How to incorporate a Delaware C-Corp for a startup with two founders?


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My co-founder and I recently went through the process of incorporation. I just got back the documents for the filing of a Delaware C-Corp and noticed my lawyer setup my co-founder as director and that I don't show up anywhere in the incorporation documents.

I have no issues with it being done this way and I remember he explained that ownership/directors/etc of the corporation will be set in the bylaws but I just wanted to make sure this is standard procedure and it was done correctly.

Incorporation Company Delaware

asked Sep 1 '12 at 08:40
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Rjgonzo
157 points
  • Side comment: normally with two equal founders, it's common for both to be directors. But, for the initial organization of the company, it's often easier to have just one director on the board, because you need fewer signatures. Then, the last thing he/she does is name all the other directors. – Chris Fulmer 8 years ago

2 Answers


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I have no issues with it being done this way and I remember he explained that ownership/directors/etc of the corporation will be set in the bylaws

That is correct. Ownership of the corporation is established by the entity's own contracts with individuals, not the articles of incorporation filed with the DE SecState. The bylaws will determine how these contracts are drafted and executed. One such contract that formally establishes you and your co-founder's ownership of the corporation is a Stock Purchase Agreement.

Fyi, your corporation's officers' names will appear in the first annual statement of information you file with the DE Secretary of State. In the eyes of the DE SecState, the officers have the power to update/alter the legal status of the corporation's registration in Delaware (DE SecState does not ask who your shareholders are). This happens as you pay your annual corporation franchise tax near the beginning of next year for the current tax year. While most startups do appoint founders as the initial officers, officers and founders/owners are not synonymous, since officers don't necessarily have stock/ownership of the company.

To give you a better picture of the process and when individual persons' names show up on documents, here's a quick summary:

1) Incorporation - only incorporator's name appears on the DE Certificate of Incorporation.

2) Incorporator appoints directors (this can be informal) -OR- Incorporator establishes the bylaws (obviously, how the 'incorporator' acts should be the result of a consensus between founders).

3) If directors are appointed in lieu of the establishment of bylaws, they can establish the bylaws at a meeting.

If bylaws are established first, then directors are appointed according to stipulations in the bylaws.

4) Either way, the bylaws and directors influence how officers are appointed, procedures for issuing stock (ownership of the company), shareholder powers, and other decision-making procedures for the corporation.

5) You'll find out when opening a business bank account that the corporation will need to provide a copy of its bylaws (or use the state's default rules) and provide a resolution authorizing the opening of and officers' signing power over the account.

This is only a quick summary of how number of other Silicon Valley startups have gone through the early stages of the process and should not be taken as legal advice.

answered Sep 1 '12 at 08:52
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Henry The Hengineer
4,316 points

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Without (a) seeing the documents, (b) knowing whom the lawyer was representing, and (c) knowing the founders' prior agreements or understandings, it is impossible to say whether the documents were prepared "correctly" or in accordance with "standard procedure".

What matters, ultimately, is that the founders are issued the appropriate number of shares and elect the appropriate directors, and that the directors appoint the appropriate officers - all of the foregoing in accordance with appropriate bylaws and shareholder and board resolutions.

Final point: You should pose your question to the lawyer who prepared the documents.

Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.

answered Sep 5 '12 at 06:00
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Dana Shultz
6,015 points

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