Pre-Incorporation Checklist for U.S.-Based Startups

We are often approached with the question, "What do I need to do or learn before starting a company in the U.S.?"

We have developed a checklist of important things that many people forget about before entering the U.S. market, and then incur significant financial expenses on consultations with experts to correct the mistakes made.

State of Incorporation

The gold standard for startups is to have a corporation in Delaware. However, this option may not work for everyone. In particular, if you reside in the U.S. or plan to move in the foreseeable future, depending on the state of your residence, you may additionally be required to obtain a business license in the state of your personal residence, even if all of the company's activities are conducted online. Such requirements are mandated by the laws of many popular states, including Florida, California, and New York. If the company does not plan to attract investment and is to be used solely for operational purposes, it is worth considering a state of incorporation that coincides with your state of residence.

Form of Company

The U.S. offers a wide range of corporate structures available to both U.S. citizens and foreign nationals. The choice of entity depends on factors like business activities, fundraising plans, and ambitions to go public.

The two most common entity types are:

• LLC (Limited Liability Company) – Ideal for businesses that operate with their own funds rather than external investment. It is particularly beneficial for founders living in low-income tax jurisdictions, as LLCs are pass-through entities, meaning profits are taxed at the individual level.
• C-Corporation – The preferred structure for startups aiming to become high-growth companies. C-Corps are designed for businesses that plan to raise venture capital, issue employee stock options, and eventually go public.

Choosing the right structure early on can impact taxation, fundraising opportunities, and long-term scalability.

Corporate Governance

The corporate governance structure of a company depends on its legal form. In C-corps, management is divided into three levels:

• Officers – Handle day-to-day operations, including managing bank accounts, signing agreements, and representing the company in external matters.
• Board of Directors – Oversees the company’s strategic direction and makes key decisions, such as raising investments, approving share transfers, and corporate transactions.
• Shareholders – Hold ultimate authority over major corporate decisions, including restructuring, dissolution, going public, or selling significant assets.

To ensure effective corporate governance, it is best to identify key individuals for these roles before incorporation. Establishing a clear governance structure early on helps prevent conflicts and ensures smooth decision-making as the company scales.

Equity Capital Structure

Delaware corporations commonly issue 10,000,000 shares of common stock, which are then distributed to the initial shareholders.

A frequent mistake is founders allocating all shares to themselves upfront, leaving no available shares for employee stock options, accelerators, or early investors. To avoid this, we recommend founders allocate only about 60% of the total authorized shares at incorporation, ensuring enough flexibility for future growth and fundraising.

Licensing of Activities

Certain business activities in the U.S. require licensing, which varies by federal, state, and municipal levels. For example:

• Payment intermediaries operating on a platform may need a Money Transmitter License.
• Logistics, construction, architecture, warehousing, and financial services may also require specific licenses, depending on the circumstances.

Before choosing a state, it is crucial to determine whether: (a) the company’s activities do not require licensing in the selected state, or (b) the company has the resources and capacity to comply with licensing requirements and obtain all necessary permits.

Intellectual Property (IP)

Companies expanding into foreign markets often have intellectual property scattered across employees and entities, leading to unclear ownership structures.

Before entering the U.S. market to raise investments, we recommend conducting an IP audit to:

• Identify and formalize ownership of all IP assets.
• Transfer IP to the existing company and/or founders.
• Ensure proper assignment of IP rights to the newly created U.S. legal entity.

Proper IP structuring helps protect assets, streamline investment negotiations, and prevent ownership disputes.

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