, you will likely lose money for quite a while so this isn’t a huge concern.