You are now in the post-incorporation stage, in which you lay the foundation for your company’s governance and operations. Some of the checklist items outlined in this blog post may seem unnecessary at the moment, but by completing them, you’ll be practicing good corporate governance hygiene and ultimately saving yourself from costly future complications. Here’s our post-incorporation checklist (you can download your own copy here):
Appoint Your Corporate Officers
Corporate officers are people appointed by the board to deal with the day-to-day operational aspects of the company. Officers have titles like President, Treasurer, and Secretary. They each have different responsibilities and therefore, sign different documents. More specifically:
- The President is responsible for leading and managing company activities overall, as well as executing important contracts and signing stock certificates (note that a second officer will also need to sign stock certificates).
- The Treasurer is responsible for company financials.
- The Secretary is responsible for company records, including meeting minutes from Board of Directors meetings and shareholder meetings.
Issue Your Initial Equity
You’ll want to issue equity to the founders by granting shares. But first, you’ll have to determine the terms of granting shares: number of shares; price per share; type and frequency of vesting; and duration of the cliff (if you choose to have one).
It may seem premature to worry about granting initial equity soon after you incorporate, but there are several good reasons to grant founder shares now. By keeping your financial matters straight, you’ll be able to save time and money later on. Anytime an equity grant is subject to vesting, you should also consider making an 83(b) filing for that grant.
Protect Your Company’s IP
As a startup, your intellectual property (IP) lies at the heart of your company.You’ll want to make sure that any relevant IP is owned by your company, not by one of the founders. If a founder who owns IP integral to the company leaves, you’re in for some tricky conversations and an expensive clean up once you start seeking outside investments. IP is typically transferred from individuals to the company using the following documents:
- IP Contribution Agreement transfers the rights to IP created prior to incorporation to the company. This is typically used with founders.
- IP Assignment Agreement ensures that any IP created by an employee while at the company belongs to the company, not the individual.
Complete Any Foreign State Registrations
If you’re reading this, there’s a good chance you’ve incorporated your company in Delaware, even if you’re operating elsewhere. You’ll also need to register with the state(s) in which you operate, and this is known as a foreign state registration (i.e. a Delaware C corporation operating in California is considered foreign in California, because it is incorporated in Delaware). Foreign State Registration forms are filed with the state(s) you operate in. For example, if you operate in Massachusetts but are incorporated in Delaware, you must file the forms with Massachusetts. Without proper registration in the state(s) where the company is located, you may not be able to file lawsuits against customers or vendors, and you could face late fees as well as tax liabilities. The appropriate forms are usually available on the website of your state’s Secretary of State.
Get an Employer ID Number (EIN)
The EIN is a 9-digit number assigned to your business by the Internal Revenue Service (IRS). It identifies the business and is used for tax compliance reasons. If you’re planning to hire employees or open a company bank account, you’ll need it. In many ways, it’s like a business’s social security number. The Internal Revenue Service (IRS) has a helpful website to help you apply.
Operating a business is inherently risky and the startup world is no exception. In order to protect yourself and your company from unexpected costs, you should make sure that you have the appropriate commercial insurance for your company. While an insurance broker or trusted advisor may be your best resource, here are some key insurance policies that companies typically consider:
- Directors and Officers (“D&O”)
- Property Insurance
- Errors and Omissions Liability
- Cyber/Network Liability
Recruiting and hiring new employees is critical to any growing startup. Check out our blog post on onboarding new employees.
Keep this in mind in the hiring process: as more and more individuals begin to work for you, it is essential that you properly classify them as either employees or contractors. Misclassification can turn quickly turn into a costly legal mess. Just ask Uber. The Small Business Administration has a great guide to hiring.
Organize Your Legal Documents
When it’s time to raise capital, investors will need to perform due diligence.They’ll need to see your legal documents, including the ones that you used to incorporate.There are plenty of good reasons to organize your legal documents, and to do so early: it streamlines the due diligence process and signals to your investors that you and your company are on top of your game.
While the required documents sought out in a due diligence may differ from firm to firm, our blog post on due diligence lists some core documents that you should plan to have on hand.
This may seem like a lot of work, but keeping your company’s corporate activities organized is critical to its long-term success. Digging through your inbox years later for missing documents and paying a lawyer to fix documents is inefficient and costly. It’s always much cheaper (and less stressful!) to organize your post-incorporation matters now. Shoobx uses automated workflows to generate and organize corporate documents, saving your company money and setting your business up for success from the moment you incorporate to the moment you exit.
We’ve put together a handy post-incorporation checklist download for you to use as a reference as you grow your business. Click to get your copy!