I recently started a hardware company and Im in the process of setting up my incorporation. We have zero income at this point, but incurring expenses chiefly product design and material goods to produce.
In order to scale, I know we're going to need outside investment. Plus, my partner and I are will to exchange stake and royalties to enlist the kind of outside help we need to get this thing going faster. Would it be silly for us to incorporate as LLC (DE) for the time being so we can stay focused or incorporate as C-Corp and just deal?
You should discuss it with legal and tax advisers.
Generally you can convert an LLC to a Corporation, either for tax purposes or as a legal entity, and you can convert a C-Corporation to an S-Corporation and vice versa. But there's a time limit that you have to remember when doing it - you have to wait 5 years between each conversion (2 years if the initial conversion was done at the time of creating the entity). There are also significant tax implications for these conversions.
Also, are in you in DE? If not, is there a specific reason to incorporate in DE? Or is it just because you've heard a rumor somewhere that its a good idea but don't really know why?
There are many more different issues and implications that you have to consider, and better discuss it with a professional.
Corporation vs. LLC: Because you will be seeking investors, a corporation, with its well-defined investment and ownership structures, makes more sense. (I don't understand how an LLC, more than a corporation, would help you to "stay focused".)
DE vs. another state: If you will be seeking institutional (e.g., VC) investment, then DE makes sense, because that is what most institutional investors will want. Otherwise, incorporate in the state where you will be doing business to minimize fees and taxes (avoid paying both DE and your home state).
Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.